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Chancellor excluding Northern Rock from next week’s Budget

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by Kay Mitchell

Chancellor Alistair Darling has come under fire for his plans to exclude Northern Rock out of next week’s Budget.

Mr Darling plans to leave out Northern Rock’s estimated £100 billion liabilities from the headline figures, instead, the figures are to be treated as a special item.

Legal & General, one of the bank’s largest shareholders, has spoken out against the Government’s handling of the Northern Rock situation and its decision to nationalise the bank when, in their view, it was still a going concern.

The management of Northern Rock is also subject to criticism after it was revealed that it paid £15 million for the Newcastle Falcon’s rugby club grounds when it could not keep up with its mortgage repayments, just weeks before it approached the Bank of England for emergency funding.

It was revealed earlier this week that Jon Wood, the fund-manager behind SRM Global with a 12% stake in Northern Rock, is expecting to file legal action.

Mr Wood is launching his attack against the government, regulators and the individuals he accuses of ‘commercial vandalism’ over the bank’s demise.

SRM, together with RAB Capital, the bank’s two largest shareholders, face combined losses of approximately £170 million following the nationalisation.

After rejecting takeover bids from the board of Northern Rock and a consortium led by Sir Richard Branson’s Virgin Group, the Government rushed through legislation to nationalise Northern Rock last month.

Former Lloyds of London boss, Ron Sandler, is currently in charge. Mr Sandler and the rest of the team are involved in a plan to revive the struggling bank.

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News posted: March 6, 2008

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