Ensuring a Future for Northern Rock
The global credit squeeze is having an effect right across the developed world. In this context, the Government must not take risks with our country’s banking system – that is why the Government has been supporting Northern Rock since last autumn. The objectives are to protect the hard-fought-for economic stability of our country and to protect the interests of depositors and tax-payers.
The Government would have preferred not to have had to take Northern Rock into public ownership. However, under current market conditions the private options would not deliver sufficient value-for-money for the taxpayer. The alternative, which is being put forward by the Conservatives, would be to put Northern Rock into administration. This would lead to Northern Rock’s assets being sold off cheap, the tax-payer not getting the tax-payer’s money back, and the workforce losing their jobs. The shareholders would get nothing.
State ownership gives the bank a chance to get through its present difficulties and return to private sector ownership. It also gives the new management a chance to make realistic assessments about the size and configuration of the bank’s workforce. Both Doug Henderson MP and myself have already had a number of meetings with trade union officials representing the work force, and we will continue to work closely together on these issues. The Government has agreed to an independent evaluation for the shareholders.
By guaranteeing an income of £15m a year for each of the next three years to the Northern Rock foundation the Chancellor has doubled the projected budget for 2008 and given the Foundation a chance to continue with its valuable charitable works.
None of this is easy but it is the Government’s response to the crisis at Northern Rock that gives the bank the best chance of getting through the present difficulties.
