by Gabriel Neil
It has been confirmed that the trading half of Northern Rock will be sold to Richard Branson’s Virgin Money
for the sum of £747 million, at a £373 million loss to the taxpayer.
Northern Rock was nationalised in 2008 by the Labour government at the start of the international financial crisis, as it was unable to repay its government loans of £24 billion.
Richard Branson was opposed to nationalisation in 2008 stating that “a commercial solution would have been the best way forward”. It is estimated that £1.4 billion of government money has been invested in the bank, and commentators are expecting an overall loss of between £400-£650 million from the sale.
If a proposed £280 million extra is paid in full to the government, then the taxpayer will make a minimum loss of £373 million.
Virgin Money’s takeover of Northern Rock Plc. may mean there will be changes in interest rates for savers, as the bank was originally offering an tax-free ISA for 2.65%, whereas Virgin Money has been offering a very similar product for only 0.1%.
The side of the bank which owns 90% of its mortgages, Northern Rock Asset Management, remains under state control.
This loss will eradicate the savings that cuts to the BBC, announced in the Delivering Quality First report in October, were due to provide. In last year’s spending review George Osborne said that the BBC would make yearly savings of £340 million a year.
However, if the sale of Northern Rock makes the maximum expected losses , then nearly 2 years of BBC savings will have been cancelled out.
These cuts, amounting to 20% of BBC funding have meant that the broadcaster has had to lose 2000 jobs over 5 years, sell buildings and impose cuts to funding for BBC 1 and 2 of over £62 million. The BBC website has warned that these will result “in more repeats, a reduction in entertainment programming and less money spent on original British drama programs.’
The National Union of Journalists have been quoted as saying that these losses mean that “strike action is inevitable”.