Government plans Northern Rock sale

The Government is believed to have instructed its bankers to look at selling off the lender later in the year, according to a report in the Times. The options available to the Treasury are to re-float it on the stock market or sell it to another City institution. It could also return it to its previous status as a mutual organisation, owned by its members.

The Government sees the sale as both a potential money-spinner and a sign for voters that the financial crisis is at an end, thanks to the actions of the government led by Gordon Brown. Figures inside the Treasury insisted yesterday that it was in no hurry to conduct a sale and would seek to maximise returns for the taxpayer – Northern Rock now owes only £8.8bn of the £27bn it was originally lent. However there is no doubt that it would be a hugely significant move, ahead of the Labour Party’s September conference.

The news comes as a group of former Northern Rock investors are seeking compensation for their worthless shares in court proceedings. The lender was forced to seek emergency government funds in September 2007 after it saw a run on its branches. In earlier hearings the High Court ruled that the government’s action saved it from bankruptcy but lawyers for the investors are labelling it a breach of human rights. Hedge fund RAB Capital, which bought into the shares hoping for a recovery, and SRM Global are behind the court action, along with another 200,000 shareholders, holding up to 25 per cent of the shares.

WHAT THEY ARE SAYING

The BBC: "The private shareholders, including existing and former Northern Rock employees - many at risk of losing their retirement "nest egg" shares - are backed by the UK Shareholders Association. But there is concern that the institutional investors - some of whom had bought Northern Rock shares towards the end of its life as a private firm - had bought into the firm on the gamble that they would be compensated by the government should things go wrong."

Kate Hoey in the Guardian: "The government now has a perfect opportunity to restore some trust in the battered banking system – and as a side effect, in itself – by setting up a new kind of bank. We now own Northern Rock outright. Let's make it work properly for the people rather than being sold off to relieve the government of the charge that it is nationalising the banking system. I believe the time is right for a people's bank to be established through the Post Office and for Northern Rock to be incorporated into it… ·