Northern Rock sale to Virgin Money to be probed

A PROBE into the controversial sale of Northern Rock to Virgin Money has been welcomed by shareholders and MPs.

Sir Richard Branson
Sir Richard Branson

A PROBE into the controversial sale of Northern Rock to Virgin Money has been welcomed by shareholders and MPs.

Sources at the National Audit Office have confirmed it will “take months” to complete the investigation because the timescale and scope of the inquiry still have to be completed. Auditors will have to follow a paper trial to discover how ministers reached a decision on the £747m price tag, which leaves taxpayers facing a potential £400m loss.

At the time of the announcement, Chancellor George Osborne said the sell-off “represented good value for money” and blamed Labour for pushing him into a rapid disposal of the bailed-out institution.

But Labour MPs and Northern Rock shareholders had questioned the timing and value of the agreement, and shadow finance secretary Chris Leslie wanted the deal delayed while inquiries continued.

Now Amyas Morse, the head of the National Audit Office, has confirmed in a letter to the MP that he will examine the deal to sell the bank to Sir Richard Branson’s Virgin Money.

He wrote: “I can confirm that I have decided to conduct a value for money study in relation to the creation and sale of Northern Rock PLC.

“My team will certainly consider the points which you raised when conducting the study”.

However the NAO also said that its role confined it to auditing, and could not intervene in the sale process which is expected to be completed in January.

Bishop Auckland MP Helen Goodman, who was in the Treasury during Labour’s period in power, said: “I think it is a good thing the NAO is now investigating the sale of Northern Rock. I certainly don’t think it will be a whitewash.

“The taxpayer stands to lose millions of pounds and it can’t be regarded as good value for money. Northern Rock could have been turned into a mutual but the Government decided to sell it back to the private sector. The Government’s policy is as clear as mud.”

Under the terms of the deal the Rock will be sold for £747m. Then after six months another £50m in cash will go to the Government, and a further £150m could be stumped up along with £50m-£80m sometime in the future depending on profitability.

Virgin Money declined to comment on the NAO probe.

But Northern Rock Small Shareholders Group. Spokesman Robin Ashby welcomed a full investigation.

He said: “I do not think £747m is a good price. It’s less than the market value. An investigation has to be welcomed. There is no sense selling at the bottom of the market, the Government should have waited. This deal is unfair to everybody.”

 

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