By Tim Montgomerie
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The Treasury has just announced the sale of Northern Rock to a consortium led by Richard Branson's Virgin Money. "The Government," states the press announcement, "will receive £747 million in cash on closing of the sale, with the potential in the future to receive over one billion pounds in total." Given the taxpayers' capital injection of £1.4 billion that appears to equal a loss of at least £400 million and perhaps nearer £650 million. And as Robert Peston tweeted: "We still own the so-called bad bank".
Virgin Money has made a number of important commitments as part of the deal:
- "No further compulsory redundancies, beyond those already announced, for at least three years from completion;
- Retaining and, over time, expanding the total number of branches;
- Extending support for the Northern Rock charitable foundation for a further year; and
- Making Newcastle the operational HQ for Virgin Money."
George Osborne commented:
"The sale of Northern Rock to Virgin Money is an important first step in getting the British taxpayer out of the business of owning banks. It represents value for money; will increase choice on the high street for customers; and safeguards jobs in the North East."
What is clear with the economy continuing to flounder is that there'll be no early windfall from denationalising the other much bigger banks. The fear must be that they, like Northern Rock, will end up costing the taxpayer money.