Claims in the so-called popular press today that the sale of bailed-out Bank Northern Rock to Billionaire Richard Branson’s Virgin Money has cost the British Taxpayer £400 million are to say the least, something of a spin on the true state of affairs, and the effectively highly subsidised privatisation of a part of the Bank.
Firstly, even the article above says the cost to the British Taxpayer of £400 million quoted, could in fact be £650 million if a “…further payment of £250 million” which “…is agreed but not guaranteed” is not forthcoming.
The reality however, is that the total ‘hit’, i.e. loss or cost to the state of the bail-out of Northern Rock to date in terms of monies actually paid out and received is at least £24,140 million. The discrepancy in the figures being nothing other than an accounting slight of hand, the vast majority of Northern Rock’s ‘toxic debt’ having been assigned to the “bad-bank” portion of Northern Rock, i.e. Northern Rock Asset Management (NRAM) which will remain in Government hands, and which still owes a staggering £20.7 billion to the Exchequer.
This figure does not include, according to the BBC, in addition to that figure, another £2.5 billion Government loan of additional working capital in 2010 to “…help with the orderly wind-down of the company”.
Whilst the Government might possibly recoup the greater part of this toxic debt, as it is repaid by NRAM’s 365,000 mortgage customers and 175,000 unsecured loan customers over the coming years, in some cases over decades, this is by no means a certainty, and until their terms have come to an end, it is impossible to calculate the exact loss or ‘hit’ to the state.
The £400 million figure quoted in the headline above, which we later find out in the same article is really £650 million, is actually nothing other than an additional cost to the Taxpayer arising from the “good-bank’s” sell-off this week. A more honest headline to the article would be “Taxpayer takes further £650 million bank-bailout hit this week after Government’s bargain basement sale of profitable part of Northern Rock. Total bill for Northern Rock bail-out alone, now stands at over £24 billion!
The Tory Chancellor George Osborne defended the sale of the “good-bank” part of Northern Rock, saying it represented the “best deal” for Taxpayers. He would say that wouldn’t he? Closer to the truth is Branson got it for a steal, and the vast majority of us ordinary folk are the ones who will once again foot the Bill.