National Audit Office to investigate Northern Rock sale

The £747m sale of Northern Rock to Virgin Money is to be investigated by the National Audit Office (NAO).

Chris Leslie
Chris Leslie

Amyas Morse, head of the NAO, confirmed the move in a letter to Chris Leslie, shadow financial secretary. The investigation is a value-for-money study in relation to both the creation and sale of Northern Rock plc.

The sale of the bank is expected to raise between £400m and £650m, however Labour wants the Government to delay the sale.

Leslie has called for the deal to be delayed so it can be pre-assessed, however the spending watchdog has said it can only investigate a completed deal.

In the letter to Leslie, Morse said that the investigation would be carried out as a “matter of urgency” and that it will be reported back to the Commons before the summer recess next year.

Virgin Money completed the deal for Northern Rock last month with the Government claiming the best deal had been achieved for taxpayers as it was predicted that Northern Rock was to continue being a loss-making business next year. Meanwhile, Labour said the Government should of sought an extension to the EU deadline that called on the bank to be sold by the end of 2013.

Northern Rock was nationalised at the height of the financial crisis in 2008. In 2010, the Labour government split the bank into two through the creation of Northern Rock plc and Northern Rock Asset Management. Taxpayers injected £1.4 billion into Northern Rock in 2010, meaning the sale represents a £650m loss.

According to the BBC, Leslie said: “There is clearly strong evidence to suggest that this Northern Rock firesale represents poor value for money for the taxpayer.

“This investigation by the independent National Audit Office confirms that serious questions hang over George Osborne’s deal.

“At present there is the possibility that those buying Northern Rock could asset-strip so much from the firm that they get back virtually every penny they invest within a matter of months.

“Ministers haven’t thought through this deal carefully enough – they have a duty to do better than this.”