When the retail part of Northern Rock was sold to Virgin Money on January 1st 2012, British tax payers stood to lose out on around £600million. Now, an extra £73million has been added to the sale after a recalculation of the bank’s worth on that date took place. Along with other additions, this brings the total paid up to around £1billion, meaning the treasury has only lost £400million on the sale.
The government has received a lot of criticism for this decision, and many people believe that they should either have waited whilst the problems at Northern Rock were sorted out, increasing its worth and the amount that could be received for its eventual sale, or that it should have been turned into a full government bank. The latter option would allow government to stimulate lending and pump money to businesses in a way that Quantitative Easing has failed to do.
Virgin Money only bought the retail part of the bank, the area which wasn’t performing badly, meaning they have taken the seventy-five branches and one-million customers the bank had. The investment side of the business, that which holds the majority of the debt and has been performing badly, is still propped up by £21billion from the taxpayer, though that has managed to offload some assets to Virgin Money as part of this deal too.
There have been seemingly endless controversies since the tax payer bailout of the banks, especially in the case of Northern Rock which effectively became nationalised. It has seemed like no group could agree on what to do with it, leading to a confused approach that has resulted in these losses.
However, with the sale of the retail arm concluded, it seems that the Northern Rock saga is coming to an end, even if there is no sure-fire plan to offload the investment arm yet.