he Prime Minister was today forced to defend his decision to nationalise a high street bank for the first time in the modern era, claiming that the Government had saved investors from losing millions.
As shares in Northern Rock were suspended on the London Stock Exchange - and the threat of legal action by thousands of the company's shareholders loomed - Gordon Brown pledged to his monthly press conference that the Government intended to return the bank to the private sector once market conditions improve.
Flanked by Alistair Darling, the Chancellor, the Prime Minister said that agreeing to guarantee the bank's deposits last year had prevented it from going under, saving investors from losing their savings.
"We will, and always have, put the interests of taxpayers first," Mr Brown said, facing a barrage of questions at Downing Street.
Expert View
Philip Webster
Opening quote Nationalisation evokes memories of the days when Labour was pursuing policies that were to make it unelectable Closing quote
Philip Webster, Political Editor of The Times
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"If we hadn't intervened in August it would have gone under. We ensured an existence for the company. It was the best decision to protect depositors, mortgages holders and employees of Northern Rock."
However, Mr Brown added that he was right to hesitate for several months before nationalising it, claiming that examining all private sector bids - including from Richard Branson's Virgin Money - was the right thing to do, but that no potential investor had provided value for money to the taxpayer.
"Given that both bids that came forward involved a subsidy from Government without an appropriate level of return for taxpayers, after detailed consideration and independent advice, the Chancellor concluded that the right decision is to hold Northern Rock in temporary public ownership, to be run at arms length from the Government under professional management until market conditions change," Mr Brown said.
"The soft option would have been taking the easy road out and putting it into the new private sector bidders. The long-term question was what was the best interests of the taxpayer."
Adding that Northern Rock would be returned to the private sector as soon as possible, but refusing to give any timescale for this to happen, the Prime Minister added: "The option ahead of us is to see the market conditions improve, to see the restructuring of the company take place, and then to get the best deal for the taxpayers. There is no serious opinion out there at the moment which suggests that this is the wrong thing to do."
Mr Darling, who is set to face a rough ride when announcing emergency legislation to the Commons at 3.30pm today, emphasised that Northern Rock would have collapsed had ministers not acted last year to guarantee investors' deposits, stopping a public run on the bank lasting several days.
"This is a bank where, had the Government not intervened ... it would have failed because it had run out of money. We not only have to be fair to shareholders, but also to taxpayers," he said.
In a round of media interviews this morning, Mr Darling insisted that the decision to reject bids from Virgin Money and a management buyout had been taken to protect taxpayers’ interests.
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