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Last Updated: Monday, 18 February 2008, 12:16 GMT
Brown rejects competence attack
Gordon Brown at his monthly Downing Street press conference.
Gordon Brown said nationalisation was the best option.
The prime minister has defended the decision to nationalise Northern Rock and rejected suggestions he has lost his reputation for economic competence.

Gordon Brown said ministers' actions had stopped the Rock crisis spreading and also protected its customers' cash.

He said UK economic stability had been maintained and nationalisation was now "the best option" for the taxpayer.

Shadow chancellor George Osborne has called it the day "Labour's reputation for economic competence died".

Lib Dem Vince Cable said while it was the right move, it could be costly.

Financial turbulence

Mr Darling is set to make a Commons statement on his decision to temporarily nationalise the stricken bank, which will require emergency legislation.

During his Downing Street press conference, Mr Brown said the government had two options - to go with a bid by the Virgin group or a management buyout, or a temporary nationalisation of the bank.

Getting into nationalisation is a lot easier than getting out - as those of us who have read about the 1970s can remember
George Osborne
Shadow chancellor

"We did have a choice, but having looked at the options, we think the best option is this temporary period of public ownership... because that's in the best interests of the taxpayer," he told reporters.

"We took the right decisions at the right time and for the right reasons."

Mr Brown said global financial turbulence had resulted in banks failing in Germany and America, with unemployment rising in the US and mortgages affected.

"I believe we have been better prepared because of the actions of Alistair Darling in the Treasury," he said.

"I believe the reputation of London is secure because we have taken the right long term decisions for the future of our economy.

"If we had allowed the problems of Northern Rock to spread right across the economy, there would have been a threat to London and the wider economy."

Job losses?

Mr Brown was pressed about the potential for branch closures and job losses at Northern Rock.

He said the running of the bank and any restructuring will now be the responsibility of City trouble-shooter Ron Sandler, who will be paid 90,000 a month for taking on the role.

The government's made the right decision
Vince Cable
Lib Dem treasury spokesman

"Mr Sandler is free as the chairman of the company to develop the company with the restructuring plan he will develop in the next period of time," he said.

"I think it's important to stress this is arms-length management, it will look at what can be done, but obviously we want a successful company we can pass on to the private sector at the earliest opportunity."

Mr Darling said: "I'm confident that when market conditions improve and the housing market comes back, we will be able to return the bank back to the private sector."

As trading in Northern Rock shares was suspended, Mr Osborne accused Mr Brown of having "dithered his way to the disaster of nationalisation".

"The trouble with nationalisation, as we're about to discover, [is that] getting into nationalisation is a lot easier than getting out - as those of us who have read about the 1970s can remember," he told BBC Radio 4's Today programme.

Cost implications?

"Once you are in to public ownership, then the taxpayer is liable for everything that the mortgage bank does.

"Every time it forecloses on a home, every time it fails to extend a mortgage to someone.

"Also, there is the reputational damage.

"If you speak to people around the world who are connected with financial services, they have not only noticed what we've been doing with Northern Rock and the dithering and mistakes that Gordon Brown has made, but it has really affected their view of Britain as a place to come and invest."

But Mr Cable, the Lib Dems' treasury spokesman, said: "The government's made the right decision.

"It's taken five months to get there, but it is clearly preferable to take this bank into temporary public ownership rather than have a bad private sale to somebody like Sir Richard Branson, under which the taxpayer would continue to have all the risks and the liabilities, and a private owner would take all the benefit.

"So they've gone to the right place, and frankly I don't see what the other alternatives are."

However, Mr Cable said he expected Sir Richard will want some form of compensation for the money spent on building up Virgin's bid for the stricken bank.

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