Northern Rock 'cost taxpayer £2bn'

By Mark Fordham

The taxpayer could lose around £2 billion once the assets of the collapsed bank Northern Rock are wound down, according to the public spending watchdog.

National Audit Office (NAO) also stated that taxpayers lost about £480 million on the sale of Northern Rock PLC last year.

However, the NAO said the sale of the bank to Virgin Money, which was criticised by some as being too early, helped to minimise the losses for the general public.

It was originally rescued in 2008 at the beginning of the financial crisis and after nationalisation the bank was split into a mortgage lending and savings company - Northern Rock PLC - and a "bad bank" of sub-prime assets called Northern Rock Asset Management (NRAM).

The NAO said it could be years until the assets of NRAM are wound down properly.

However, the government's bank investments body said in February that Northern Rock would be expected to return a profit of up to £11 billion to taxpayers in the next 15 years.

"This net present cost should, however, be seen as part of the overall cost of securing the benefits of financial stability during the financial crisis," the report stated.