Mark Field, the Tory MP for the City and Westminster, and Ed Balls, the shadow chancellor, make an unlikely pairing. But both men yesterday came out and attacked the government’s sale of Northern Rock to Virgin Money, asking whether it was the right time to strike such a deal against the backdrop of choppy markets.
Both wondered whether George Osborne might have extracted more than the £747m on completion of the sale — total proceeds could rise to just over £1bn over five years — had he waited a little longer. Both men also asked whether the government had fully explored the idea of the bank being turned into a mutual.
(Meanwhile Lib Dem peer Lord Oakeshott has put down some parliamentary questions asking if the Treasury have made it a condition of the deal that full British tax must be paid on all profits of Northern Rock and all dividends and capital gains received by the consortium.)
Others were more realistic on Thursday, with Lord Myners, the former Labour City minister, telling the Financial Times that his was a “very good price” to have achieved in the circumstances.
Osborne’s people, for their part, insist that the chancellor played the best hand with the cards he was dealt: In such consolidated market, there was hardly a raft of potential buyers waiting in the wings, particularly in these kinds of markets.
Labour want more detail on exactly want went on between Osborne and his advisers at Deutsche Bank. Chris Leslie, shadow financial secretary to the Treasury, on Thursday night sent this letter to Osborne.
I am writing following your announcement regarding the sale of Northern Rock to Virgin Money. I regret that Members of Parliament were unable to raise questions in the House of Commons today, during recess, on your decision to sell Northern Rock.
It is obviously right that Northern Rock should ultimately be leaving public ownership, as it was right to take Northern Rock into public ownership in 2008 to avoid a catastrophic collapse. But as the Shadow Chancellor Ed Balls has argued today there are important questions that need to be answered.
First, could you confirm that the Government has made a loss through the sale of Northern Rock? How will the sale of Northern Rock now and for this price be accounted for in the national accounts?
Second, can you explain why this sale was made at this time and in this way? Can you reassure me, and taxpayers more widely that the timing of this sale is in the longer-term interests of taxpayers and consumers. What grounds did you have for deciding not to wait longer for a better deal? What advice did you receive as to whether selling later would not have led to a smaller loss or even a profit?
Third, for this sale and for future sales of Lloyds and RBS, Labour have said that if the Government makes a profit or gets money coming into the Treasury that this should be used to repay the national debt. Can you provide assurances about how the proceeds from this sale will be used and the impact on the national debt?
Fourth, the Coalition Agreement said that you would “bring forward detailed proposals to foster diversity in financial services, promote mutuals and create a more competitive banking industry”. There will be many who are concerned that in making this decision you gave no serious thought to making Northern Rock either a building society or a mutual.
The mutual option was put to you by a number of groups including the Co-operative Party, however your announcement of your intention to sell Northern Rock was made before you could have had a chance to consider those proposals or meet with any of those putting them forward.
Are you satisfied that this decision is consistent with the pledge made in the coalition agreement and what grounds did you consider in rejecting the mutual option?
Fifth, could you provide an update on the state of the financial performance and value of Northern Rock Asset Management, any state loan commitments they retain and progress on divestiture?
Finally, do you agree that opposing nationalisation of Northern Rock in 2008 was a mistake? In 2008 you said you were “not in favour of nationalisation, full stop”, is this still the case? Do you now accept that had the Labour government listened to your advice then there would have been serious harm for our economy?
I look forward to your reply.Yours sincerely
MP for Nottingham East
Shadow Financial Secretary to the Treasury