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Treasury to take Rock stake

• Robert Peston
• 20 Jan 08, 07:28 PM

Gordon Brown's decision to provide a Government-guarantee for up to 拢25bn of new Northern Rock bonds means something startling.

The prime minister is promising that the taxpayer will finance the bank for five years or until markets recover enough to allow it to stand on its own two feet again.

Make no mistake, there is an element of nationalisation in this.

If Sir Richard Branson, or Olivant, the company itself or any other potential rescuer agrees to do a deal on this basis, the risks at Northern Rock would be shared between the owners of the business and the taxpayer for many years to come.

It would be a public-private partnership, or a partial nationalisation, depending on your point of view.

In fact, I expect the Chancellor to say on Monday that the Government may end up owning a piece of the Rock -- though initially it will probably take an option on shares, via what are known as warrants.

It would make sense for the public sector to end up with a stake in the Rock.

Because if we as taxpayers were to shoulder many of its business and financial risks going forward, surely we should be rewarded with any future gains - if there turn out to be any.

Alistair Darling will also say that he'll decide which of the rescue plans, if any, will be agreed -- and that the Rock's board and shareholders will become almost bystanders

Why this sudden determination to take charge? Well he's the one with the money -- provided by all of us as taxpayers -- that the rock so desperately needs.

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