By Sky News business correspondent Joel Hills

So it's nationalisation - although the government won't say the word.

"Public ownership" is deemed much more palitable. But the effect is the same the government is now in the banking business. But then, in a sense, it's been in the banking business since Northern Rock first wobbled back in September.

In a sense then, although this is a significant move, very little has actually changed. The tax-payer had billions of pounds at risk yesterday, it has billions of pounds at risk today.

Nationalisation simply means the tax-payer's fate is now in the governments hands rather than a PLC. A sensible outcome you may think.

Indeed theree are those who are staggered that it has taken the Chancellor five months to conclude what many in the City always felt: that Northern Rock was a busted bank being kept alive by tax-payer's money and with so much public money at stake public ownership was the only sensible way forward.

Why is nationalisation such a dirty word? Well, in the past, government bailout have proved pretty unsuccessful. In the mid 70s British Leyland was rescued from bankruptcy by a Labour government only to die a slow and painful death.

We're told The Rock will be different. Nationalisation will be temporary. The bank will be revitalised and then flogged back to the Private Sector with tax-payer pocketing the profits.

This is terrible news for Northern Rock's shareholders. The company they own is about to be taken from them.

At the bank's recent EGM in Newcastle they expressed fears nationalisation would levae them with nothing. Next to nothing is what they'll probably get. The banks shares have already been suspended.

The prospects for Northern Rock's 6,000 staff are also, at best, gloomy. The Rock will survive but, as the Chairman in waiting admitted yesterday, it will be downsized and jobs are likely to go.

The tax-payer though is being told to feel chipper. If the bank makes money so do we, if it fails well our billions are secured against top quality assets. A view some the City support. That's not to undersell the scale of this task.

We'll end with a reality check. The man leading the Rock's new management team once rescued the insurer Lloyds of London. For his next trick he's going to try to revive a damaged mortgage-lender at a time when the economy and the housing market is slowing...

Comments

[Uyi, London 29 Feb 2008 17:36:46]

The government and the media?!! Never believe what they tell or conspire not to tell you.
Nothern Rock is Northern Rock - a PLC doing business until the government made a mistake in its lending and has oppressed the owners to take ownership. The govt should fire who made the mistake and leave NR alone for its owners.

[Jensen, Newcastle 18 Feb 2008 16:06:52]

Mark, London well....eh yes as a shareholder I DO think I am owed something. I invested into the company so why should the government now take forced control and then hey prestoe profit later, and I get nowt!!
Furthermore if you look at assetts ie mortgage books, properties owned etc the correct price per share of the company works out at £5.00 as reported in a broad sheet newspaper!

[Khalid 18 Feb 2008 14:14:57]

Sir
As the market has been made aware of such options of financial stability, then I think the Chancellor must be duly praised for putting a [Stop] to the misery caused by [Jamelia]
Inosfar as shareholders and other such options, then whilst shares are suspended, and the emergence of yet more guarnatees towards independant reviews, notwithstanding further public expenditure, then hold on to your share certificates, as good times emerge to keep the rock a shining example.
As for British Leyland and its differing market sector, Northern Rock does emerge as a different product and will indeed benefit from many a prudent moment as global markets recover.

[Mike Liverpool 18 Feb 2008 12:06:39]

By the way dont be too hard on shareholders people. They may lose everything and I dont think its fair... " not fair " I hear you say... "they know the risks!!"
well... all the money you have in your bank accounts .. you are effectively shareholders and they use your money to play the stock market get you into debt and pay back pitance to you in ISA's and saving accounts. If your bank went under tomorrow you would lose everything... would it be fair and funy then?

[Mike Liverpool 18 Feb 2008 12:03:17]

This is great news .. the tax payers make a profit along with the government when northern rock is sold! Ok all I need to know is when will I get my cheque ... or will it appear in my next pay slip as NORTHERN ROCK REBATE WITH INTEREST .. since I have paid to keep northern rock a float.. I should get my loan payment portion back with interest right :).. oh hold on .. I get it .. the GOVERNMENT gets all the money but makes it sound like the taxpayer gets all the perks!

[Dennis, Cramlington Northumberland 18 Feb 2008 10:39:06]

Double speak once again Joel?
You say: "If the bank makes money so do we, if it fails well our billions are secured against top quality assets..."

It is only about 1 day since you and all the other media hawks stopped referring to the taxpayers' money being 'at risk', doom & gloom etc etc

Now, suddenly, when the dirty deed is done, what was previously grossly prejudiced and hysterical talking down of the NR situation, is now talk of 'top quality assets'..

Talk of running with the hare and the hounds?

Muck raking by a biased media, covered up by sweet nothings later.

Disgusted

Dennis
Cramlington
Northumberland

[Mark, London 18 Feb 2008 09:52:47]

The shareholders need to realise that, if the gov hadn't stepped in, the company would have gone under. Their share's were worthless long ago. I just hope they don't think they are owed some compensation for them.