Rock plans are ‘an accounting trick’

Opposition parties have denounced the government’s plans for Northern rock as
nothing more than an ‘accounting trick.’

The government is planning to securitise £25bn of Northern Rock’s mortgage
pile, parceling them out as bonds and taking on some of the risk.

The move may mean the bank will no longer be on the balance sheet, but will
appear in the government books only as a contingent liability.

Liberal Democrat Treasury spokesman Vincent Cable said: ‘This is an
accountancy trick. The government is determined to present this as not
nationalisation – the dreaded N word – but this is what it in effect amounts to.

‘They may be trying another accountancy trick by trying to get it of the
public sector balance sheet but I don’t think they will succeed.’

Chancellor Alistair Darling told the Commons yesterday: ‘It is for the
independent Office of National Statistics to determine whether Northern Rock is
classified to the public sector in the National Accounts.

‘Any liabilities classified to the public sector would be temporary and
backed by significant assets and do not represent any meaningful measure of
fiscal sustainability. The Code of Fiscal Sustainability – underpinned by
legislation passed by this House of Commons – provides for such situations.’

Tory shadow chief secretary to the Treasury Philip Hammond said:
‘Guaranteeing a loan in order to pay off debts to the guarantor sounds like more
Enron-style accounting. This will not achieve any reduction in the risk or
exposure that the taxpayer faces; it is designed to reduce the risk to Gordon
Brown and push the moment of reckoning to the other side of a General Election.’

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