Northern Rock plan "the best" says Chancellor

Chancellor Alistair Darling will continue to defend his plans for resolving the Northern Rock crisis today, after confirming that the £25bn Bank of England loan would be turned into government bonds and sold to investors.

Speaking in the House of Commons yesterday, Mr Darling said: "The proposal best meets our objectives of protecting taxpayers and depositors and maintaining financial stability."

In response, shares in Northern Rock ended the day 46% higher at 94.25p, although the proposals will still need approval from the Financial Service Authority (FSA) and will have to satisfy European Commission rules, before they can be put into action.

Mr Darling also confirmed that Northern Rock bonds would remain guaranteed by the government, to assist in speeding up initial sales.

Bidders will have until 4 February to offer rescue packages based on the Treasury’s new plans. It is thought that new bidders may come forward, as the key issue of repayment of the enormous state loan has been deferred through the use of bonds.

If no sale is agreed, the bank will be temporarily nationalised – a solution which has been long opposed by the Conservatives and long proposed by the Liberal Democrats, in particular by Vince Cable during his period as Acting Leader.