Northern Rock bill costing taxpayer 'twice national primary school budget'

The Northern Rock crisis is costing the taxpayer the equivalent of twice the country's primary school budget, it was claimed yesterday.

Acting Liberal Democrat leader Vince Cable said the Government's initial £25billion bail-out was growing by £1billion a week.

He accused the Treasury of leaving itself open to "blackmail" by hedge fund shareholders who were threatening to block any sale of Northern Rock unless yet more public money was poured into it.

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He demanded that taxpayers' interests be put above those of institutional investors who bought into Northern Rock only after its difficulties became clear. He also said any deal with potential purchasers could involve the postponement or cancellation of massive interest payments on Bank of England loans.

"Either the Government goes along with that or it pulls the plug, in which case the company is forced effectively into bankruptcy and some form of administration in the meantime, in which case the Government could lose a lot of money, the people in the North-east are wiped out - but the depositors are protected," Mr Cable told Radio 4's Today programme.

"The Government has to have a plan to take this company into temporary public ownership."