Did Branson use Beijing trip with Brown to win sweetheart deal over Northern Rock?

The admission came as investment bank Goldman Sachs, called in by Labour to advise on Northern Rock, proposed a solution to enable the bank to remain in the private sector.

Sir Richard's Virgin Money and finance group Olivant are the remaining rival bidders to buy Northern Rock, which was plunged into crisis after a run by savers last September.

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Mr Brown insisted the bank's future had not been covered "in any detail" with Sir Richard while they travelled in the same business-class section of the British Airways plane hired by Downing Street for the Chinese tour.

Later, using similar language, Sir Richard claimed: "We haven't had any detailed discussions."

But the Conservatives and Olivant voiced suspicions about the close contact between the Prime Minister and the flamboyant businessman.

Shadow Chancellor George Osborne accused Mr Brown of a U-turn.

"One moment Gordon Brown is talking up nationalisation and now he is in full retreat," said Mr Osborne.

"From the beginning his dithering has contributed to the Government's incompetent handling of Northern Rock.

"Now he appears to be planning to entrench the taxpayers' exposure and shatter his own debt rule.

"Now that it is clear that the Prime Minister, not the Chancellor, is in day-to-day charge, perhaps he can tell us if the guarantee that taxpayers will get all their money back still stands."

Olivant boss Luqman Arnold said: "I am not sure how Gordon Brown will feel about having his China story taken over by Richard Branson.

"If I was Richard, I would have let Gordon have more use of the airwaves."

Chancellor Alistair Darling will make a statement about the bank's future to MPs tomorrow.

The Government is believed to have concluded that the only way to escape the expensive – and politically embarrassing – option of nationalisation is to underwrite a private-sector takeover and hope that an economic revival stops the taxpayer from having to foot the bill.

Under the complicated scheme, the Rock would remain in private hands. But the £24billion that the Government has already loaned the bank would be converted into bonds, which would then be sold off in stages to investors.

If the business failed to rally within five years, the money would be written off.

Although hugely attractive for private bidders, the Goldman Sachs proposal came under fire last night for giving taxpayers "nothing" and leaving them to prop up the company for years to come.

Liberal Democrat Treasury spokesman Vince Cable said: "This proposal is a complete con. It's simply the Government solemnly undertaking to repay the Government. "It's just replacing Government loans with Government guarantees. Instead of the proposal we had a few months ago, where taxpayers would be getting £15billion, they are now getting nothing."

And in a scathing attack on Mr Brown, Mr Cable added: "It looks increasingly like desperation on the part of the Prime Minister to do anything to avoid nationalisation.

"It gives the taxpayer the worst possible outcome while the private bidders keep all the potential to make money.

"Gordon Brown seems to suffer from a pathological inability to admit failure.

"He must not waste billions more of taxpayers' money to save himself from the political embarrassment that would arise if Northern Rock was to be taken into public ownership.

"At a little under £60billion, this must be the most expensive face-saving operation in history.

"It is a cop-out to transfer loans into guarantees and the Government cannot imagine that the public will be naive enough to be conned by this accounting dodge."

Mr Brown also became irritated yesterday when a television interviewer asked him how he thought Virgin's rival bidders would react if they felt he was having private discussions with Sir Richard.

"The financial discussions are taking place in London,' he told Sky TV's Adam Boulton.

"I would never involve myself directly in negotiations."

He emerged from the exchange muttering angrily that if potential commercial partners wanted to talk to the Government it was not the Government's place to stop them.

Mr Brown added: "The reason we intervened in the first place is we wanted to make sure that in a period of financial turbulence there would be no spillover from Northern Rock into the rest of the financial system.

"Now we have been presented with a report we commissioned from Goldman Sachs that gives us a number of options.

"All options, including public ownership on the road to moving the firm back into the public sector, are on the table."

Sir Richard said he believed he was in a strong position to win the bid.

"I'm still confident that our bid is good," he said. "And I believe it's the best bid on the table, it's the best option for Northern Rock.

"I believe it's the best option because we would rebrand it the Virgin Bank, which is a very strong brand."

Olivant boss Mr Arnold said: "The key message is that the Government is providing the financing and it will be up to Virgin and ourselves to come up with proposals on what we could do.

"I expect they will give us a schedule to come up with something."

The main risk to a private-sector deal now appears to be a veto from the European Commission, which could rule that the long-term financial support provided by the Government would be in breach of rules prohibiting State aid.

But Mr Brown said he was confident that Europe would not prove to be an obstacle.