Taxpayers left with Northern Rock 'rubbish' thanks to offshore company

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Opposition MPs warned that, as a result of nationalisation, the public could be forced to shell out billions more to the offshore trust called Granite.

The Liberal Democrats threatened to withdraw crucial support last night and, with the Tories already opposing nationalisation, the Government risks a series of humiliating Parliamentary defeats today.

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Some of Northern Rock's customers, who queued for their money last year, had their mortgages sold on by Granite

Granite was set up in 1999 by Northern Rock to package up and sell on its best mortgages and will not be acquired by the Government when it takes over.

The Treasury insisted there had been no recent transfers into Granite and that it depends on Northern Rock's new boss Ron Sandler whether commercial relations continue between the two.

Gordon Brown is facing a possible Commons defeat over the nationalisation of Northern Rock

But Shadow Chancellor George Osborne said: "This is further proof that under the Government's plans, the taxpayer comes last."

LibDem Treasury spokesman Vince Cable said: "It's now critical there is a full independent audit of the quality of Northern Rock's remaining assets.

"We can't have a situation whereby Northern Rock continues to push high-quality mortgages into Granite while taxpayers are left with a far less reliable group of assets in return for their money."

˜Alliance & Leicester said yesterday that millions of homebuyers will struggle to find cheap mortgages this year as lenders will be "far more cautious".

The bank, one of the biggest lenders, issued its warning after revealing that its profits fell 30 per cent to £399million last year and that profits will be under pressure again this year.