Rock loans payback 'to take years'

Chancellor Alistair Darling is to pilot through legislation allowing the bank to be taken into "temporary public ownership" after facing down calls for his resignation.

Employees are also braced for thousands of job losses as the business's operations are scaled back.

Justifying the nationalisation decision to the Commons, Mr Darling insisted: "We could have let the bank go under. But the risks to the wider financial system, for savers and the general public were not acceptable."

Gordon Brown, asked directly at a No 10 news conference whether the bank would return to private ownership before the next election, not due until May 2010, replied: "We can't have a timetable when we are talking about the return of better market conditions as a first step to resolving the issue."

Ron Sandler, the new Treasury-appointed chief of Northern Rock, told a press conference in Newcastle he believed it would be "some years" before billions in government loans and guarantees were repaid in full. He said he wanted to give the bank "a period of stability" and not "run it down to extinction".

But both he and the Chancellor acknowledged that restructuring the bank now had to be done under tight competition rules and EU guidelines designed to ensure state aid did not distort financial markets.

And Mr Sandler refused to speculate about possible job losses among the 6,500 staff.

Treasury Chief Secretary Yvette Cooper refused to confirm reports that taxpayers faced a £100m bill for advice on the crisis from City lawyers and bankers.

But she defended the Government's need to take "serious legal advice" and accepted that large sums would be indirectly borne by the public purse through Northern Rock.