Northern Rock today hired Barclays vice-chairman Gary Hoffman as its new chief executive, 10 months after it collapsed.

Hoffman, 47, takes over from Andy Kuipers on 1 October, and will earn £1.5 million plus bonus in his first year in charge.

Ron Sandler, who was parachuted in by the Government to lead the stricken mortgage lender when it was nationalised earlier this year, will become non-executive chairman.

Hoffman, who joined Barclays 26 years ago and is also vice-chairman of Coventry City FC, said: "This was a very tough decision for me. My affection for Barclays is deep and built over many years. Yet the opportunity to help lead Northern Rock back to strength is both compelling and exciting."

He today pledged to return the bank to private ownership "as a thriving, stable business" although it is not thought this could happen for at least three years.

Northern Rock ran out of funds in September, and was forced to go cap in hand to the Bank of England for an emergency £26 billion loan. It sparked the first run on a British bank since Victorian times.

Hoffman had been one of the biggest whiz-kids within Barclays, rapidly rising-through the ranks to run Barclaycard between 2001 and 2005 when it, along with other credit-card companies, suffered from a surge of people getting snowed under by debt, and entering IVAs.

He was then made chairman of UK banking before becoming vice-chairman of the group in 2006.

Barclays insiders denied he had been sidelined after leaving Barclaycard, saying he had been doing important, albeit low-profile, public-policy and regulatory work.

Leigh Goodwin at Fox-Pitt, Kelton said: "This job is a real challenge. Northern Rock is a political fishbowl - every politician and journalist will watch his every move.

"His main jobs will be managing foreclosures and arrears, controlling costs and dealing with the political process. It will be very stressful and all in the public domain."

Hoffman will earn a basic salary of £700,000 a year but will get three paymentsof £400,000 to compensate his loss of long-term incentive programmes at Barclays - one on arrival and the others on his first and second anniversaries. He will also be entitled to a bonus.

It means he will earn at least £1.5 million in his first year at Northern Rock and £1.1 million in his second year - making him the highest-paid public servant in Britain, ahead of Royal Mail chief executive Adam Crozier.

TOP PRIORITIES

Hoffman's Newcastle in-tray will be bulging. Here is a flavour of his to-do list:

1) Decide how to run a bank that is facing growing accusations from rival banks of unfair competition because of the Government's 100% guarantee on savings.

2) Work out what to do with Rock's shareholders.

3) Find a reputable executive prepared to value the business (and probably get sued whatever he says).

4) Run down the mortgage book to £50billion from £100billion.

5) Repay the Bank of England's £26billion loan by 2010.

6) Manage a rapidly rising number of bad debts and foreclosures as house prices fall.