Red tape detail forces Northern Rock to repay £270m in interest

Ben Southwood
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THE TAXPAYER-funded arm of Northern Rock will have to pay £270m back to customers, after a regulatory technicality means borrowers’ interest payments were not legally required.

Around 152,000 Northern Rock loans made in 2008 are not valid, the chancellor told parliament yesterday, because the newly state-owned lender failed to include certain compulsory information in letters and statements to customers. These borrowers, who borrowed about £1,776 each, on average, will be refunded for all their interest payments since 2008 – though they were not overcharged.

Treasury economic secretary Savid Javid told MPs that repaying the interest was “likely to increase public sector net borrowing for 2012-13,” but would not significantly delay Northern Rock’s eventual repayment of government funding, worth £19.6bn.

As this came just after the George Osborne’s Autumn Statement, but did not appear in the main fiscal figures, shadow chancellor Ed Balls accused Osborne of “trying to play fast and loose with the public finances.” But Osborne said the Treasury had been completely transparent.