MPs on the Treasury Select Committee called on Northern Rock to abandon plans to pay £60 million to shareholders only weeks after seeking emergency assistance from the Government.

Representatives from all three political parties accused the beleaguered bank of “sending the wrong message” to taxpayers and customers by pressing ahead with the interim dividend, which is up 30 per cent on last year.

Michael Fallon, the Conservative MP for Sevenoaks, said that the bank’s board ran the risk of being forced before the committee to testify on the dividend payment.

“It’s a very big increase that doesn’t look to be justified by performance,” Mr Fallon said. “It’s one of the issues we’ll be exploring.”

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But Matt Ridley, Northern Rock’s chairman, said yesterday that the bank’s board “stood ready to account for its actions”. In a letter to 100 MPs, including the members of the committee, he denied that Northern Rock had been a reckless lender.

A spokesman for the bank confirmed yesterday that, although the bank was not legally obliged to pay the 14.2p per share dividend that it announced in July, its decision on September 14 to go ahead with the payment had not changed.

The dividend is due to be paid on October 26 to everyone on the shareholder register on September 28, leaving Northern Rock just a few days to alert potential investors if it changes its mind and pulls the payout.

Despite the likelihood of a furious response from taxpayers, major shareholders in Northern Rock said that they expected to be paid.

Philip Richards, the fund manager behind Rock's biggest shareholder, RAB Capital, said that, given that the bank was solvent and had a fundamentally sound mortgage book, and that the Bank of England was receiving a penal rate of interest for its emergency loans, it was “right and proper” that the dividend should be paid.

Another large shareholder said: “Dividends are paid out of solvency, not liquidity, which is where Northern Rock’s problems lay.” But George Mudie, the Labour MP for Leeds East and a Treasury Select Committee member, said that the payment would be “insensitive to taxpayers and customers who went through a torrid time with worry over their savings”.

Another member of the committee, John Thurso, Liberal Democrat MP for Caithness, Sutherland and Easter Ross, said that although Northern Rock might be able to pay a dividend, to do so would be “injudicious”.

Meanwhile, Mr Richards, whose RAB Capital funds own 6 per cent of the bank, yesterday repeated his concern that short-sellers might be conducting a campaign to destabilise Northern Rock’s share price.

He described how, in the space of a minute, five bank trading desks independently telephoned him to relay the same false rumour about the bank. “You’ve got to think it’s being orchestrated when five different trading desks contact you with the same bit of hot news,” he said.

Shares in Northern Rock zig-zagged yesterday, ranging between 163p and 221½ before closing at 174.4p.

Meanwhile, the Treasury has appointed Goldman Sachs to advise it on its options regarding Northern Rock. The move comes amid mounting conviction that a sale to another bank will be hard to achieve and a break-up looks more likely. The Government would be closely involved because of its pledge to guarantee savers’ deposits.

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