The Chancellor Alistair Darling announced today that Northern Rock is to be nationalised after deciding it was the best way to safeguard the £55 billion of taxpayers' money pledged in loans and guarantees.

Mr Darling decided that neither of the two remaining private sector bids to buy the troubled bank delivered “sufficient value for money to the taxpayer”.

Shares of Northern Rock will be suspended on the London Stock Exchange tomorrow morning and legislation will be passed to allow the Govenment to take it into temporary public ownership.

Mr Darling said that the level of compensation to Northern Rock shareholders, which analysts expect to be minimal, would be determined by an “independent valuer” who had yet to be appointed.

The news was announced at a hastily convened press conference at the Treasury this afternoon.

"The government has decided to bring forward legislation to bring Northern Rock into a temporary period of public ownership," said the Chancellor.

He refused to be drawn on what 'temporary' meant, insisting only: "We will transfer it back into the public sector when it is right to do so."

He excused the Sunday afternoon announcement, saying: "It is necessary to make a formal announcement before the markets open tomorrow morning."

Ron Sandler, the City grandee who led the rescue of Lloyd's of London from the threat of collapse, will become chairman of Northern Rock. At the press conference, he said that he would travel to the bank's headquarters in Newcastle tomorrow afternoon to see how the fortunes of the bank could be turned round.

He added that he was looking forward to the “exciting new role”, but reiterated that he saw his job as a “transitional” one. He said he saw his main task as being to return the Rock to being a “profitable and vibrant” bank.

Branches of Northern Rock will be open for business as usual tomorrow, the Chancellor stressed, and borrowers and savers will not be affected by the move. He said he was confident that every penny of taxpayers' money sunk into the troubled bank would be recouped.

Today's decision has come as a disappointment to Sir Richard Branson’s Virgin Group and the Northern Rock management team, who had both been working on bids up until the Chancellor’s decision today.

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