241 Pizza

Both remaining bidders had been warned by the Treasury last week that they needed to improve their offers, because neither offered taxpayers a good enough deal.

Mr Darling said he was “grateful to the bidders for their work over many months” in formulating offers, but, after consulting with the government's financial advisers, Goldman Sachs, he had concluded that neither was in the best interests of taxpayers.

“I’ve always said I wanted to protect taxpayers’ interest,” he said, adding that under nationalisation the subsidy provided by the Treasury would be repaid in full.

He said that Northern Rock's problems stemmed from "a board that had a particular financial model which, when the markets became difficult, could not carry on".

The decision to nationalise Britain’s fifth-largest mortgage lender, which conjures up the nationalisations of the 1970s, follows the near collapse of the bank in the wake of the credit crunch.

The company’s financial difficulties forced it go to the Bank of England to ask for emergency funding, triggering the first significant run on a British bank for more than a century.

British taxpayers have been forced to subsidise the Rock through loans and guarantees to other lenders worth about £55 billion.

The timing of this afternoon’s announcement has come as a surprise, with most experts expecting the decision to be made via a Stock Market or Common’s statement.

The move is likely to be seen by many as a failure on behalf of the Treasury. Mr Darling has repeatedly said that a private sector solution was the preferred option.

Gordon Brown, the Prime Minister, said recently: "My first concern has always been the stability of the economy. Why we acted to help Northern Rock in the first place was to prevent contagion to other banks and other building societies and the British economy.

"And because stability is the issue, we will look at every option, and that includes taking the company into public ownership and then moving it later back into the private sector.”

George Osborne, the Shadow Chancellor, condemned the move. "I think nationalisation does enormous reputational damage to the UK as a place for financial services," he said. "And it also means now that the government is responsible every time Northern Rock forecloses on someone's mortgage."

Shareholders had been hoping to have a say in the outcome of talks between the Treasury and the bidders. However, the bank's two largest investors failed to win support for a number of proposals that would have given investors the right to approve the sale of the bank's assets.

Until today, Virgin Group - who planned to rebrand the stricken bank as “Virgin Bank” - had been seen to be in pole position when it came to a likely suitor. Even so, as late as Friday reports suggested that the Government was pushing for a better deal for taxpayers than currently on the table.

Mr Darling said that he had spoken today by phone to Sir Richard, who was "disappointed" at the Treasury's decision. Sir Richard said that he felt that a commercial solution would have been the best way forward.

Some job losses are predicted at Northern Rock.

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