THE Liberal Democrats have demanded that Price Waterhouse Coopers (PWC) be sacked as auditor to Northern Rock after the revelation of mounting losses in the nationalised bank’s loan book.

The call comes amid mounting pressure for a full investigation into the Rock affair by the Commons public accounts committee.

Lib Dem Treasury spokesman Lord Oakeshott attacked Northern Rock for retaining PWC despite decisions taken by the bank’s executive chairman Ron Sandler to change a slew of accounting policies. The old practices have been blamed for masking the extent of the bad-debt problem looming in Rock’s accounts.

The attack follows Rock’s interim results, published last week, showing the bank lost £585.4m in the first six months of the year.

Oakeshott said: “Northern Rock’s horrific results pile up more evidence of the true state of the problems. Arrears, particularly in the toxic Together mortgages [which handed out 125% of home value], were not disclosed properly as the House of Lords voted on the bank’s nationalisation.

“There must be a full independent audit of Northern Rock. PWC, who were the auditors at the time of the crash, must stand down. The government, not the new Northern Rock board, should investigate to see if there is a case to answer as taxpayers’ money is at stake.”

The extent of taxpayers’ exposure was heightened last week after the government’s decision to convert £3 billion of Rock’s loans from the Bank of England into equity. Chancellor Alistair Darling also converted £400m of preference shares into ordinary shares, giving the bank a total additional cushion of £3.4 billion.

Jon Wood of SRM Global, Rock’s largest shareholder at the time of its collapse, said: “The chancellor assured parliament that the UK taxpayer would have any exposure to Northern Rock secured on the company’s assets. This is now not the case. This week’s announcement unnecessarily subordinates the interests of taxpayers to that of other creditors.”

Wood continued: “It is clear that the UK taxpayer has not been given a full and complete explanation as to why Northern Rock was nationalised. We would therefore urge the public accounts committee to fully investigate the reasons for the nationalisation and the current and future impact on taxpayers. It is time for the Treasury to open the kimono on Northern Rock.” Taxpayer risks rise, page 8

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