The Government courted fresh controversy in the Northern Rock saga yesterday when it appointed an independent valuer for the stricken mortgage bank and agreed to pay a fee of £4.5 million.

Andrew Caldwell, valuations partner at BDO Stoy Hayward, will receive the award irrespective of the time it takes him to establish the level of any compensation for former Rock shareholders.

The Treasury said that Mr Caldwell had extensive experience of valuing companies and would be assisted by “an expert team from BDO Stoy Hayward and outside professional firms”.

A Treasury spokesman confirmed yesterday that the valuer would be paid a fee of £4.5 million and would remain an employee of BDO Stoy Hayward. He said that it was for Mr Caldwell to decide whether his new responsibilities were full or part-time. No firm timetable for a valuation of Northern Rock had been established, he said.

Mr Caldwell's appointment, after a two-month search, marks a turning point in the tense wrangle over the Government's decision to nationalise the lender in February. It comes before a high-profile legal action by leading former shareholders, including SRM Global, the hedge fund.

Ron Sandler, the insurance markets expert, was named as the bank’s executive chairman in February on a £90,000-a-month pay deal that also caused a stir.

Northern Rock ran into funding difficulties last September and was forced to seek emergency help from the Bank of England.

Having borrowed more than £25 billion from the Bank, the Government took it into state hands, along with an estimated £100 billion of liabilities that temporarily are being paid for by the British taxpayer.

SRM and RAB Capital, the former hedge fund shareholders, and Legal & General, the institutional investor, argue that the bank should have been allowed to remain a going concern or rescued by the institutions that owned it.

SRM, which has joined forces with the UK Shareholders Association, has vowed to press ahead with legal action against the government. RAB and L&G have reserved the right to join the claim at a later stage. The case is expected to reach the courts next year.

Some estimates have suggested that former shareholders are entitled to about 400p a share for their holding. Sceptics have suggested that the Treasury was likely to offer them virtually nothing.

The Government has always argued that it had no choice but to take control of the bank, whose difficulties sparked the first run on a high-street lender for more than a hundred years.

It is understood that the Treasury, which received clearance to appoint a valuer in March, received more than ten applications for the position, before composing a shortlist in August and ratifying the appointment of Mr Caldwell yesterday.

The Treasury said: “Andrew Caldwell will inform former shareholders and others of the basis on which he is going to operate and how he intends to proceed.”

A spokesman said that the bill for Mr Caldwell’s work would be met by the taxpayer initially but would be reclaimed from the Rock once the bank had been sold on or refloated.

Banking by numbers

£1.1m Pay and pensions top-up for Adam Applegarth, the former chief

£167.6m Northern Rock’s pre-tax losses for the year to December 31, 2007

£100bn Maximum estimated liability for taxpayers

£4.5m One-off fee to Andrew Caldwell, Rock’s independent valuer

Source: Times Database

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