Northern Rock sale will be subject to independent review, MP says

In a statement posted on the Labour Party website Chris Leslie, who is shadow financial secretary to the Treasury, said that the public spending watchdog had written to confirm that the audit would take place.

The Government announced the sale of the part-nationalised bank last month. The Labour Party said the sale would mean a loss of between £400 million and £650 million to the taxpayer.

Leslie had previously confirmed that the NAO would carry out a 'value for money' investigation of the £747 million sale on his Twitter feed.

A spokesman for the NAO declined to comment on the reports and said that the content of the letter to Leslie, which reports said had come from NAO head Amyas Morse, was not public.

A VFM audit is a non-financial audit which measures the effectiveness, economy and efficiency of government spending. A VFM audit only examines the implementation of a particular policy and cannot question the policy itself. The NAO carries out roughly sixty of these investigations each year, according to its website.

Reporting on the letter, the BBC said that Morse had confirmed he would conduct the study "in relation to the creation and sale of Northern Rock plc".

However, the letter went on to say that the watchdog's role was to "act as an auditor, in this case of the completed sale transaction".

The review would be carried out "as a matter of urgency", he said.

Leslie said that there was "clearly strong evidence" to suggest that the "firesale" of the troubled bank was poor value for money for the taxpayer. He urged the Chancellor to delay the sale, due to complete on 1 January 2012, until the NAO could assure the public that it was the right way to proceed.

"At present there is the possibility that those buying Northern Rock could asset strip so much from the firm that they get back virtually every penny they invest within a matter of months. Ministers haven't thought through this deal carefully enough – they have a duty to do better than this," he said.

As part of the deal, Virgin Money will pay £747m for Northern Rock's retail operations on closing of the sale and an expected £50m within six months of completion. A further £150m will be paid in the form of a capital instrument, and an additional cash consideration of between £50-80m will be payable within the next five years if the bank is sold or shares are offered on the stock market.

Northern Rock's shares were transferred into temporary public ownership after its near collapse in 2008. The bank was then split into two separate entities: savings and mortgage bank Northern Rock plc; and Northern Rock (Asset Management) plc which retained the bank's bad debt. The Government has said it has no plans to sell Northern Rock Asset Management.

Writing on the Labour Party's ProgressOnline blog last week, Leslie said there were "serious questions" around the sale which deserved further scrutiny.

"On the timing of the sale, the government had at least until the very end of 2013 to secure a sale under EU rules... Yet, with our economy flatlining, the eurozone crisis deepening and bank shares falling, George Osborne decided to go ahead when the proceeds for the taxpayer look decidedly small. Either the government thinks sale conditions might get even worse and just had to get on with things... or they genuinely feel this was a great deal, which must raise questions over their stewardship of the taxpayer's best interests," he wrote.