Gordon Brown yesterday denied the government was nationalising “rubbish” mortgages at Northern Rock after it became clear that over a third of the bank’s assets will remain outside state control in Granite, its Jersey-based trust. Financial Times

Conservatives claimed Granite’s assets of £45bn included some of the best quality Northern Rock mortgages, leaving the taxpayer exposed to more risky loans on the remainder of the bank’s £110bn balance sheet.

The exclusion of Granite, Northern Rock’s special purpose financing vehicle, from the nationalisation stunned many MPs and left the government scrabbling to explain the relationship between the nationalised Rock and its Jersey offshoot.

Brown argues the government is not exposed to Granite, a separate legal entity, and denies the special vehicle has creamed off the best Northern Rock mortgages to raise finance on the bond market.