Troubled lender Northern Rock is to be nationalised, months after worried savers queued outside its Kingston branch.

The bank was forced to borrow billions of pounds from the Bank of England in September after being caught out in the international credit squeeze.

Announcing the move yesterday, Chancellor Alistair Darling said nationalisation guaranteed taxpayers would get their money back.

The decision ends bids by the Virgin group and managers to takeover the stricken bank.

Taxpayers have so far subsidised the bank with loans and guarantees of about £55billion.

With nationalization, that amount will double to £110billion, or £3,500 per taxpayer.

Mr Darling said it was better for the government to hold onto Northern Rock until market conditions improved and its value increased.

It would then be sold back to the private sector.

Shareholders are expected to be offered compensation at a Government-set rate while more than 1,000 jobs are also expected to go.