(02-17) 09:02 PST LONDON, United Kingdom (AP) —

Treasury chief Alistair Darling said Sunday that struggling bank Northern Rock PLC will be nationalized after the government rejected two private takeover bids.

Darling told a news conference that the ailing mortgage lender would be placed under temporary public ownership because both bids had failed to meet the government’s demands.

He said neither a proposal from Richard Branson’s Virgin Group nor an in-house management team delivered “sufficient value for money to the taxpayer.”

The government had said more than 25 billion pounds (US$49 billion; euro33 billion) in government loans must be paid back within three years.

“Taking into account the wider considerations, I’ve concluded this is the right approach,” Darling told the news conference.

“It is our belief that the company can be moved back into the private sector at the earliest and most prudent opportunity,” he said.

Northern Rock ran into trouble in September because it relied too heavily on short-term money markets instead of deposits for funding. A subsequent profit warning and appeal to the Bank of England for an emergency loan led to the first run on a British bank since 1866.

The government had been in the middle of an auction process to find a private buyer for Northern Rock, with revised bids submitted this weekend by Virgin and the in-house management team.

Darling had a deadline of March 17 to chose between the bids and nationalization. That is the date when he must submit a restructuring plan to the European Union for state aid approval.

Corporate troubleshooter Ron Sandler has been appointed head of the newly nationalized bank, Darling said.

An ex-head of Lloyd’s of London insurers, Sandler is regarded as close to Prime Minister Gordon Brown. He also has previously helped the Treasury on pension policies.

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On the Net: «www.northernrock.com»

NEW powers for the Scottish Parliament, including control over taxes, will come closer this week as Unionist parties seal an historic alliance.

Leaders of the three major pro-UK parties - the LibDems, Tories and Labour - will meet for private talks to discuss a complete overhaul of the Parliament’s powers.

Currently, the Scottish Parliament has the right to vary the basic rate of income tax only by up to 3p, a power which has never been used.

But now the Unionist parties are to consider looking at far more powers, such as taxes on inheritance, real estate, gambling and vehicles.

The dramatic move will be seen as a clear bid to outflank the SNP government, which two weeks ago unveiled a white paper on holding a referendum on independence.

The three Unionist parties are now attempting to grasp back the initiative and isolate the SNP, saying they are willing to consider reforms, short of an independence referendum.

However, SNP sources last night declared themselves “delighted” by the move, arguing they were forcing the pace of change.

The talks this week will see the three parties agree on a new parliamentary forum to take the matter forward. It is understood they will involve Scottish Lib Dem leader Nicol Stephen, Scottish Labour deputy leader Cathy Jamieson and former Scottish Tory leader David McLetchie.

Stephen told Scotland on Sunday: “It really isn’t credible for a Parliament simply to receive a cheque for 30bn and to decide how to spend it and not to have any responsibility for how it is raised.” He added: “Labour, the Liberals and the Conservatives have the majority in the Parliament and we will take this through the Parliament.”

Stephen said the three parties would now agree to invite the public and leaders of civic society to have their say over reform.

As revealed in this newspaper earlier this month, one option is to have a Convention chaired by the Parliament’s Presiding Officer Alex Fergusson. Other options include an ad-hoc committee of the Parliament, taking evidence on the matter.

Stephen said: “It is too early to say which of those will be preferred but that is the sort of decision that we will be making [this week]. That is the sense I get from speaking to other parties, that that is the way forward.”

Stephen added that the new body would not even consider independence as one of its options, a move clearly designed to isolate the SNP.

“This is an initiative which is very different from the SNP white paper on independence because the one objective here is a stronger Parliament, not separation from the rest of the UK,” he said.

He added: “I am keen that it involves the political parties, voters and civic society in the same way as the Constitutional Convention.”

Wendy Alexander, soon to become Labour leader at Holyrood, declared last week she too welcomed a debate on the matter. In the past, she has backed the idea of a more “fiscally responsible” Parliament.

However, there is sure to be some resistance within Tory and Labour ranks over further transfer of powers to Holyrood. Consequently, senior Labour figures are understood to believe the forum should also debate whether some powers should be handed back to Westminster.

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Kauto Star is once again an odds-on favourite to land back-to-back victories in the totesport Cheltenham Gold Cup following an upbeat bulletin from trainer Paul Nicholls.

Most bookmakers suspended their markets on the March 14 race last night after it emerged Kauto Star had returned home lame following his eight-length Ascot Chase romp. Initial fears were that he had sprained a fetlock, but Nicholls now reports the problem to be a minor infection.

“It’s basically pus in his foot,” said Nicholls. “Once the vet and my head lad had released that he was virtually sound. We were quite confident last night as we took his shoe off and that instantly relieved him a bit, so we thought that was what the problem was. It’s basically a minor setback and shouldn’t affect him too much.

“He would have had a couple of days off after running anyway and this should clear up within 48 hours, so it shouldn’t make too much difference. We were fairly confident it was something simple like that but it’s a huge relief. I don’t think anyone slept here last night and I was almost afraid to go in this morning to find out what was wrong! I’m absolutely chuffed though, and it’s all systems go for the Gold Cup now.”

William Hill make Kauto Star their 10-11 market leader while VC Bet go evens about his chances. The eight-year-old’s stablemate and main market rival Denman is now 6-4 from 7-4 with Hills to take the extended three-and-a-quarter-mile prize. “It’s a huge relief to wake up this morning and read that all appears to be well with the world,” said Hills’ Kate Miller.