Northern Rock on Monday announced plans to axe one-third of its staff, halve its balance book and shed 60 per cent of its mortgage holders as it races to repay all but £1bn of its £24bn government loan by the end of next year.

The ambitious timetable set out by Ron Sandler, executive chairman, gives hope to Alistair Darling, UK chancellor, who wants to dispel Tory claims that the nationalisation of the bank was a political “disaster”. If all goes to plan the taxpayer could be almost repaid in full before the last possible election date in spring 2010.