SIR Richard Branson's Virgin Money is to buy nationalised lender Northern Rock in a £747m deal, the Treasury announced today.

The takeover of the Newcastle-based bank, which was taken into public ownership in February 2008, is expected to be completed by the end of this year.

The Government will receive an initial £747m with the potential to secure 1 billion in total - less than the estimated £1.4bn it has injected into the bank during its period of public ownership.

Virgin Money failed in a bid to buy the bank following its collapse in 2007.

The sale of Northern Rock to Virgin Money "was the best deal for the British taxpayer", Chancellor George Osborne said today.

The operational headquarters of the combined business will be in Newcastle, while Virgin Money has pledged no further compulsory redundancies beyond those already announced for at least three years.

Virgin Money chief executive Jayne-Anne Gadhia said the deal would create a major new competitor in the UK retail banking sector.

She added: "The two businesses complement each other well and together they will create a strong bank with over four million customers."

The acquisition includes 75 branches and 2,100 staff, one million customers, a £14bn mortgage book and retail deposits worth £16bn.

David Fleming, national officer of the union Unite said: “The Treasury decision to sell Northern Rock to Virgin Money marks a significant moment in the history of this North-East based financial institution.

"After three years of turmoil and upheaval for the workforce at Northern Rock, Unite hope that today will be the start of a secure future.

“It is now vital that Virgin Money give Unite firm guarantees that the 2,500 Northern Rock workforce is protected. "Since the near collapse of the bank in 2008 some 3,000 staff have lost their jobs, it is now time to rebuild this iconic brand.

“Unite welcomes the acknowledgement today, by the new owner of the importance of Northern Rock for the North–East region. “

Virgin Money, which was founded in 1995, has around three million customers.

But Co-operative Party general secretary Michael Stephenson claimed it was a bad deal for the future of Northern Rock.

He said: "George Osborne has missed a real opportunity to return the Rock as a new mutual, which would have signalled the Government had learnt crucial lessons from the banking crisis.

"The sale to Virgin is a resurrection of the failed former model.

"This fire-sale demonstrates he is not willing to think long-term about how banks can serve their customers and reduce risk for taxpayers."

Shadow chancellor Ed Balls told the Victoria Derbyshire programme on BBC Radio 5 Live: "It was definitely right to take Northern Rock into public ownership in 2008 to stop a catastrophe and it is good news it is now going back to the private sector.

"We will need to look at the details. Given the original money put in from the taxpayer was £1.4bn, we are going to get less back, we're going to have a loss here.

"There is a question for the Chancellor as to why he had decided to sell this bank now rather than at a later stage - would that lead to a smaller loss or a even a profit?

"We need to make sure there will be proper protections for the consumer and have more competition.

"The other thing to say is, given the Government is going to be borrowing so much more money than it planned, I have said for this sale and for future sales of Lloyds and RBS, if the Government is making a profit, or getting money into the Treasury, they should use that money to repay the national debt to get borrowing down.

"Using it for a tax cut for a minority would be wrong. George Osborne has been a bit silent on that and I hope he will confirm that.

"We need to keep an eye to make sure he does not think he can use these proceeds to fund a tax giveaway for the minority.

"The priority has to be to use the returns of the sales to repay the national debt - that's what I would do if I was chancellor.

"I think we need to study the details. This has come out of the blue this morning. Parliament is not sitting today so we can't ask him questions and he's not done a press conference.

"There is a question as to why this was the best time to do this. If he had waited until the markets were slightly less unstable - bank shares are very low at the moment - would that have led to a better return?

"I'm not saying it's right or wrong - I just want to look at that question, but clearly there is a loss for the taxpayer."

Mr Balls said he meant cutting top rate taxes for people earning more than £150,000 when he referred to the minority.