When you’re short of money, the odd £747 million always comes in useful, but it doesn’t go far these days. It’s enough to finance the UK state spending machine for about nine hours. The government had spent more than the proceeds from the sale of Northern Rock before it could read the reaction to it in Friday’s papers.

The sale is almost irrelevant to the future of British banking. The price isn’t bad, in the circumstances, even if the taxpayers have lost nearly half the money we put in to rescue the Crock in the first place. But it speaks volumes about value in the rest of the sector.

Northern Virgin is the cleanest, prettiest, simplest bank on the block. Its assets were cherry-picked from the ruins of Northern Rock. It has next-to-no funny funding deals. It has no euro exposure to speak of. It’s perfectly placed in an industry desperately in need of reform. Yet it can only make 0.7 times its net book value in a drawn-out auction, and then only with massive help from an outsider who specialises in buying distressed assets and admits to looking for a sale just a few years out.

Shares in Lloyds and RBS sell on about 0.4 times NBV. Yet their shares plumbed new depths on the Northern news, suggesting that the market believes their far larger balance sheets are full of porkies, or at least dogs. There is no possibility of the government getting our money back in the forseeable future, and we may even find ourselves having to stump up still more before the whole truth about the value of the assets can be told. While this is a disappointment to the Chancellor who might have hoped for help from a sale, it’s also an opportunity. Since the taxpayer owns RBS, and Lloyds is also a government pensioner, both should be refashioned as utilities to serve the economy. Theyn should look more like the electricity and gas companies, and less like playgrounds for financial engineers.

Lloyds exists in its current form only by accident. It is obliged to sell 630 branches to meet the EC’s demands, but nobody is going to pay £1.5 billion. The Co-op cannot buy this unattractive package without risking its own credit rating. The anser is to break Lloyds up, giving shares in the Halifax to the existing shareholders. The Chancellor need not be seen to be involved. He has the deeply obscure Robin Budenberg at the UKFI to do the dirty work for him.

As for the Northern Virgin, she’s entering a vitally important  industry where existing providers are demoralised and their customers loathe them. Conditions for success could hardly be more favourable, but even Richard Branson won’t force the others to improve without pressure from above.