The National Audit Office (NAO) is to probe the sale of nationalised bank Northern Rock to Virgin Money, the Labor Party said, after the terms of the deal meant the taxpayer would effectively book a loss on the disposal.

The Labor Party said the National Audit Office had agreed to the probe following a call from Labour's financial secretary Chris Leslie, who also urged Chancellor George Osborne to delay the deal until the NAO had fully examined it.

In November, the government agreed to sell Northern Rock to Virgin Money - the banking arm of billionaire Richard Branson's Virgin Group -- for between 747 million pounds and 1 billion pounds

However, since Britain had to pump 1.4 billion pounds of equity into Northern Rock in order to support it through the credit crisis, the sale would effectively represent a loss of at least 400 million pounds.

There is clearly strong evidence to suggest that this Northern Rock firesale represents poor value for money for the taxpayer and this investigation by the independent National Audit Office confirms that serious questions hang over George Osborne's deal, Labour's Leslie said in a statement.

The Chancellor should consider delaying the sale, due on 1st January, until the NAO can assure the public that it is the right way to proceed, he added.

Northern Rock was fully nationalised three years ago after nearly collapsing during the credit crunch.

The group was starved of funding after banks abruptly stopped lending to each other in the 2007 credit crisis, triggering the first run on a British bank in many decades, and prompting the government to step in with emergency support.

(Reporting by Sudip Kar-Gupta)