The Government was under pressure last night to allow freedom of information laws to apply to Northern Rock as it battled to push emergency legislation to nationalise the bank through Parliament.

Peers demanded the move - as well as outside scrutiny of the troubled financial institution's performance - as a condition of approving the law.

Opposition parties joined forces to call on ministers to "let the people know the facts" about exactly where their money was going and how it was being used.

The move came amid renewed controversy over Granite, the offshore trust to which Northern Rock sold off its most profitable mortgages, sparking claims the taxpayer had been left with "rubbish".

As parliamentary debate continued late into last night, ministers had to decide whether to accept the Lords' amendments to The Banking (Special Provisions) Bill or risk a period of late-night parliamentary "ping pong" with the Upper Chamber.

Downing Street indicated it wanted to get the measure passed "as quickly as possible" so the process of nationalisation can get under way.

That will involve the approval of two further orders - one to transfer the bank's shares into public hands and the other allowing the payment of compensation to the present 180,000 shareholders.

Prime Minister Gordon Brown has said the FOI exemption in the Bill was needed to ensure Northern Rock's competitors cannot find out the full detail of its business plan.

But critics insist commercial interests and trade secrets were specifically protected under the FOI laws and so the bank should be subject to them like other public bodies.

The Liberal Democrat-led move to reverse the exemption was backed by a majority of 31 in the House of Lords.

Lib Dem spokesman Lord Oakeshott said: "Taxpayers must know the full picture at Northern Rock, including Granite and the £8 billion of dodgy unsecured loans. Making Northern Rock subject to freedom of information requests will stop any Treasury cover-up."

The upper House also amended the Bill to introduce a requirement on the Bank of England to carry out an audit of the troubled bank within three months of it coming into public ownership and then at least annually and requiring the Office of Fair Trading to report annually to Parliament on the impact of the nationalisation on the competitiveness of the UK banking market.

Tory Lords leader Lord Strathclyde said: "The House of Lords is doing its proper job in revising legislation - and, under the most difficult circumstances, doing it well.

"We need the transparency in government which the Prime Minister trumpets - and nowhere more than over this, the biggest nationalisation in British history.

"Fine words about liberty and transparency mean nothing unless they are matched with action."

The Tories, who unlike the Liberal Democrats oppose the nationalisation, claimed the Treasury was in confusion about the status of Granite.

Assertions that it was an "independent legal entity" were contradicted by Northern Rock's annual report which said they were "regarded as legal subsidiaries under UK companies legislation", shadow Chancellor George Osborne said.