Big cutback for Rock foundation

Nov 29 2007 by Paul James, The Journal

THE Northern Rock Foundation last night revealed it will cut its spending by more than two-thirds in the next year because of uncertainty over the bank’s future.

The charity, which receives 5% of the bank’s pre-tax profits, has spent an average of £19m a year since it was founded in 1997.

But bosses announced that their 2008 budget will be just £7m, compared to around £22m this year and £27m in 2006.

A statement from the charity said: “The foundation’s trustees have set this prudent working budget while negotiations about the future of Northern Rock continue.

“During 2008, the foundation’s trustees will keep their priorities and budgets under review and will aim to make decisions about their longer-term plans once the negotiations on Northern Rock’s future are resolved.”

The announcement came just two days after the consortium led by Sir Richard Branson’s Virgin group was named by Rock chiefs as their preferred bidder.

Business leaders and politicians are continuing to press for a quick resolution to the Northern Rock situation to safeguard jobs at the bank and its charitable arm.

Newcastle Council leader John Shipley said last night: “This isn’t a surprise but is nevertheless understandable, given the circumstances.

“We hope that a new owner can be found who will support the work of the foundation, on which so many organisations have been able to depend in recent years.”

In an interview in The Journal yesterday, Jayne-Anne Gadhia, the proposed boss of Virgin’s new bank, could not confirm whether the Northern Rock Foundation would continue to receive its 5% if the Virgin bid was successful.

Virgin has pledged, however, to give an extra £10m in each of the financial years up to 2015 when the company’s pre-tax profits exceed £638m. The extra payments would happen in a maximum of five years.

The charity was established in 1997 when Northern Rock converted from being a mutual organisation, and since then its funds have totalled just over £190m.

Next year’s cash will be targeted to help older people, people with mental health problems, people with learning disabilities, carers, disadvantaged young people, people trying to overcome homelessness or addictions and victims of domestic abuse, sexual violence and sexual exploitation.

The foundation statement added: “The 2008 budget of £7m represents a major investment in charitable activities, which will see the foundation continuing as one of the largest funders of the voluntary sector in the North-East and Cumbria.”