Will Northern Rock be a building society again?

Nov 10 2009 by William Green, The Journal

TURNING Northern Rock back into a building society may offer taxpayers a "longer-term" payback, according to top Government officials.

Bosses at the Government agency overseeing taxpayers’ shares in banks have told MPs that Rock mutualisation has “interesting” characteristics – but admitted a sale could be more attractive in raising cash.

The comments from UKFI come after Chancellor Alistair Darling said he had “no difficulty” with a Rock building society after European competition chiefs approved plans to split the lender into a so-called good and bad bank. But Mr Darling warned that the Government would not pay for the Rock to return to its building society past. Speaking before the Commons Treasury committee last week, UKFI chairman John Kingman said: “The Government has said that mutualisation is one of the options it will want to consider in the context for example of the disposal of Northern Rock.

“We will certainly look at it on a level playing field with any other option. In the end it will be a decision for the Government because disposal decisions around any of our assets ultimately go to the Chancellor.”

He said different structures had pros and cons, adding: “There might be a value choice between them. That is a legitimate policy choice.”

Committee member Andy Love said: “If you look at it in the longer term, building societies or mutuals have been advantageous to the consumer because the consumer gets a good deal.

“Will that play a prominent part in your decision about how to divest yourself of these organisations?

Keith Morgan, UKFI head of wholly-owned investments, said: “In the case of Northern Rock, mutualisation is an option that should be considered as part of our remit to realise value for the taxpayer. The re-mutualisation does have some interesting characteristics to it.”

Page 2: End the bonuses