MPs call for Rock to become building society

Nov 13 2009 by William Green, The Journal

NEARLY 100 MPs are calling for Northern Rock to be allowed to become a building society once again.

Gordon Brown is under pressure to make the move from a dozen former Labour ministers, chairmen of influential select committees, and Tory and Liberal Democrat MPs.

Widely respected Vince Cable, the Lib Dem Treasury spokesman, also backs the move having pressed the case to nationalise the Rock. The developments come as the battle over the Rock’s future intensifies after European competition chiefs approved plans to split the lender into so-called good and bad banks. A total of 97 MPs have signed a Commons motion, tabled by former minister Malcolm Wicks.

It expresses regret that so many building societies turned into banks in the 1980s and 1990s, and that not one survived as an independent British bank.

And it “urges the Government, as part of the restructuring of the banking sector, to enable and encourage the remutualisation of a significant part of it, including the conventional banking side of Northern Rock”.

Former minister Chris Mullin, MP for Sunderland South, ex-Whip and Tyne Bridge MP David Clelland have signed the motion as have Stephen Hepburn of Jarrow and Sunderland North’s Bill Etherington. Mr Clelland said: “I think building societies give a much better service to customers than the banks and Northern Rock was really a model building society. Things went wrong when it became a bank and returning it to a building society would be a right and popular thing.”

There was “no question” that Northern Rock should become a building society again, according to Mr Etherington.

He added: “It seems to me that if you want to try and get the state’s money back out of Northern Rock, you would have a better chance of doing that if it was not a bank.”

The calls for a new Rock building society come after Government advisers said the move could offer taxpayers a “longer-term” payback.

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

Chancellor Alistair Darling has also said he has “no difficulty” with remutualisation, but warned the Government would not pay for the Rock to go back to its building society past.