There seems to be some disappointment about VInce Cable’s indication that Northern Rock will not be turned back into a building society. The business secretary has told The Journal that remutualisation was not actively being considered.
Michael Stephenson, chief executive of the Co-operative Party, said that the coalition had “failed its first big test on co-operatives” early into the Parliament.
“By reneging on their commitment to re-mutualise Northern Rock, Vince Cable has shown that their devotion to a new approach to the economy is just a sham,” he said.
“Just like David Cameron’s Big Society, this is a Big Con. They are dumping all of their promises one by one and showing that they are just like the last Conservative government which de-mutualised all of our building societies.”
There are two problems with Michael’s reasoning.
1] The coalition did not promise to remutualise Northern Rock. I’ve just been through the coalition agreement and the lender is not even mentioned.
2] At a time of severe public spending cuts would the public stomach giving away Northern Rock for free? Taxpayers put £1.4bn into rescuing the troubled lender. Even by selling it or privatising it the government is unlikely to raise anything like this sum.
By mutualising it the taxpayer would have given it away for nothing. In theory you could demand money from all customers and staff to do a mutual-esque buyout. But would everyone want to take part? Probably not.
Presumably it could still be bought by an existing mutual such as Nationwide or the Co-operative Bank – at a market price. That seems the most desirable outcome.
“How does the taxpayer get his money back?” Indeed.
Jim Pickard
Kiran Stacey
