Northern Rock Ten Years On

As we look back on the demise of Northern Rock ten years ago it’s worth remembering steps could be taken now to continue the good work done by the Northern Rock Foundation for the VCSE sector – and the communities - of the North East and Cumbria.

Northern Rock Foundation was an exceptional initiative in corporate and charitable giving. It was established as an independent charity when Northern Rock Building Society de-mutualised in 1997 and until 2007 was funded through a covenant whereby it received 5% of the new bank’s pre-tax profits annually – a much higher level of support than almost any other corporate organisation has given to its charitable foundation.

By 2007 the Foundation was amongst the larger grant making trusts in England. It became known for the quality of its grant making, its willingness to experiment and innovate and its support for less popular causes. The scale of funding its commitment to one geographic region allowed the Foundation to develop long-term programmes and in-depth relationships with voluntary organisations.

Between January 1998 and December 2014 the Foundation awarded £225 million in 4,400 grants.

The Northern Rock Foundation always focused on those people in the North East and Cumbria who most needed help, but who were least likely to receive support from other sources. It targeted its funds through grant programmes which had specific criteria and the programmes were developed by Foundation staff through research and consultation with regional and national experts in the relevant fields and in the voluntary sector.

The Foundation also helped voluntary and community sector organisations to be successful and sustainable by funding training and development support and carrying out research and policy work.

The Sale of Northern Rock Bank

The Northern Rock Foundation owned 15% of the shares in Northern Rock Bank and received 5% of pre-tax profits. In January 2012, Virgin Money bought the Northern Rock business and branch network for £747m.

Meanwhile Northern Rock Asset Management (NRAM), which was hived off under the UK Asset Resolution Scheme, made over £1bn in the 15 months prior to March 2014 and £876m in 2012.   

Since 2012 we understand the continuing sales of parts of the NRAM portfolio have amounted to the Government loan to bail out Northern Rock being fully paid back to the Treasury.  Experts predict that the remaining portfolio will generate a profit of between £8-11 billion over the next 10-15 years.

There is a strong moral case that 5% of this profit should now be made available to support the VCSE in the NE and Cumbria. 5% of £11billion is £550m. If this were placed in an endowment at 6% return it would create a grants pot of £33m per year – forever.

The losers here are charities and community groups in the North East and Cumbria and the vulnerable individuals and communities they support.  These organisations, following several years of austerity, public sector cuts and increasing demand for their services, are facing increasing financial pressures.

In 2014 VONNE wrote to the Treasury and the Charity Minister requesting such a pledge, with a hint of a wider public campaign if we didn’t see anything by the Autumn statement.  The moral case for the government making a pledge to give 5% of pre-tax profits to a sustainable grant-making body was also made by others, including the Bishop of Durham and Lord Shipley, but with no discernible response.

An announcement was made after the 2014 Autumn statement by George Osbourne to give £4m over 4 years from LIBOR fines to the newly created Virgin Money Foundation

We publicly thanked the Treasury for this, adding we hoped the announcement will create a sustainable charitable commitment to the region. We said we would look for a commitment from Virgin Money to pledge at least 1% of all future pre-tax profits in order to secure a lasting future and urged the Treasury to make a similar pledge when the surplus assets of Northern Rock Asset Management return to the Treasury.

That time is now and the ten-year anniversary of the demise of Northern Rock puts this further into focus.  Ten years on, the argument for 5% of the NRAM assets to return to the North East is as strong as ever.