Following the news that Virgin Money is to float and the so called “bad bank” part of Northern Rock is returning a profit, VONNE wrote to the new Minister for Civil Society and to the Treasury setting out why it is right and fair that the VCSE in the North East should reap some of the benefit from the surpluses. I will provide you with some background to this:
Northern Rock Foundation held 15% of the shares in Northern Rock bank and was entitled to 5% of the pre tax profits. In January 2012, Virgin Money bought the Northern Rock business and branch network (the so called “good bank”) for £747m. With subsequent payments this has risen to £1.02bn. Virgin money made profits of £60m in the first half of this year and are set to float, which will raise a further £150m.
Meanwhile NRAM – (the so called “bad bank”) 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. According to financial experts, if you add the money raised by the Treasury from the sale to Virgin, the Government has made more than £3bn from the business in the past 3 years. 15% of that should arguably be enjoyed by the VCSE in the North East and Cumbria.
The outright losers here are Charities, Social Enterprises and Community groups in the North East and Cumbria. The Northern Rock Foundation is set to close at a time when Charities are reporting increased demands for their services and income streams are drying up. Northern Rock Foundation was an intelligent grant maker that made grants worth around £220m to Charities in the North East and Cumbria over the past 17 years. The loss is hard to convey – given that almost everyone in the North East will be associated with a charity that at one time or another was touched by the Northern Rock foundation.
Whilst we are grateful to Virgin money for their commitment of £1m to youth projects, clearly the gap between what Northern Rock Foundation previously granted to Charities in the region is enormous.
There is a real opportunity for the new Minister to make a difference by urging the Treasury to place a value on the asset that existed for the benefit of Charities in the North East. If the Treasury were to make a gift to the foundation of just 1% of the money that it has raised through the sale of the business this would create a £30m investment in Charities in the North East. This would provide a much needed lifeline to organisations that support some of the most vulnerable and deprived people in the country.
I am as always interested in your views and would be delighted if you would join VONNE in urging the Treasury to play fair on this. Email me at email@example.com