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Northern Rock debate needs to revive mutuality

A branch of the Northern Rock Bank on Northumb...

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The debate about mutuality is back up and running and not before time.

As the need to set a course for returning Northern Rock to the private sector forces its way up the Chancellor's agenda, more people are looking at the mutual option. In last year's General Election, Labour made it clear that it was serious about this as an option and its new shadow business minister Chuka Umunna has has ensured that this option is seriously looked at by tabling an Early Day Motion in the House of Commons that has now gathered support from over 100 MPs, including many Liberal Democrats and a handful of Conservatives, among them Jonathan Evans, chairman of the All Party Parliamentary Group on Insurance & Financial Services.

The mutual option also got an airing this week on the back of the excellent results from Nationwide, demonstrating to many that mutual ownership does have a role in the modern financial services sector. Nationwide has been quick to rule out taking over Northern Rock because it has a huge overlap in branch locations. The suggestion has, however, ensured that the debate is now very live in advance of a Deutsche Bank report on Northern Rock's future due to be delivered to UKFI - the taxpayer owned vehicle for managing the nationalised bank assets -  before the summer recess.

I have long been a fan of mutuality in the financial services sector and regretted the tidal wave of demutalisations in the 1990s, including Northern Rock, as it severely reduced what I always thought was a valuable diversity of ownership that meant longer term interests of customers had a greater chance of being taken into consideration. Mr Umunna summed this up well in The Guardian today; "A remutualised Northern Rock would inject a valuable dose of participatory democracy into an industry that too often puts the short-term interests of shareholders above all else".

It will be over to Deutsche Bank for the next instalment in this debate but at least we are having a debate.

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