Treasury put £1.6bn into Dunfermline financing
By Alex Stevenson
The government’s net financing for the collapse of the Dunfermline Building Society is £1.6 billion, Alistair Darling has told the Commons.
The chancellor was updating MPs on the government’s decision to force the breakup of Dunfermline over the weekend.
He said this amount had been provided by the Treasury to Nationwide after it was decided a short-term bailout would not give the society realistic prospects for an “independent long-term future”.
Under the Nationwide arrangements Dunfermline will continue as a brand and none of the staff at its branches will be made redundant for at least three years.
Mr Darling admitted there were likely to be some jobs lost at the society’s head office, however.
And he said the government faced a “small residual exposure” as a result of the sale.
Dunfermline MP Willie Rennie, a Liberal Democrat, questioned whether the move was necessary and said it was a “sad day that such an institution has come to this”.
Mr Darling reiterated this feeling, saying it was a “great pity” and later adding: “All of us deeply regret that decisions taken by the management of the Dunfermline Building Society mean. the action we’ve taken was necessary.”
But MPs repeatedly attacked the Financial Services Authority (FSA) for its failure to regulate the building society.
Michael Fallon, the senior Conservative on the Commons’ Treasury select committee, wanted to know “what questions were being asked”. He said: “Isn’t it an extraordinary thing. that this no longer seems extraordinary?”
Mr Darling admitted the supervisory system needed regulating but insisted the government was left in no choice in acting as it had done.
“Even if we’d put all this money in, our belief and the regulator’s belief is it would not be enough,” he pressed.
Shadow chancellor George Osborne took the opportunity to criticise Mr Darling’s relations with the Scottish government.
“The Scottish people are entitled to expect a bit more cooperation and a bit less confrontation between those elected to govern them in Edinburgh and London,” he said.
Mr Darling said relations north and south of the border were “extremely constructive”.
Dunfermline Building Society was the 12th largest building society in Britain, employing around 500 people and holding 300,000 members.
The FSA decided on Saturday it could not remain open for business because of a range of flawed management decisions dating as far back as 2005.
Its purchases of high-risk American self-certified mortgages and the need to write off £10 million from the purchase of a £31 million IT system led to it making an expected loss of over £24 million last year.
