Personal Finance: There'll be no such thing as societies

Bad news: the building society carpetbaggers are back.

THE FUTURE of Britain's remaining building societies was once again thrown into uncertainty this week when it emerged that carpetbaggers had succeeded in forcing seven societies to consider turning themselves into banks.

Eight of Britain's building societies were sent unwelcome New Year's resolutions, which may have to be taken seriously by the end of April when they will be holding their annual general meetings.

The resolutions, put forward by two carpetbaggers and supported in each case by 50 members of the society, propose that their boards take steps towards converting to plc status, and distributing shares to society members.

Behind seven of these resolutions is a familiar figure: Michael Hardern, former butler, self-appointed "carpetbagger-in-chief", and the man who was twice defeated in attempts to be elected a director of the country's biggest building society, Nationwide.

This year, Mr Hardern is targeting Yorkshire, Portman, Leeds & Holbeck, Chelsea, Skipton, Coventry and Britannia building societies. (Peter Mandelson, the former trade secretary who resigned amid questions about whether he told the full truth in his application for a mortgage with Britannia, could be a beneficiary if shares are distributed.)

In each case, Mr Hardern has attempted to persuade at least 50 members of each society to support his resolution, and also his election to the board as a director. It is already known that he has failed to get enough support at one society, the Coventry, but he is likely to have succeeded at others.

Stephen Major, a plumber working in Lisburn, County Antrim, has gained the support of 70 members of the Bradford & Bingley. He is thought to have been in contact with Mr Hardern through his website, www.carpetbagger.com, which is also how most of the nominations were obtained.

His resolution is almost identical to Mr Hardern's and his application was submitted at the same time. "The Internet means the flame of Athenian democracy can be rekindled and ignited here in the UK," says Mr Hardern.

Christopher Rodrigues, chief executive of Bradford & Bingley, has, in public at least, been unambivalent in his defence of mutuality. But last week he and the society's board decided to go ahead and hold an election on Mr Major's proposal.

To stop carpetbaggers from speculating, the society has suspended all new openings of savings accounts (though other business continues as usual).

Mr Hardern confesses that he is a self-publicist, and once fought against the de-mutualisation of Abbey National. He coupled this year's resolutions with a call for every citizen to become a member of the House of Lords. But the societies have been forced to take him seriously. They are now checking the signatures supporting his resolutions for validity.

If confirmed, there will probably be seven societies voting on de-mutualisation by the end of April. And, at Bradford & Bingley alone, it will cost pounds 5m to raise awareness of the de-mutualisation vote.

Martin Ritchley, chief executive of Coventry, said: "The problem we have here is that there are two classes of members: the general members, who want a business connection with the society for years, and those who have joined us as speculators, and are hell-bent on trying to bring down - not only us, but the whole building society movement."

The societies have already started fighting. Adrian Coles, director-general of the Building Societies Association, says: "There is no such thing as a free share." Recent interest rate cuts have demonstrated the market leading positions of several building societies: Nationwide on Thursday dropped its standard variable rate to 6.95 per cent, 0.5 per cent lower - or pounds 20 a month on the average pounds 60,000 mortgage - than its converted rivals.

Patricia Hewitt, economic secretary to the Treasury, has already knocked back a call to raise the number of members required to forceavote on conversion - currently just 50.

But societies are hoping that they can challenge Mr Hardern's New Year's resolutions in court. A 1974 decision in a legal case, Hinkmott vs Woolwich, ruled that resolutions could not be used to interfere with the running of a society's business. The building societies hope this may be enough to defeat Mr Hardern and his carpetbaggers' website.

See Nic Cicutti, page 2