Money: Bradford & Bingley's loyalty bonus is of mutual benefit to everyone

Two contrasting images summed up the debate over mutually owned building societies and insurers this week.

First, Alliance & Leicester Building Society confirmed 21 April as its flotation date. A&L members will each receive 250 shares, worth up to pounds 1,200.

The next day, Norwich Union, the insurer, gave details of its own flotation, planned for May. Almost 3 million members will receive free shares, albeit on a less munificent scale than building society demutualisations.

The plan is that some 1.8 million NU members with a traditional with- profits endowment - such as those linked to mortgages - will get a minimum of 300 shares, worth about pounds 720.

More than 1 million among this number will actually receive more than the minimum, depending on the value of their existing policy. While the exact calculation has not yet been worked out, no maximum will apply. So those with particularly large policies will be made very happy.

In addition, a further 1.1 million NU policyholders will receive a fixed allocation of 150 shares, worth pounds 360. They include people with life assurance cover, investors with Norwich Union unit trusts and pensioners with a NU personal pension. However, home and motor insurance policyholders will get nothing.

With all these free shares "floating" around it is hard to see how the mutuals might compete. Which is where Bradford & Bingley comes in. The B&B is determined to remain in the hands of its policyholders.

This week, it too announced that it would reward its members' loyalty with a package worth pounds 100m in 1997. The society is pledging to push its savings rates at least 0.25 per cent above those of its floating rivals: Halifax, Woolwich, Alliance & Leicester and Northern Rock. Variable mortgage rates will also stay 0.25 cheaper.

Bradford & Bingley argues its move, in which it gives profits back to members, is like a flotation but with a slow fuse. A borrower with a pounds 50,000 mortgage, for instance, could save about pounds 900 over seven years, compared to stock market rivals. In future, the society adds, the benefits to savers and borrowers will be even greater.

Of course, one must wonder why it has taken so long for building societies to respond to the threat from those converting to banks in this way. And there is more than a tiny dose of "poison pill" to the Bradford & Bingley's decision: potential raiders might have to admit that a hostile bid for the society could jeopardise these benefits to policyholders.

Even so, this is good news for savers and borrowers. It opens up the prospect of a minor rates war and an extreme reluctance to push up home loan costs for fear of losing market share. How long it lasts is another matter.

But as long as it does, those extra few pounds in interest from Bradford & Bingley will pay for a nice night out. Or that extra bottle of ouzo at the duty free - to go with the holiday bought with the proceeds of the Alliance & Leicester flotation perhaps.