NORTHERN WRECK

I was surprised when Tory rhetoric went from “No such thing as Society” to the “Big Society” and even more surprised about their new found passion for co-operatives and mutual’s. Well we can all now see that it was purely cosmetic. The coalition has fallen at the very first fence. The first chance the Coalition gets to turn the rhetoric into action about creating co-ops and new mutual’s and they sell Northern Rock to of all people Richard Branson.

As Ed Mayo general secretary of Co-operatives UK said “The government had a real chance to show the strength of its commitment to co-operatives and mutuals….it passed it up”. The winner is the people’s capitalist and self publicist par excellence Richard Branson.

This is the man who made his first pile from the Exorcist. A film that like the Coalition was pretty scary. Every time we went towards that room we heard the music of Mike Oldfield’s Tubular Bells. Released as single in America on the Virgin label it became a top ten hit. The success of the film drove the sales of the album, until then an underground success, and made it the first hit on Branson’s Virgin records – a hit that made a fortune for Oldfield and for Branson.

Tom Bower wrote a wonderful biography of Branson, a book which had this glowing endorsement from its subject, “What I have read has offended me on every single level ... it is a foul, foul piece of work from the first words to the last - really rotten, nasty stuff.” In the book Bower points out that, “Virgin Music - started amid a sophisticated purchase-tax fraud that Branson admitted in 1971 - was sold in 1992 for a record £560m”. The money was used to found an airline Virgin Atlantic (which is now 49% owned by Singapore airlines) created when the government stripped BA of landing slots at Heathrow.

Since then Branson has been lending his Virgin brand name to various enterprises to give what are a set of fairly mediocre business a bit of hippy radical gloss as customers using any thing carrying the Virgin brand will tell you.

Most of the things he has launched in competitive markets have failed, Virgin, condoms, cola or vodka anyone and what happened to Virgin stores?

And there are Virgin trains (49% owned by Stagecoach) currently operating the West Coast franchise who used to be much bigger until they lost the cross-country franchise after lumbering it with the worst modern train fleet in Britain. Trains that are noisy, uncomfortable and unable to cope if passengers dare to turn up with luggage.

As with Virgin phones, Branson operates in protected markets. As Aditya Chakrabortty said in the Guardian, “the Virgin boss keeps himself in homes in Holland Park and Necker Island by taking taxpayers subsidies and operating in heavily protected businesses.”

Now he has written a book, called ‘Screw Business as Usual’ needless to say published by Virgin Books in it he talks about the “new capitalism”. He says that he has a new name for it, “Capitalism 24902” apparently because the circumference of the earth is 24,902 miles. Then you read in the Financial Times Branson’s chief investor in Northern Rock, American Financier Wilbur Ross saying, “We would hope to sell out a few years down the road.”

This sounds like business as usual to me. It is not the business that is being screwed it is the taxpayer. The Northern Counties Building Society founded in 1850 and the Rock Building Society in 1865 they survived two world wars and the great depression before merging in 1965 to form Northern Rock. Then it floated as a mortgage bank on 1st October 1997. Less than ten years later it in 2008 it was spectacularly bust!

Many commentators have pointed out that the £747 million price Branson is paying for Northern Rock means that every taxpayer in Britain is paying Branson £13 to take Northern Rock away. But this is not the full story. Branson is only buying the good part of Northern Rock. So far the Coalition has no plans to sell Northern Rock Asset Management or the so called Bad Bank.

In October 2010 Northern Rock (Asset Management) plc and that other busted bank and former building society Bradford & Bingley were integrated under a single holding company, UK Asset Resolution which has a plan that hopes to wind down the institutions in a way that repays a combined debt to the taxpayer of around £50billion.

There is no reason to think that this tiny mortgage bank can survive on its own with just 75 branches and investors would be wise to get out as soon as practically possible. None of the converted Building Societies have survived as Mortgage Banks because the model simply does not work.

That is why many people campaigned for the Rock to be remutualised to return to its roots as a provider of mortgages based on savers deposits. But no George Osborne has decided to make his own horror movie and once again the Virgin label is providing the soundtrack.