Building Societies (Funding) and Mutual Societies (Transfers) Bill

In that case there is no particular reason for me to continue discussing my point, so I shall say a little about the three major components of the Bill as amended. As I understand it, the key component is clause 1, which enables some relaxation of societies’ funding requirements and updates the Building Societies Act 1997, following the publication of the David Miles inquiry. There are two issues connected with that, which probably need to be spelled out a little. The first is the greater freedom for building societies to grow and to draw on wholesale markets. In following some of the discussion, I was a little troubled by the potential implications, although I do support the move. The argument seemed to be that it was important that building societies should expand as rapidly as possible into mortgage lending. The model cited was Northern Rock, which is the one demutualised society that has been able to expand, because it no longer has a funding limit, which is the essence of clause 1. What worries me slightly is the assumption that rapid expansion into mortgage lending is intrinsically desirable. I suspect that we are reaching the point at which former societies such as Northern Rock are in danger of experiencing serious difficulties as a result of being over-extended in the housing market. It may be that very rapid expansion is not desirable. For example, Northern Rock may well find itself with a great deal of bad debt and having to pressure many of its borrowers into repossession. I therefore have slight doubts about the desirability of unlimited growth.