Between a third and a half of the adult population will share the bonanza, with most hand-outs in the region of pounds 500 to pounds 2,000.
Under the terms of the Halifax flotation announced yesterday, 8.5 million people will receive shares worth an average of pounds 1,300 in June. Just over four million will receive the minimum allocation of 200 free shares worth between pounds 780 and pounds 900. The rest will receive this plus an additional hand- out of up to 981 shares, depending on the balance in their accounts on two key dates.
Members can vote by post by 17 February or in person at the special general meeting in Sheffield on 24 February. More than 50 per cent of the society's investing members - more than 3.3 million - must vote in favour for the flotation to proceed.
The other building societies lining up to convert from mutual status include the Woolwich, which is paying out shares worth pounds 3bn, and the Alliance and Leicester, which will be worth pounds 2.5bn. The total amount being distributed to savers and borrowers in the next 10 months will be equivalent to 10p off the basic rate of income tax for one year and four to five times as large as the biggest Budget handouts ever seen.
Economists forecast yesterday that the giveaway would boost consumer spending by between pounds 6bn and pounds 8bn, with roughly two-thirds of the free shares saved and one-third cashed in and spent on holidays, home improvements, clothes and the like.
The pounds 20bn in free shares compares with the estimated pounds 6bn that investors could have made by cashing in their shares in privatised companies immediately after flotation.
Whereas about 10 million people have benefited from the pounds 66bn privatisation programme since 1979, nearly twice that number will benefit from the building society giveaways. Nor does the pounds 20bn figure include the pounds 4bn flotation of the insurance company, Norwich Union, scheduled for summer, or the pounds 3.2bn of cash and shares already handed over to consumers from earlier building society flotations and takeovers.
Simon Briscoe, economist at the Japanese securities house Nikko, said the boost to the economy, although small in comparison with total annual consumer expendi- ture of pounds 550bn, would increase pressure for higher rates. Other economists warned that an increase in base rates was very likely, given that the building society windfall would lift the growth in consumer spending to even more unsustainable levels.
David Walton of the investment bankers Goldman Sachs said: "Households with the right building society accounts will gain this year but those consumers with borrowings will lose out." Other City experts fear that the legacy of the instant windfall payouts will be dearer home loans as quoted building societies are forced to raise mortgage rates so they can afford to make dividend payments to shareholders. Economists believe that the conversion of building societies will do the same for consumer confidence as did council house sales in the early 1980s and privatisation in the late 1980s.
The impending flood of financial institutions on to the stock market is reckoned to be one reason why the Chancellor, Kenneth Clarke, calculated he could get away with consumer tax cuts of just pounds 750m in last November's Budget.
Kevin Gardner, chief economist at the US bank Morgan Stanley, said: "This is all part of the ongoing story of improving consumer confidence. The building society giveaways are the icing on the cake, but the cake was already pretty big already."
If the entire pounds 20bn were cashed in, it would be enough to finance the entire country's high-street shopping for seven weeks and would give a boost to the economy four or five times as large as the biggest Budget handouts ever seen. This would almost certainly lead to a raging boom and a leap in inflation, and force the Government to raise interest rates sharply.
Nikko's consumer research found that one in six would spend their windfall, but the older and wealthier, who generally get the largest payouts, were more likely to save it. The evidence so far is that consumers are likely to react cautiously. Last year, there were building society windfalls totalling pounds 3.2bn when Cheltenham & Gloucester was taken over by Lloyds Bank and National & Provincial by Abbey National. But only 16 per cent of N&P shares were cashed in.
David Owen, an economist at Kleinwort Benson, said this probably boosted growth by about 0.5 per cent, and he expects a further 0.5 to 0.75 per cent this year as a result of the renewed windfalls.
Only one society, the Alliance & Leicester, will have paid its members before the likeliest election dates in April and May. But the Halifax flotation - the biggest, with a handout of more than pounds 11bn - the Woolwich flotation and the Bristol & West takeover by Bank of Ireland will issue payments shortly after, in June and July.