COMMENT: At last, a building society that puts up a fight

`In the Nationwide vote, we have probably witnessed the first significant backlash against the carpetbaggers. It is plainly neither moral nor justified for these people to be able to whip in at a moment's notice and share in the spoils of conversion'

Geoffrey Robinson, Paymaster General, could have been speaking for the previous government when he said recently that building society conversions were a matter for market forces and society members. In attempting to wash the new Government's hands of the matter, he profoundly misjudged both the mood of the country and the needs of that dwindling band of building societies which has chosen to resist the stampede, as yesterday's overwhelming vote for mutuality at the Nationwide amply demonstrates. Brian Davis and his board have won as clear a mandate as they come against conversion, but without action the carpetbaggers will be back. The vote could so easily have gone the other way, and may still do for others. The Government must act, and act swiftly.

To be fair on Mr Robinson, he's hardly alone in failing to spot the growing backlash against the likes of Mr Hardern. Nearly everyone believed the Nationwide would fall, incredible though the slate of pro-conversion rebels seemed. Nobody could quite believe members were going to look a gift horse in the mouth and turn down the chance of free shares. How wrong they were. So what's really happened here?

People often forget that the Nationwide building society used to be called the Cooperative Permanent and it is still stuffed full of Old Labour, thoroughly decent and honourable types. Plainly there's more to it than that, however. This is really the first time members have had an opportunity to hear something different. Other building societies have caved in and failed to put the case against conversion. Nationwide argued it in compelling and forthright fashion.

In the Nationwide vote, we have probably also witnessed the first significant back lash against the carpetbaggers. It is plainly neither moral nor justified for these people to be able to whip in at a moment's notice and share in the spoils of conversion. Building society membership should carry certain duties of trusteeship, for members are in effect guardians of assets build up over generations. It seems quite wrong that feckless, disloyal carpetbaggers should be allowed to nip in in this way and steel the family silver.

The Government's starting point, therefore, should be to invest in membership certain duties of loyalty and longevity. This could easily be done, as Mr Davis and others point out, by introducing a two to five-year qualifying period for membership. The hatches could be further battened down by reversing the ill-thought out Building Societies Act, rushed through by the last government in its dying moments, which gives all building society depositors equal rights of membership. The old distinction between long-term savers and short-term hot money might reasonably be reintroduced so as to make membership a reward for loyalty.

Another useful reform would be to up the level of support members need to stand for election from the present 50 to 500 or more. This would prevent a repeat of frivolous and disruptive campaigning like Mr Hardern's.

Building societies obviously do still have an important and constructive role to play in the provision of financial services, helping to ensure a more vibrant and competitive market place than would exist in a world populated only by banks. It is a tribute to Nationwide's members that that they were prepared to vote for the public good over narrow self interest. Perhaps New Labour might learn a thing or two from them.

The economy needs to cool down gradually

No shopping spree is ever for free and the one caused by the pounds 38bn in shares from converting mutuals is fast coming home to roost. Unfortunately, it is industry that is being forced to pick up the tab.

Yesterday's figures for high street sales were uncomfortably upbeat and undeniably back to boom levels. They did not even include some of the goodies the windfall money is likely to be spent on, such as cars and holidays. Nor are the windfalls the only consideration. Wages are rising faster than prices, job vacancies are at the highest levels in recent memory, and the strong pound is boosting spending power on imports.

For the time being, home demand seems strong enough to offset falling export orders. The British Chambers of Commerce Survey was presented as a tale of struggling exporters, but the detail showed higher turnover, new job creation and skills shortages in both manufacturing and services. This presents a policy dilemma in the sense that raising interest rates to cool the domestic economy is driving the super, soaraway pound ever higher. There has not been an appreciation of sterling on this scale since 1981, and we all know what happened to industry then. In another sense, though, there is no dilemma. If the economy is expanding fast enough to run the risk of higher inflation, it needs cooling down. The bigger the boom is allowed to grow, the bigger the bust that will follow.

Contrary to popular belief, both levers of macroeconomic policy, monetary and fiscal, are already being applied, a tight Budget and rising interest rates. Unfortunately, the UK is the only big economy in this position. The US is the only other country where growth is buoyant, but Alan Greenspan's testimony this week has made the prospect of higher rates across the Atlantic recede. The reaction of the foreign exchanges means that British exporters must pay for the windfall-financed shopping boom.

This does not mean that the cost of borrowing will have to climb all that much higher. The Bank of England is likely to opt for a quarter-point increase in the next month or two, but it will proceed cautiously. As Martin Weale, head of the National Institute of Economic and Social Research, explained to MPs earlier this week, running the economy is like taking a shower. If you find the water is too hot, you reduce the temperature. But there is a danger of turning the taps too far, too fast, and before you know it your shower has turned cold. The latest figures point to the need for another notch on the dial, but the trick is to turn gradually.

Ecclestone's formula for clarifying issues

Bernie Ecclestone, or to be more precise his lawyer, helpfully decided to put the record straight yesterday about the on-off flotation of Formula One Holdings. Yes, a public offering remains the preferred course of action and, yes, Salomon Brothers remains Mr Ecclestone's exclusive financial adviser.

Considering this was Mr Ecclestone's first formal statement on the matter and considering the mountain of speculative press coverage his plans have attracted, it was a masterpiece of non-clarification. What's more, no sooner had the faxes stopped whirring than Bernie was back in the chicanes, confiding to the London Evening Standard that he still thought about calling the whole thing off and placing financial advisers somewhere beneath used car dealers in the evolutionary chain.

Given the extraordinary antics of the investment banking community as it has fought to win the FOH mandate, Mr Ecclestone's disillusionment is understandable. Perhaps he should forget about a listing and stick to the more sedate and altogether less cut-throat world of motor racing.