Comment: Up and up go the costs of Halifax conversion

Most mortals are going to find the amount being spent by Halifax on merging with Leeds Permanent and then floating on the stock market hard to understand or justify. At pounds 413m, once everything is totted up, it is equal to the cost of several spanking new hospitals. Alternatively, it could be made to pay for about half the planned uplift in Government spending on education next year, or to cut the deficit to a level which might qualify Britain for the single European currency. It dwarfs even the costs of preparing the water companies for privatisation and then floating them on the stock market.

Looked at another way, it is about 10 per cent of what Halifax and Leeds combined pay their depositors each year in interest. Even taking into account the fact the bulk of the cost is being incurred on the merger, expenses which presumably can be quite swiftly recouped out of subsequent cost savings, we are still talking about quite spectacular numbers.

Costs associated with the flotation alone are expected to come out at pounds 153m. That may not look unduly high set against the company's expected pounds 11bn stock market worth, or the usual percentages charged by the City, but given that this float does not need to be marketed or underwritten in any way, the figures still look out of all proportion. The reason, Halifax claims, is the enormous costs associated with communicating with its 9 million members. The sheer bulk of the necessary documentation is way above anything seen before, and as a consequence unanticipated to some degree.

The obvious question is whether the exercise justifies the expenses. Halifax, it will be recalled, was a late convert to the idea of conversion. The full story of how it came to change its mind has yet to be told. For some years, Jon Foulds, the chairman, held out against it, giving long and highly articulate dissertations on why it wasn't for Halifax. Then the scales fell from his eyes, the dyke was breached and those that still cling to mutuality are now the odd ones out. But the assertion that Halifax will be better for its members as a joint stock company has yet to be proved.

Nationwide argues that what the others are going to have to pay out in dividends can in their case be used to offer their members keener interest rates. On the face of it, this is not an easy thing to argue against. The costs of the Halifax-Leeds merger and its subsequent flotation would be worth approximately half a percentage point to its depositors, the sort of advantage competitors would kill for. But with all those free shares around, who is going to dispute the costs?

Suggested Topics
Start your day with The Independent, sign up for daily news emails
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Ashdown Group: Learning and Development Programme Manager

£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

The saffron censorship that governs India: Why national pride and religious sentiment trump freedom of expression

The saffron censorship that governs India

Zareer Masani reveals why national pride and religious sentiment trump freedom of expression
Prince Charles' 'black spider' letters to be published 'within weeks'

Prince Charles' 'black spider' letters to be published 'within weeks'

Supreme Court rules Dominic Grieve's ministerial veto was invalid
Distressed Zayn Malik fans are cutting themselves - how did fandom get so dark?

How did fandom get so dark?

Grief over Zayn Malik's exit from One Direction seemed amusing until stories of mass 'cutting' emerged. Experts tell Gillian Orr the distress is real, and the girls need support
The galaxy collisions that shed light on unseen parallel Universe

The cosmic collisions that have shed light on unseen parallel Universe

Dark matter study gives scientists insight into mystery of space
The Swedes are adding a gender-neutral pronoun to their dictionary

Swedes introduce gender-neutral pronoun

Why, asks Simon Usborne, must English still struggle awkwardly with the likes of 's/he' and 'they'?
Disney's mega money-making formula: 'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan

Disney's mega money-making formula

'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan
Lobster has gone mainstream with supermarket bargains for £10 or less - but is it any good?

Lobster has gone mainstream

Anthea Gerrie, raised on meaty specimens from the waters around Maine, reveals how to cook up an affordable feast
Easter 2015: 14 best decorations

14 best Easter decorations

Get into the Easter spirit with our pick of accessories, ornaments and tableware
Paul Scholes column: Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season

Paul Scholes column

Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season
Inside the Kansas greenhouses where Monsanto is 'playing God' with the future of the planet

The future of GM

The greenhouses where Monsanto 'plays God' with the future of the planet
Britain's mild winters could be numbered: why global warming is leaving UK chillier

Britain's mild winters could be numbered

Gulf Stream is slowing down faster than ever, scientists say
Government gives £250,000 to Independent appeal

Government gives £250,000 to Independent appeal

Donation brings total raised by Homeless Veterans campaign to at least £1.25m
Oh dear, the most borrowed book at Bank of England library doesn't inspire confidence

The most borrowed book at Bank of England library? Oh dear

The book's fifth edition is used for Edexcel exams
Cowslips vs honeysuckle: The hunt for the UK’s favourite wildflower

Cowslips vs honeysuckle

It's the hunt for UK’s favourite wildflower
Child abuse scandal: Did a botched blackmail attempt by South African intelligence help Cyril Smith escape justice?

Did a botched blackmail attempt help Cyril Smith escape justice?

A fresh twist reveals the Liberal MP was targeted by the notorious South African intelligence agency Boss