Outlook: Windfall outrage

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BY ALMOST any definition, the de-mutualisation process at Birmingham Midshires has been a public relations disaster.

First it encouraged carpetbaggers by the lorry load by failing to dispel rumours of conversion. Then it agreed to sell to Royal Bank of Scotland for an undervalue only to be outbid by Halifax. Now it has crowned the lot with an allocation of spoils which looks to be grossly unfair on borrowers.

Midshires is proposing to award each of its 150,000 borrowers the same amount of preference shares, worth about pounds 400, as it will pay the 375,000 savers who signed up to an account as late as 31 December.

It is worth bearing in mind here that in the past three years, Midshires became renowned as the society which was consistently among the first lender to push up its mortgage rates when the occasion demanded it, and the last to lower them. Any borrower who stayed with the Midshires in such circumstances must surely deserve something for their loyalty.

Yet they are to be treated no better than the many hundreds of thousands of carpetbaggers who swarmed into Midshires on the promise of a quick cash or share handout.

Ian Kerr, Midshires' new chief executive, claims he is hamstrung by building society regulations and cannot pay borrowers more than savers. Nor can borrowers be granted a sliding scale of payments in recognition of their critical contribution to the success of Birmingham Midshires. This may be so - although it is worth noting that the Building Societies Association does not appear to agree.

Unlike savers, of whom at least 50 per cent must vote and at least 75 per cent of those voting must be in favour, borrowers need only to record a simple majority for de-mutualisation. Since nearly half of borrowers are generally also savers, this is an easy vote to achieve. Birmingham Midshires has gone beyond the bounds of decency in taking its borrowers for granted in this way.