Dunfermline Building Society to be bailed out

The Government was close last night to a take-over of the toxic assets of Scotland's largest building society.

Ministers were negotiating the sale of the profitable parts of the Dunfermline Building Society. It is expected that its deposits and network of branches will be sold to another building society, while its loan book will be brought under state control. The Treasury said at least £60m of public money would be needed to stop the mutual collapsing.

The deal, which could be confirmed today, has sparked recriminations between the Scottish Nationalist administration in Edinburgh and the Treasury in London.

Alistair Darling, the Chancellor, confirmed that Dunfermline would receive a cash injection from the taxpayer to secure its future. It has been exposed to loans of more than £650m on commercial property.

He said its problems were too deep for a short-term fix and it needed between £60m and £100m to keep going. Mr Darling said: "It couldn't even service that sort of loan, let alone repay it."

The 130-year-old mutual is expected to announce losses this week of £26m.

But Jim Faulds, its chairman, said the take-over was unnecessary and a "scandal". He insisted Dunfermline had a viable long-term future and that its problems were not as bad as had been portrayed: "We cannot get the faceless mandarins in London, who will not speak to us, to sit round a table and see that we have a sustainable future."

The SNP condemned the "appalling nature of the process undertaken by UK authorities, and in particular the behaviour of the Treasury".