1. We ask, was the HM Treasury NR Compensation Order Legislation equitable and fair? For decades from the 1980s Thatcher government, citizens have been encouraged to become more active ‘stakeholders’ so that they benefit from UK business growth, enterprise, and endeavour. home ownership, shareholding in private enterprises, savings schemes such as PEPs, ISAs, SIPPs, and Employee Savings/ Share Schemes. These all provide potential benefits from a successful private enterprise-driven UK economy.
2. NR shareholders have invested, saved, purchased property to achieve these aspirations and values. Clearly some private enterprises, like NR, did experience severe difficulties (mainly global factors outside their control imprudent management). Is it fair to confiscate their shares and savings without ‘fair value compensation’? Our valuation estimates acknowledge NR management failure, and that shareholders must accept diminution of value. We also estimate the loss of future profit and dividend prospects because of a lower risk, sustainable business model.
3. Should we endorse a ‘denial and delay’ approach in government administration that delays ‘equitable justice’ for years or decades, with huge cost implications of delayed justice? The Equitable Life case and Postmasters scandal are appropriate examples. Each case of injustice is unique but regulatory failure is equally evident in the case for NR shareholder compensation delayed for 16 years that has disastrously affected many individuals unfairly.
4. The evidence and facts support the award of ‘fair value compensation’. We emphasise the disastrous ‘unintended consequences’ and ‘unjust enrichment’ of inappropriate legislation and political opportunism. There is damning evidence of regulatory failure and NR management failure. The BBC leak greatly damaged both NR shareholders, delayed Tripartite crisis management and disrupted UK financial stability during a global banking crisis. Despite NR having the least toxic mortgage assets among UK banks it became the first victim and the only one to have its shares confiscated.
5. To conclude we would like to thank all members of the TSC for their time and consideration. The Northern Rock situation is unprecedented in British banking history, this is an opportunity to ‘Right a Grave Wrong’ and consider our appeal for fair compensation. Should you require any additional information or have any questions relating to the above please do not hesitate to contact either of us via UKSA office email.
Click on the header 'NRSAG Submission to the TSC' to see a copy of the report we sent to the Treasury Select Committee on 16th May 2024.
In an article for the Financial Times on 19th February 2008, the prominent economist, Professor Tim Congdon said:
“If Northern Rock does repay the loan in full but its shareholders receive nothing, the British Government’s actions would amount to robbery under the law."
Professor Tim Congdon CBE
Economist
Shareholder Enterprise Value adjustments
We stated that ‘Unjust Enrichment’ ranged between £7.8 billion (based on the Book Value of NR Accounts) and up to £16 billion (Shareholder Enterprise Value). We offer a ‘roadmap’ of the range of relevant ‘Key Causal Factor Cost/Benefits Analysis’ that could be applied to the Accounts Based £7.8 billion to the £16 billion valuation.
£7.8 billion – Actual Accounts based Book Value
ADD £2.2 billion -estimated loss of dividend Income over 16 years.
ADD £1.5 billion – sale to Virgin Money at Book loss of £400M (NAO estimate) combined with loss of future interest income/ profits from best value customers.
ADD £5 billion potential estimated loss due to Regulatory Failures, BBC Leak, including delay in LOLR, FSA supervision failure, no trading/short selling ban, Brand Value damage, False Market.
ADD £1 billion – estimated loss of interest income from book value/ distress asset disposals.
ADD £6 billion intangible loss for Unintended Consequences for 150,000 Shareholders stress, anxiety, health problems, pension value destruction, delayed Compensation.
DEDUCT £2.5 billion estimated for NRB Management Failure, Liquidity Exposure, Inadequate Insurance, extra LOLR interest costs.
DEDUCT £2 billion estimated Shareholder Contribution
DEDUCT £3 billion estimated lower NR Profit Growth from Lower Risk Business Model