Page last updated at 11:01 GMT, Monday, 30 March 2009 12:01 UK

Brown says Dunfermline 'failed'


Gordon Brown says the Dunfermline was the 'author of its own mistakes'

The collapsed Dunfermline Building Society was "the author of its own mistakes", the prime minister has said.

Gordon Brown's comments came as it emerged the Nationwide will buy the Dunfermline's branches, good loans and deposits.

The Treasury will take £1bn of commercial property lending and acquired mortgage debt.

Mr Brown said the UK Government had been forced to step in where the Dunfermline had failed.

The Bank of England used new powers under the Banking Act to rush through the deal and prevent the Dunfermline - which was founded in 1869 and has 34 branches - from going bust.

'Mistaken judgements'

The Nationwide has bought the Dunfermline's retail and wholesale deposits, branches, head office and most of its residential mortgage book.

Dunfermline chairman Jim Faulds has claimed that the Treasury "sacrificed" the the building society which employs more than 500 people, the prime minister responded: "Let's face facts - the Dunfermline building society is the author of its own mistakes: mistaken judgments, mistaken investments, mistaken policies.

"We have had to step in where the Dunfermline Building Society has failed, and we have stepped in in such a way that we can protect both the savers and give those people who depend on the building society for mortgages a way through for the future."

Scottish First Minister Alex Salmond welcomed the deal, but suggested an injection of capital would have been a better solution.

Jim Faulds
Mr Faulds expressed concern for the Dunfermline's 550 workers

He said: "I welcome the easing of the uncertainty which, over the last 48 hours, must have been affecting the 530 people whose livelihoods depend on the building society."

But he went on: "If the Treasury is keeping the commercial book where the problems were, it does open the question of wouldn't it be more cost-effective to provide the capital, as we wished to contribute, to allow the Dunfermline to trade on?

"Wouldn't that have been better for the public purse?"

But Labour MP John McFall, chairman of the House of Commons Treasury Select Committee, replied: "If Alex Salmond is defending the Dunfermline building society and the directors, he is really defending the indefensible."

Mr McFall also questioned the Scottish Government's offer of a cash injection for the Dunfermline, in relation to the building society's role as the second largest lender to housing associations.

Redundancy risk

He went on: "The Scottish Government, from what I can gather, was talking about £25m. The taxpayer is standing behind it to the tune of £1bn.

"The Scottish Government is incapable of putting money like that behind it."

Dunfermline's social housing portfolio has been placed into a bridge bank, which is wholly owned by the Bank of England.

The Treasury said it was talking to a number of people, including the Scottish Government, about securing a long-term future for that portfolio.

Mr Faulds claimed government funding of £20m-£30m would have helped secure the Dunfermline, but Chancellor Alistair Darling said the building society would have needed a bailout of between £60m and £100m.

The Nationwide said the Dunfermline brand would remain intact, but there may be redundancies from back office and support operations.

Print Sponsor


The BBC is not responsible for the content of external internet sites

Has China's housing bubble burst?
How the world's oldest clove tree defied an empire
Why Royal Ballet principal Sergei Polunin quit


Sign in

BBC navigation

Copyright © 2019 BBC. The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.

Americas Africa Europe Middle East South Asia Asia Pacific