For a number of months now, savers with the distressed Presbyterian Mutual Society have known some of the details of a proposed rescue package. The package required HM Treasury to approve a £175 million loan to the Administrator plus a £25 million cash pledge. At one stage in the spring we thought that this proposal was on Gordon Brown’s desk awaiting his approval, but that approval never came. Yesterday the Chancellor of the Exchequer, George Osborne, announced that the package had been approved. What a relief!
Last February I went to the Treasury with two senior advisors whose knowledge and understanding of the financial world can only be described as encyclopaedic. We presented what we believed were compelling arguments in favour of a government rescue of the PMS. The weather conditions around Westminster that day were dismal, and our reception in HM Treasury was equally depressing. We were given no hope that Treasury would ever do anything to rescue the PMS savers. So yesterday’s announcement marks a very significant and important change in the Treasury’s position and an important leap forward in the campaign to see the PMS crisis resolved.
It seems that once the size of the cake has been determined, it will be up to the Northern Ireland Executive and the Administrator to decide how that cake will be sliced. They face a challenging task. On the one hand, there appears to be a genuine desire to see that smaller savers, who have been left most exposed by the crisis, are rescued. Under the current administration, and without a rescue package, these people are at the back of the queue in terms of any distribution of funds and are at risk of losing everything. On the other hand, the final decision about the approval of any rescue package will be taken by the larger savers, and in that important vote those with most money in the PMS carry the heaviest punch. Can a scheme be devised which will help the smaller savers and yet be agreeable to those with larger savings?
Throughout this campaign we have insisted that a fair and just solution would be achieved if everyone got access to 100% of their savings. When Mr Cameron and Mr Paterson said they were committed to such an outcome, they did so in the context of quoting Mr Brown’s claim that “no British saver has lost a penny in the financial crisis”. We have campaigned with that objective clearly before us. But even when a £25 million contribution from the Northern Ireland Executive and the £1 million contribution from the church are added to the pot, the total of £226 million is still not enough to give everyone immediate access to all their savings. Can our goal be achieved?
In the absence of our preferred option, namely the take-over of the PMS by a larger financial institution, the question is: Can the Administrator, given the requirement to pay back the £175 million loan, manage the PMS assets over the next few years in such a way so that everyone eventually gets their money back? That will clearly depend on a number of factors outside his control, such as the overall improvement in the property market, a steady rental income from PMS-owned properties, and the repayment of loans to the PMS. Given a favourable wind, could we get close to our goal? In hoping for a favourable wind, some would say we are being much too optimistic. The current economic storm is very much against us.
Savers will have to weigh very carefully the alternative route. A move to sell-off the PMS assets immediately would result in nothing for the smaller savers and only a percentage return for larger savers, with no further money becoming available.
We await the details of a scheme for the use of the resources which were approved yesterday. And as we wait we continue to pray for the Administrator and members of the Northern Ireland Executive who have given so much time and energy in seeking a resolution of this crisis.