The debate over whether building societies should remain mutual or convert to quoted plc status has generated much heat over the summer.
Much of it has concentrated on the relative attractiveness of conversion windfalls compared with the supposed longer term benefits offered by mutual societies.
There has, however, been little objective analysis in the media of the actual benefits to customers offered by the different financial services businesses. My priority is providing financial products and services which delight the customer and this will continue to be the focus of the Halifax's approach. We will only be a successful business for our shareholders (many of whom are also our customers) if we properly meet the demands of our customers.
I do not believe it is any coincidence that the leading businesses throughout the developed world, not just in the UK, are plcs not mutuals. It is this constitutional framework which offers businesses the flexibility, discipline and access to capital needed to permit them to provide the best possible service to their customers.
But first, I want to cover the supposed longer term benefits of mutuality.
A key characteristic of mutuality is one member, one vote, no matter how much the member has invested. But most building society members have relatively low balances, in many cases less than £1,000, and certainly the great majority less than £5,000. Even if the mutual societies did manage to retain over a long period a 0.5% difference in the interest rates offered to their savers, assuming a median balance of around £2,000, this would amount to a benefit for their savers of no more than £10 per annum. The minimum received by savers with the Halifax who chose to sell their shares on flotation was £1,465. Even the interest on share sale proceeds, if reinvested in a Halifax savings account, should amount to more than a mutuality dividend for the vast majority of savers. Furthermore, the dividends on the shares received by those who did not sell could also be well in excess of this 'mutual dividend' and these people will still have their shares, which they can sell when they wish.
Benefits of slightly higher rates for those savers who have larger balances - a saver with £100,000, for example, would benefit by £500 per annum - are self-evidently more but it is difficult to justify the principle of mutuality on the larger benefits accruing to such a small minority of members. Furthermore, such savers with the Halifax would have received shares valued at over £8,650 on our flotation, which again shows the higher benefits even to these individuals from conversion.
I think the financial benefits of flotation to building society savers are clear. They are also well appreciated by savers. The high turnouts in conversion votes and the strong majorities - 98% in the case of the Halifax - are a good indication of what members want if building society boards give them the opportunity of voting on conversion.
It could be seen as somewhat patronising on the part of some building society boards to decide on behalf of their members what is in their best interests without actually asking them. I believe that conversion not only offered the best short term benefits for our members, but it is also vital for the success of the Halifax in the long term.
Quoted plc status provides access to capital and commercial flexibility - both of which are just not available through other constitutional forms.
Certainly we became very quickly aware of the inflexibilities of the 1986 Building Societies Act. The fact that it took almost a decade to reform it, that reform remained uncertain right until the last minute given the parliamentary timetable early in 1997, and that even the reformed version contained some unwelcome restrictions, confirmed the correctness of our decision to recommend the switch to plc status.
The Halifax intends to become the UK's leading provider of personal financial services. We are already the leading provider of mortgages and are the largest holder of people's liquid savings. But conversion also allows our business to grow in other areas of personal finance.
In personal banking, we intend to increase our share of products such as cheque accounts, credit cards and personal loans. In personal lines insurance, where we are already one of the leading suppliers, we intend to sell significantly more buildings and contents insurance, motor insurance, travel and other insurance. In life assurance, pensions and other investment products, our dual approach involving the sale of Halifax-branded products through our branches and direct sales force and Clerical Medical products through independent financial intermediaries, will be developed further and we expect to increase our share of these markets steadily in coming years.
Conversion for Halifax customers, therefore, means not just the windfall of free shares to the 7.6 million of our customers who met the criteria for eligibility, but the continued availability and improvement of this wide range of attractive products and services. We will remain competitive on price, but we will also be able to offer the service extras which only such a large organisation with wide-ranging interests can provide. Many existing customers will also get preferential terms and quick response times when coming to us for other products and services. Our investment in technology improves back-office efficiencies and will provide more direct benefits such as state-of-the-art personal computer facilities for our estate agencies so that customers will be able to view a range of properties on screen. Our investment in Halifax Direct already makes available full telephone banking facilities to our current account customers and it will be used to provide more convenient access to more of our products and services in the future.
The personal financial services market is extremely competitive. Pleasing our customers in future will require efficiency, discipline and creativity to keep us one step ahead of the competition. Conversion to plc will of itself not get us there, but it is one further crucial milestone along that road. It has also provided millions of our customers with a very welcome windfall now. l
Chief executive of Halifax plc and companion of the IM
'I do not believe it is any coincidence that the leading businesses throughout the developed world, not just in the UK, are plcs not mutuals.
It is this constitutional framework which offers businesses the flexibility, discipline and access to capital needed to permit them to provide the best possible service to their customers'.