Labour has forced Virgin Money into a partial U-turn as Richard Branson’s bank says it will now provide charity cash in the North.
Ed Miliband’s comments to The Journal on Friday, in which he attacked the bank’s decision to axe Northern Rock Foundation cash, prompted a rapid rethink from Virgin Money.
Apparently fearful that Mr Miliband could continue to use the bank as an example of the uncaring capitalism he has repeatedly spoke out about, the Newcastle-based bank has gone back to the drawing board on its charitable giving.
Virgin Money had previously announced it would no longer back a historic funding arrangement which saw the Northern Rock Foundation handed a share of pre-tax profits at what was Northern Rock, meaning the charity had no choice but to announce it will soon close down.
Over the weekend though chief executive Jayne-Anne Gadhia wrote to Mr Miliband to say that if North East businesses will also dig deep, Virgin Money will return to cash handouts for the charity.
Insisting the bank had “always admired the work done by the Foundation,” Ms Gadhia said the bank would now offer £1m a year to the Foundation, but only if the charity can find £3m extra a year to bring it up to the £4m the bank says is needed to make it a healthy organisation.
That £4m figure was based on a sum put to the bank in talks with the charity when trustees had been led to believe they would be made to carry out a national role.
Sir Richard is due in Newcastle today and the row risked casting a shadow over his visit.
The Labour party, though not yet the Foundation, has been told the deal would be for five years and allow the charity the freedom to spend the money as it pleases.
The bank said: “We are prepared to commit £1m a year for each of the next five years, to the Northern Rock Foundation, provided that the remaining £3m requirement can be raised from other businesses in the North East such that the legacy of the Northern Rock Foundation becomes one shared with the North East business community.
“Through this £1m commitment – conditional on the additional support of others – we would become the cornerstone donor for the Northern Rock Foundation for another five years – and in addition continue with our support of social and community investment in the wider United Kingdom.”
In 2012 Virgin Money inherited a Government-approved deal to hand over 1% of pre-tax profits. The bank handed over around £1.5m, even though it had not made enough money to trigger a payment, but says handing over the full £4m now would be equal to as much as 10% of profits, a deal it does not think is matched anywhere in corporate giving.
Last night though the Foundation said it had yet to receive any firm offer from the bank.
Alastair Balls, chairman of the Northern Rock Foundation, said “No one from Virgin Money has been in touch with Northern Rock Foundation with an offer so we are not able to respond directly. We understand an offer has been put forward to others but we don’t know whether this is for one year only or one which could provide the Foundation with a viable future.”
Newcastle Central MP Chi Onwurah has led efforts to force a bank rethink. She said: “Ed has again shown how Labour stands up for ordinary people by asking Virgin Money to look again at funding the Northern Rock Foundation given its importance to the region.
“I’m so glad his intervention has led to a new offer from Virgin Money even if it’s difficult to see how it can work in practice.
“I’m not going to say exactly how much money Richard Branson should be able to afford, or where the Foundation should focus its work but given both organisations’ commitments to the people of the North East they must surely be able to come to some agreement.”