Money: All to play for at the B&B

If a man wearing a sequinned jacket and sarong can poll 156,000 votes - 34 per cent of the vote - in a bid to get elected to the board of a sober building society, then it's not exactly a resounding vote of confidence for the current management.

But in a week when more than 60 per cent of Bradford & Bingley BS's members voted to convert it to a bank, Michael Hardern's failure to get on to the board of the Britannia BS looks like a vital lifeline for beleaguered building societies.

The Britannia made PR mileage out of Mr Hardern's defeat, stating it was an "overwhelming endorsement" of its determination to stay mutual. The eccentric freelance butler had already withdrawn from the election, so the society wasn't too worried.

But it's just one victory in the increasingly murky skirmishes between building societies and other mutual organisations (the AA is the latest to come under scrutiny) and the vocal so-called carpetbaggers who want payouts of hard cash or shares.

The rewards are obvious: the first society to become a bank, Abbey National, offered 100 free shares to qualifying members in 1989. Dividend payments on that allocation have totalled pounds 159.25 and the shares are currently worth pounds 1,400.

The societies campaign on a ticket of offering long-term value to savers, with whom they can share their profits. A public company has to put its shareholders first. This doesn't convince some industry observers. Neil Jones, head of retail banking consulting at management consultants Mummert + Partner, is scathing.

"If you look at demutualisation, the average windfall is pounds 500 to pounds 1,500 per person, say pounds 1,000 on average. If the mutuals can only offer 1 per cent better interest on pounds 5,000 savings per year, then it would take roughly 20 years to make that up - not including the dividends they would receive from shares. It's hardly surprising that B&B members voted - myself included - to receive the cash."

There's a stronger case that mutuals offer lower mortgage rates. A Bradford & Bingley borrower with a pounds 50,000 mortgage at standard variable rate would have paid pounds 4,749 last year. The same deal at ex-societies is more expensive: pounds 5,016.31 at Alliance & Leicester and pounds 4,934.54 at Northern Rock. Even then, there are cheaper deals elsewhere. Standard Life and Egg have moved into the mortgage market and undercut most of the mutuals: Egg is offering a standard variable rate of 5.99 per cent.

But the director general of the Building Societies Association, Adrian Coles, stresses that independent studies show societies offer better value for borrowers.

"It is notable that in the B&B vote a majority of borrowers voted to stay mutual, giving us confidence our message is getting through to at least one class of the membership," he says.

And it's the borrowers who may end up holding the balance of power in the next round of the battle for the future of Bradford & Bingley.

In a second vote, likely to take place in about six months' time, different rules will apply. For the society to move towards a flotation on the stock market, 75 per cent of savers (on a 50 per cent turn-out) and a simple majority of borrowers will have to vote in favour of the move.

Pro-mutual campaigners are confident they can still win. Gordon Nardell, a barrister specialising in financial services, is a borrowing and investing member at the Bradford & Bingley. He spoke against conversion at last week's AGM: "A majority of borrowers voted against this, and they will need 75 per cent of savers, so my take is that it's unlikely that conversion will happen."

His optimism is tempered by the knowledge that the B&B board has decided to endorse a move towards conversion. A B&B spokeswoman said: "We are committed to being an independent plc."

The society still may not get that far - it's now fair game for any of the cash-rich predators that are stalking the high street.

Pro-mutual B&B members can get in touch with the Save our Building Societies (SOBS) campaign (see below). Carpetbaggers are also on the offensive - there is an active, if eccentric, community on the web (although they have distanced themselves from the erratic Mr Hardern). These "baggers" are collecting the necessary 50 votes to put forward conversion resolutions at other building societies.

Most have already closed their doors to new windfall seekers. Several, including Nationwide and Yorkshire, ask new members to sign over any windfall to charity.

No one seems to know exactly where the B&B board stands on conversion. Having spent pounds 5m campaigning to stay mutual, it seemed confident of victory and press reports last weekend from informed sources suggested the B&B had won.

Yet some people in the building society movement are convinced the B&B board was not united in its opposition to conversion. A spokeswoman denied there had been any dissent from the pro-mutual line but the society did nothing to stop carpetbaggers by closing its doors to accounts or setting up a charitable foundation.

Now the B&B has got itself into a difficult position. As Mr Nardell says: "Until 2.30pm last Monday, they were in favour of mutuality. They could have stuck to the original view that mutuality is in the interest of members and still put the [conversion] motion. It's very difficult to see how they can argue that conversion is in the interests of members."

It's also very hard to see how conversion will help branch and head office staff. Having campaigned so hard, they are said to be devastated. Conversion for them can only mean one thing - job losses.

n Save our Building Societies: (answerphone for B&B members against conversion) 01727 847370. Carpetbaggers' website: www.carpetbagger.com