Mutuals have to show they are worth preserving

It was somehow appropriate that yesterday's love-in for those still wedded and glued to the concept of mutual ownership should have taken place in the sanctity of Church House under the shadow of Westminster Abbey. Like the established church, the movement paddled along quite happily for many years in peaceful obscurity, largely protected from the harsh realities of commercial life. Like the church, many of its advocates have the air of religious zealots, proselytising on behalf of the movement and its ideals at every opportunity. And like the church, the mutual movement is being dragged kicking and screaming into the late 20th century. Both are institutions, if not in turmoil, then certainly in the process of far-reaching and traumatic change.

The impetus for that change is coming from two quarters. First the carpetbaggers who sense that when confronted with the choice between a building society and a bung, members will choose the latter. And second, from within the movement itself for there have been as many mutuals that have converted under their own steam as under the cosh of one of the high street banks.

The purpose of yesterday's gathering was to examine how best the process could be slowed, if not stopped. There is little doubt that mutuality is worth preserving. Something has to act as a bulwark against the banks and in any case it is obviously a good thing to have some form of alternative to the joint stock company.

The question is what form that preservation should take. Two solutions were on offer yesterday. One is to man the barricades and erect every defence mechanism possible. Deter the carpetbaggers by making it much more difficult and much more expensive to seek election to the board of a mutual is one idea. Change the law so that membership does not also bestow voting rights for two years or more is another.

All this rather misses the point however. Physical defences might help halt the advance, but they cannot stop it indefinitely. To survive long term, the remaining building society and life mutuals have to demonstrate they are worth preserving. By attempting to offer a tangible mutual benefit to their customers, some mutuals have made a start. Alastair Lyons of National Provident was claiming yesterday that pound for pound, a with- profits life policy operated by a mutual delivers a 12 per cent higher return than the equivalent policy offered by a plc with shareholders to keep happy.

No doubt Norwich Union could find another set of actuaries to challenge his calculations. But NPI's tactics are undoubtedly the sort most likely to persuade members of the value, not just the virtue, of mutuality. Britain's remaining mutual building societies and life companies need to do far more of this. If they are to survive, they need to go on the offensive.