The Chancellor is facing calls to kick off an urgent review into the laws governing mutuals, as the failed sale of LV is set to cost members up to £43million.
Rishi Sunak declined to intervene in the proposed sale to private equity shark Bain Capital, with the Treasury declaring it was a matter for members.
But after LV’s 1.2m policyholders rejected the deal last Friday, MPs are pushing Sunak to launch a reform of the mutuals sector.
Pressure: Rishi Sunak declined to intervene in the proposed sale of LV to private equity shark Bain Capital, with the Treasury declaring it was a matter for members
MPs want to see the rights of member-owners strengthened and incentives for ‘unnecessary demutualisations’ removed.
They also want City regulators to be under a duty to protect the interests of mutual members and rules changed to make it easier for mutuals to raise capital.
Trust in LV bosses Alan Cook and Mark Hartigan (pictured) has hit rock-bottom
The MPs believe that the lack of regulation around the mutual sector meant LV members were left unprotected.
It has also cost the members dear with independent experts employed by LV estimating that the firm’s 1.2m policyholders would end up forking out £43million to cover advisers’ fees and other costs associated with the deal.
Even though it collapsed on Friday, after failing to gain approval from enough members, millions of pounds of savers’ cash will still be used to cover the costs of the unwanted deal.
Labour MP Gareth Thomas, who chairs the all-party parliamentary group on mutuals, said: ‘A fundamental overhaul of the law is needed to prevent any repeat of this dodgy deal.’
He is hoping to quiz Treasury ministers on their plan for the mutuals sector in Parliament.
LV has been a mutual for its entire 178-year history, meaning it is owned by its members and run entirely for their benefit.
But last year after a ‘strategic review’, bosses Alan Cook and Mark Hartigan concluded that the best option would be to put the firm up for sale, claiming that LV needed cash to fund its expansion and modernisation, and ended up with 12 formal offers.
They plumped for Bain’s – but the proposed deal infuriated LV members, who were unsettled by the idea of a rapacious private equity firm looking after their savings.
And trust in Hartigan and Cook hit rock-bottom, and after losing the vote on Friday Cook agreed to resign when a ‘way forward is agreed’.
Backing calls for a review, Tory MP Kevin Hollinrake said: ‘It’s all been a stitch-up from start to finish. Neither Cook nor Hartigan had mutual experience.’
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