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Northern Rock Foundation to close four grant programmes

Fundraising | Gemma Ware | 1 Oct 2007

The Northern Rock Foundation is to close four of its grant programmes and cut expenditure by more than two-thirds in 2008 amid uncertainty over future donations from the troubled bank.

The Foundation’s trustees estimated set a cautious initial budget of £7m for next year, a third of the estimated £22m that it will spend by the end of 2007, a figure that had already been scaled down from an original projection for this year of £30m.

Four of the Foundation’s seven existing grant programmes, which together have already totalled over £8m in grants this year, will close after trustees awarded the last round of grants for the programmes at a meeting this month.

The closing grant programmes are money and jobs; strong and healthy communities; culture and heritage, and better buildings.

All existing grants that have been allocated by the Foundation will be honoured, and the Foundation’s three other grant programmes, safety and justice, building positive lives, and independence and choice, will continue with the same application process next year.

As the trustees are uncertain about the future funding of the Foundation, the £7m budget for 2008 has been allocated by the trustees from the Foundation’s reserves, which stood at £36m in December 2006.

A spokesman for the Foundation said it had no specific plans to reinstate the programmes if the funding situation improved. “We’ll keep the budget under review in 2008, but we have to give people some certainty so we’re saying they’re closed,” he said.

The Foundation receives the bulk of its money from a covenant with Northern Rock plc, which donates 5 per cent of its annual pre-tax profits. The money is usually paid in two instalments, in July and January.

The Foundation received £15m from the bank’s pre-tax profits in July 2007, but the spokesman said trustees “can’t predict” what their income would be in January.

While a potential bidder for the bank would not be obliged to honour the Foundation’s 5 per cent donation from the bank’s profits, the Foundation has an allocation of 15 per cent of the company’s shares. The shares are dormant as long as the 5 per cent covenant remains – meaning the Foundation currently has no voting rights - but would need to be taken into account should the ownership of the bank change.

“We’d welcome a situation where the future of the Foundation is maintained in some way but we can’t comment on any bids because we don’t know the detail,” said the spokesman.  

David Milburn, regional chair of the Development Trusts Association and executive director of Amble Development Trust which received a grant under the money and jobs programme this year, said the Foundation was an excellent funder to work with and the situation was very unfortunate.

“The impact it will have will be very significant and it’s up to the sector to find ways to deal with it,” he said. “People are worried but they fully understand the position the Foundation is in.

“People will get on and adapt, it’s part of working in the north east, you bounce back and you’ll find something else.”

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