The Northern Rock Foundation has announced it has lost its £15m a year partnership with Northern Rock Asset Management (NRAM) and will be forced to draw on its £38m reserves to keep its programmes going.
The £15m funding was the bulk of the Foundation's income in 2009, with other sources of income only amounting to £340,000.
The partnership between the Foundation and NRAM was formed by the government after Northern Rock business entered temporary public ownership in 2008. It saw governement put in place a three year funding agreement where the Foundation received £15m a year between 2008 and 2010 from Northern Rock business.
The government also asked Northern Rock business to consider how to secure the Foundation’s long-term viability.
During 2010 the Northern Rock business was separated into two separate companies: mortgage and savings bank Northern Rock plc and Northern Rock Asset Management (NRAM), which became part of UK Asset Resolution.
NRAM took responsibility for the government’s funding arrangement with the Foundation and made the final £15m payment under the three year contract.
However, the Foundation has this week complained that it has been unsuccessful in resolving a plan for future funding and has said the NRAM will no longer fund the Foundation.
Chair of the Foundation Alistair Balls said: “During 2010 the Foundation has actively sought a resolution to the issue of future funding.
“We are disappointed that NRAM is not willing to continue to support the Foundation. We will continue to press the government to fulfil the commitment to achieve a firm and long-term funding solution.”
The Foundation expects annual funding to be “radically” reduced compared to previous years, and will start to draw on its £38m reserves to enable the Foundation’s work to continue.
In better news, Northern Rock plc has agreed to provide funding to the Foundation at a level of 1 per cent of its pre-tax profits from January 2011. It will be a two year rolling agreement which will be reviewed annually.
Up to December 2007, Northern Rock gave, by covenant, 5 per cent of its annual pre-tax profit to the Foundation, totalling more than £190m.
