Virgin Money announced a new charitable foundation yesterday to support communities in the North East of England.
The announcement comes as the Northern Rock Foundation prepares to hand out its final grants.
The future of the Northern Rock Foundation has hung in the balance since Virgin Money’s buy-out of Northern Rock in 2011. The bank and the charity have failed to reach a funding agreement and the Foundation announced in September that it was forced to close.
The new Virgin Money Foundation will launch with a £4m investment from the government which was announced by chancellor George Osborne yesterday.
The government’s investment will be spread over four years and will come from the fines levied on banks for manipulating the London Interbank Offered Rate (Libor) financial benchmark.
The figure will be matched by Virgin Money in the first year with a possible increase going forward.
Virgin Money faced criticism earlier this year following its failure to reach agreement with the Northern Rock Foundation. The Foundation was previously funded by Northern Rock bank and received funds of up to £15m a year, which in turn were distributed as grants to charities in the North East of England.
In September, Virgin Money offered the Northern Rock Foundation a £1m a year investment over a five year period on the basis that the Foundation raise an additional £3m a year from other sources. But the Foundation said that it was unlikely to be able to raise the funds and announced soon after that it would close.
In September, Virgin Money donated £1m to charities in the North East. The figure was described as “paltry” by North Durham MP, Kevan Jones.
“Virgin Money and Richard Branson should hang their heads in shame,” he said in October. “I would challenge them to make a substantial donation to charities from their potential [stock exchange] windfall.”
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Osborne said yesterday: “The Northern Rock Foundation made a considerable impact in the North East in recent years, but sadly that has come to an end as a result of the deal made when Northern Rock collapsed.
“It is only right that we use the fines from those who’ve demonstrated the worst values, to support the charitable causes in the north-east that demonstrate the best of British values on a daily basis.”
The new Virgin Money Foundation will be independent from Virgin Money with its own chair and board of trustees but Virgin Money will cover operating costs. It is expected that the Foundation will become fully operational during the first half of 2015.
The Foundation’s first projects in the North East will focus on charities helping young people in the region. This will include an investment of £850,000 to help create the first Youth Zone in the North East, giving young people aged 8-19 a place to socialise.
It will also work with the community foundation for Tyne and Wear and Northumberland to help young people overcome barriers such as homelessness, mental health issues and low educational attainment.
Jayne-Anne Gadhia, chief executive of Virgin Money, said: "Virgin Money takes its social responsibilities very seriously in all of the communities in which it operates - but particularly here in the North East. We are very grateful to the Government for their generous contribution which will enable the new Virgin Money Foundation to make a positive and sustainable difference in the North East."
