Sell-off would help everybody and soul

ONE of the oddest ideas floating in financial circles is of John Lewis, the department store group, de-mutualising itself, an idea that is both repellent and appealing.

The thought repels me because of John Lewis' unique status among department stores of being a mutual entity owned by its "partners", who would otherwise be mere employees. It has lifted the company's corporate moral for years and invested their team with the dignity a mere salary does not give.

But the 38,000 partners have twigged that if they converted into a conventional plc, as many building societies have converted into banks, they would each enjoy a cash windfall of #100,000. The shops with all their tempting merchandise would still be operating, but dormant value would have been tapped.

The temptation is only an excuse in applied human nature. Chairman Sir Stuart Hampson has made many a harrumphing noise about the conversion, which broadly translates as "over my dead body" and he has 13 years to go until retirement.

However, sold off on the stock market, John Lewis would realise #3.5 billion so the "partners" are unlikely to give up their ambition easily.

It is 10 years since the Trustee Savings Banks discovered nobody owned them at all and slowly won the courts approval to translate themselves from limbo into tradable asset. The same happened at Reuters. The press agency had flourished into a precocious money making machine but nobody in particular owned it. They merely had subscribers who bought its torrent of news and data. Reuters was then processed by the brokers and bankers and became a prodigious success as a piece of financial engineering.

These oddities are not the only institutions of venerable age and many virtues that could be brought to the market. I have two nominations: the Church of Scotland and the National Trust for Scotland.

The Kirk is a thoroughly odd body. Its legal personality is a charity. It has its own corporate secretariat - 121 George Street, Edinburgh - where they administer a diverse portfolio of properties and equities. Around Scotland, the different Kirk communities hold other assets, although it may be argued that many of its churches and associated manses and meeting halls are more liabilities than resources.

What would happen if the Kirk tried to de-mutualise itself? It is not an entirely silly notion. They did it at the time of the Disruption in the 1840s, when the Free Church split from the establishment. The tussle over the estate still causes wrangles in many communities. Ecclesiastical historians say the fractures would not have occurred if Kirk trustees had invested earlier in the soaring shares of the new steam railway companies.

Who owns the Church of Scotland? Certainly not the state. It took centuries of tenacious fighting to stop kings and parliaments exercising any proprietary rights. It endures in a curious limbo owned by the abstraction of the bureau in Edinburgh and its trustees.

Employing 3000 people and claiming assets worth #500 million in its annual accounts, the Kirk is a wealthy agency. Yet it is odd by every other criteria. It exists to promote the advice of a freelance rabbi in bronze age Palestine. It also offers various comforts, including immortality, to its remaining members. And its service staff, outwith its George Street headquarters, are mostly ministers leading threadbare existences on meagre stipends and modest pensions.

De-mutualising the Church of Scotland would not compromise or dilute its religious purposes. Indeed, they could be revitalised by the juices of sound finance. After all, if each minister was to share in the assets, then they would get a one-off payment of perhaps #300,000. They could blow it on luxury but that would sour the idea. Converted into an income stream, that sum would lift the clerics on to a middling professional salary level.

I suspect the experience of the exercise of selling off the Kirk's portfolio would flush out many assets that have laid hidden for generations, a series of accretions left over from the days when the state forced us all into the Roman version of religion.

Since we converted to the Swiss national faith, many well-meaning folk have bequeathed money and shares to the Kirk as a mixture of personal insurance policy - just in case the supernatural claims proved true - and because local kirks were centres of affection and a sense of community. I believe this process, akin to privatisation, could jolt the docile Church of Scotland into being a more lively and benign force.

It is possible that demutualisation could be accompanied by a tax change allowing us all to give, say, #250 a year tax-free to a religious institution. The churches of America and Germany enjoy tasty tax concessions that we ought to match, but I think that too many Scots divines feel such ideas are far too pedestrian and vulgar for them to even address the subject.

To those for whom religion is largely baffling but also harmless, no demands would be made on us. For those who did believe in the church's evangelical role, it has to be happier with more cash.

Meanwhile, the National Trust for Scotland is another attractive but thoroughly odd entity. It shows assets of #31m, but its break up value far exceeds that.

I am not proposing the desecration of its estate - it does look after many national treasures - but I do think that if National Trust members voted to de-mutualise their eccentric and delightfully curious collection of properties then they could all enjoy a pay out of around #15,000 each.

I should declare my interests I have no shares in the Kirk but I do covenant money to the National Trust. But I do know both could be improved. The capitalist way has to be better than the present licence to snooze.

Copyright 1999
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