THE North-East’s biggest charity is poised to close, but its sole funder has pledged £1m to support good causes across the region.

The Northern Rock Foundation said yesterday it had been unable to find a viable way to continue its work, which relies on about £4m of support every year.

Virgin Money took over Northern Rock in the wake of the banking crash, and inherited responsibility for the foundation, which has handed out more than £200m to good causes over the past 17 years.

MPs last night voiced concerns that the foundation's demise will see charities fold.

Kevan Jones, Labour MP for North Durham said: “This will be totally devastating for community causes across the North-East.

"It is a betrayal of the commitments made by the government that the foundation would be safeguarded when Virgin took over Northern Rock.”

In May, Newcastle-based Virgin Money said it was willing to donate £1m-a-year via the foundation as long as other North-East companies made up the £3m annual shortfall.

At the time, Virgin boss Sir Richard Branson issued a blunt message to foundation bosses when he urged them to “get of their a*** and prove themselves.”

However, the foundation has never been a fund-raising body, and after consultation with local charities and potential funders it became clear that attracting the additional cash was not possible.

In a statement it said: “It is with deep regret that, after 17 years of grant making, Northern Rock Foundation will close its current grant programmes at the end of 2014 and begin to prepare for the foundation’s now likely eventual closure.”

It added: “Trustees believe there are now no funding routes left to pursue, (although they would be open to viable approaches) and will therefore proceed with the scaling down of the foundation's work.

“The foundation’s remaining funds will be used to achieve long term positive impact on the lives of children and young people in the region, and also to support the development and sustainability of voluntary organisations.”

The foundation, which employs 10 people, will hand out its cash reserves next year– believed to be about £10m – before winding down operations. Four member of staff who have been on secondment will return to Virgin Money.

The bank has agreed to honour its pledge with an initial charitable investment of £1m in 2015 to help young people in the North-East. Its earlier offer to donate £1m-per-year over the next five years has not been confirmed.

The initial donation will give £850,000 to help charity OnSide establish the first Youth Zone in the region to build a place for 8 to 19-year-olds to socialise; a new £150,000 grant-giving fund will be set-up with The Community Foundation (Tyne & Wear and Northumberland) to help young people realise their potential, and discussions are taking place on a proposed new housing regeneration scheme with Newcastle City Council.

Mr Jones added:“The £1m offer is a paltry amount when you consider the sums being paid to senior executives at Virgin Money, including its chief executive.

“Virgin Money and Sir Richard Branson should hang their heads in shame."

Jayne-Anne Gadhia, Virgin Money chief executive said the bank was serious about its commitment to the region, adding: “We are excited to be working alongside the Northern Rock Foundation to support the creation of the North-East’s first Youth Zone, which will benefit young people in the region for generations to come.

“We are also delighted to be extending our long-standing relationship with The Community Foundation, to help young people realise their potential, and I am looking forward to opening the grant application process in January 2015.

“Virgin Money takes its social responsibilities very seriously in all of the communities in which we operate as we seek to deliver on our ambition to make everyone better off. We are grateful to all of the organisations we are working with for helping us to deliver on this ambition in the North-East.”

Chi Onwurah, MP for Newcastle Central said the foundation had made a “remarkable contribution to the North-East” and feared that its demise would leave a gap that wouldn’t be replaced.

Businessman Sir Peter Vardy, who is championing OnSide Youth Zones in the North-East said: "This project represents an investment in young people, demonstrating our belief that they deserve the best, and ultimately it is an investment in the future of the North-East itself."

Rob Williamson, The Community Foundation (Tyne & Wear and Northumberland) chief executive said: “With this extra support through the Virgin Money Fund, we will be able to support vital local organisations which help make a tangible and positive difference to people’s lives. We are looking forward to getting started in early 2015.”

James Ramsbotham, NECC chief executive, said: “It is regrettable that the foundation, which has donated so much to so many good causes in the last 17 years, is to close. However, we very much welcome and applaud Virgin Money’s commitment to invest £1m in the North-East in 2015 and finance a new community grant fund for the region.

“Northern Rock Foundation has been a fantastic charitable organisation, but we take heart in the fact that its fantastic work will live on and continue to be of benefit to our region for years to come.”