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hon. Member for Brent, South (Mr. Boateng) is in order in making that point, but he should now return to dealing with the Bill.Mr. Boateng : I am only too anxious to do so. I wish to draw a comparison between the Bill and the regulatory mechanisms that it contains and the current practices of life assurance companies and am compelled to point out the fat commissions that are used to secure tied agents such as banks and building societies, whose customers might reasonably expect to receive objective advice on matters such as life assurance.
No wonder that, as a result, the leader of the Financial Times of 24 January stated that the
"quality of the product has never been as low as now, and the power of a well-organised sales force never as high."
Nor is the customer told the cost. Only last month, from figures submitted to the Department of Trade and Industry by the life assurance companies but never before published, were we able to identify the true price tag attached to their products. The cost of selling a policy in 1990 typically amounted to the whole of the first year's premium payments, but it could be much more. In one case it amounted to more than 250 per cent. of the first year's premiums, which is precisely the point that is made by my hon. Friend the Member for Macclesfield--
Mr. Boateng : The brief exchange with my hon. Friend the Member for Makerfield (Mr. McCartney) gives me a distinct sense of deja vu. It shows how long it is since we have had the pleasure of contributing together to such a debate. I have learnt a lesson at my hon. Friend's hand once again.
The chief executive of the Life Assurance and Unit Trust Regulatory Organisation, Kit Jebens, said at the time--he was right--that "On policies, the consumer eventually pays the acquisition cost, sometimes indirectly."
It may therefore take a policy holder seven to 10 years on average just to get back the premiums that he or she has paid. Meanwhile, according to LAUTRO's figures, the sales agent receives on average £570 for a typical sale, such as a mortgage-related endowment policy with premiums of £50 a month. In a working year of 48 weeks, therefore, he has to make only a couple of sales a week to earn a salary of well in excess of £50,000 per annum. Yet nothing in the law obliges a life assurance company to reveal the cost of the product to the customer at the point of sale.
However, the Securities and Investments Board's review, to be published later this week, is simply a commitment to reveal an industry average, and even that will be expressed not in pounds sterling but as a reduction of percentage return over the life of a policy, if it runs to maturity. The practices of life assurance companies bear heavily on small savers. They show why a healthy friendly society movement based on self-help, mutuality and a sense of responsibility towards its members over and above its contractual obligations is so desperately needed and why we wish that the measure had been brought before the House earlier.
My hon. Friend the Member for Makerfield raised a second matter relating to pension funds and their regulation. [Interruption.] I hear the Economic Secretary
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moaning and groaning about the time that consideration of this matter has taken. That is a bit rich considering the time that the Government have taken to bring the matter before the House. We shall take as long as we think necessary to consider the matter and no amount of harassment, muttering or fulminating by Conservative Members, who should be silent but who are incapable of being so, will change the time that we take to deal with this important issue. Despite warnings 10 years or more ago from the Wilson committee reviewing the functioning of financial markets and the Gower report into investor protection and the Occupational Pensions Board in 1982, the Government have done nothing to protect savings made through pension schemes from their hopelessly inadequate basis in trust law. The all-party Social Security Committee, reporting today on the operation of pension funds, says that the fact that there have not been scandals of an equal dimension to that perpetrated on Maxwell-owned pension funds owes more to the decency of employers and the integrity of trustees than it does to trust law. The fact that those matters have come to light calls attention to the undue reliance on the decency of employers and the integrity of trustees. That decency and integrity have been a greater protection than existing trust law. When that decency and integrity break down, the consequences are grave, as they have been for those who put their trust in the Mirror Group pension fund.Mr. Maples : The hon. Gentleman mentions the Select Committee's report published today and points out the dangers and inadequacies of trust legislation. Does the Select Committee come up with examples other than that of a socialist newspaper proprietor--a long-term supporter of the Labour party and ex-Labour Member of
Parliament--robbing his pensioners of £400 million or £500 million ?
Mr. Boateng : The Economic Secretary, even in his hour of need--we understand the problem that he faces in his constituency, although we do not sympathise with him--should not stoop so low as to suggest that the political philosophy espoused by the late proprietor of Mirror Group Newspapers had anything to do with his dishonesty. To suggest that there is a link between the two--bearing in mind the current funders of the Conservative party, such as Asil Nadir and the clutch of Greek and Hong Kong entrepreneurs to whom the Conservative party has been obliged to go to shore up its depleted electoral funds--is a bit rich.
Mr. McCartney : The Minister-- [Interruption.] Protect me from these hordes, Madam Deputy Speaker.
Madam Deputy Speaker : The hon. Gentleman needs little protection from me.
Mr. McCartney : The Minister asked for other examples from the report--I can give him one. The Government sold Mr. Maxwell the privatised helicopter section of British Airways. Pensioners in that industry now face the loss of all their pensions--
Madam Deputy Speaker : Order. We are now straying some way from the Bill.
Mr. Boateng : The recommendations of that report should certainly be taken seriously--
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Mr. McCartney : They were unanimous.Mr. Boateng : Indeed they were.
On the role of the Investment Management Regulatory Organisation, the only part of the regulatory regime to have been significantly modified by the Government, the report has this to say :
"The way IMRO has gone about carrying out its duties suggests to the Committee that this aspect of the system of self-regulation is--when the chips are down--little short of a tragicomedy. What IMRO appeared to be telling the Committee was that their part of the self-regulatory system works well providing all the participants are honest. In other words, the system works in those circumstances where there is little need for a regulatory system at all."
So the regulatory regime provides no protection for pension scheme members, and does not protect the manner in which assets are managed. Now that the public are beginning to appreciate how exposed their pension rights are to malpractice, the matter is giving rise to great concern throughout the country.
The consequences of deregulation are becoming all too clear in the context of a third matter, and here, too, the friendly societies movement shows the way. I refer to housing and owner occupancy. The Government want us to believe that this is one of their great triumphs, although that claim rings hollow now, with more than 150, 000 households six months or more in arrears with their mortgages and with 80,000 homes repossessed last year. It is interesting to note that in 1980 fewer than 4,000 homes were repossessed--in the immediate aftermath of a Labour Government--yet after 12 years of Conservative rule, 80,000 are repossessed.
I draw the attention of the Minister to the plight of up to 100,000 pensioner households who owned their homes outright until they fell foul of unscrupulous financial advisers. The advisers who sold them investment bond -related home income plans, aided and abetted by the building societies, robbed these pensioners just as surely as if they had backed a van up their drives and removed all the furnishings and fittings of their homes. I hope that, even at this late stage of a Parliament, Treasury Ministers will take the plight of these people seriously.
The Government's only response so far has been to set up committees of regulators. The victims and the House are entitled to know from the Minister tonight whether he and his Treasury colleagues will do more. When will he put some political weight behind the victims' search for restitution? When will he make it his business to ensure that building societies do not repossess the homes of persons suffering from this fraud, at least until each case has been reviewed by a committee of regulators? Will he make it clear to the Building Societies Association that building societies are obliged to take account of the ability to repay of the people to whom they lend? This is a growing scandal and something must be done about it. Hitherto, there has been too much to-ing and fro-ing between the Treasury and the DTI about who should take responsibility for it. When will the Minister ask his DTI colleagues to do something about the sharks who sold these plans and who remain in business to this day?
The slack regulation of financial services has not only hit consumers ; it has also been reflected in the employment prospects of those who work in the sector. Service sector growth was meant to be an engine room for the economy but that engine room is decidedly debilitated now--
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Mr. Boateng : I can understand my hon. Friend's frustration. He represents very well those of his constituents who work in the financial services sector. The many bank employees in Makerfield will be mightily relieved to know that my hon. Friend has their interests so closely at heart. The good folk of the building societies and banks of Makerfield will breathe a sigh of relief when they hear that my hon. Friend has made these remarks.
There has been a dramatic fall in business confidence throughout the sector. Not only building societies but banks and fund managers are beginning to display their lack of faith in the policies of this Government. About 37 per cent. of them are less confident than before ; the negative balance is a massive 27 per cent. There is a widespread lack of consumer confidence. The uncertainty of business prospects is holding back authorisation of investment in all areas except information technology. The only bright feature is the steadiness of overseas demand, which is a tribute to the competitiveness of British financial services--hardly an argument in support of the Government's contention that our economic problems are part of a world-wide recession.
Employment in banking, finance and insurance has declined from a peak of 2.7 million in June 1990 ; it had fallen by 140,000 by September 1991, on the latest available figures. Under the Conservatives, 1992 can only bring more of the same. The signs are that losses will be even greater.
The clear conclusion is that no sector is safe from the recession. Previously secure jobs are being considered for the knife, and a wave of fear spreads through the country, especially in London and the south-east where jobs in the financial sector are most concentrated. For the first time, thousands of people must ask themselves whether they will still be in a job by the end of the year.
We welcome the Bill and the attention that it gives to friendly societies. Our three areas of concern may be summarised in the following way. First, the regulatory framework must be robust enough to cope with the problems of closed-down societies and possibly new ones, as well as allowing the smooth expansion of successful societies. The tax privileges accorded to friendly societies justify the new commission in closely supervising their activities. The commission should make it its business to ensure that each society operates as it should. We cannot afford the sort of laissez-faire approach which has so characterised other parts of the regulatory system. The commission must reassure itself that societies are at all times managed by people who are fit and proper to do the job. It must keep a particularly close watch on sales methods, especially as marketing is seen by many in the friendly societies movement as the key to future success.
LAUTRO rules on the training of sales staff mean that traditional methods of selling have already had to be abandoned. The societies undoubtedly face a mountainous challenge, given the head start of their competitors who built up networks of tied agencies in the 1980s. So far the friendly societies have not been seen as perpetrators of overselling or misrepresentation, but they must avoid any future temptation to cut corners.
Secondly, there must be suitably high barriers to demutualisation. Of course there are advantages in limited company status which gives access to outside capital. However, many other savings vehicles can fulfil that need. Only friendly societies recognise implicitly in their constitution that security for members cannot always be
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achieved by pursuing profit maximisation. Mutual status permits social, philanthropic and welfare activities to be pursued as well. The pursuit of those activities is important, because they are valuable and must be preserved in the friendly societies movement. We do not want to see them lost in the marketplace. That is not popular with the Government, but it is a popular idea with the public as a whole and it has found its time. The friendly societies commission should permit mergers in the movement, in preference to take-overs by insurance companies, which is the last thing we want to see as a consequence of the Bill.Thirdly, we require an appropriate compensation scheme because we have learnt from recent experience across the sector that sooner or later such a scheme is required. The present voluntary investor protection scheme is clearly unsatisfactory, and a move to join the policyholders' protection scheme with its more generous terms must be welcomed. It must be kept under review to ensure that it meets the needs of friendly society customers, even those whose savings are relatively small.
Legislation on friendly societies dates back to before the 19th century, and it was in 1793 that the movement was truly born. The movement dates back to Roman times and must be allowed to continue to prosper well into and beyond the 21st century.
The first friendly society in Roman times was known as the Hornblower society, a fact which will not have escaped the Economic Secretary to the Treasury. It was established by soldiers to provide for funeral expenses. We are about to witness the Government's funeral, mercifully the end of an era, and I suspect and hope that it will be the end of the Economic Secretary's career. No doubt he is a perfectly reasonable person.
Mr. Anthony Coombs : The hon. Gentleman is not a disinterested party.
Mr. Boateng : I am disinterested in the sense that I have no particular--I am not quite able to bring myself to say what I was about to say, but, while we are on the subject of Roman Britain, may I say that I have no specific or personal animus against the Economic Secretary. I regret that he is on that side of the House and the sooner that many Conservative Members are translated to the Opposition Benches or are out of the House altogether, the happier we shall all be and the more certain will be the future of friendly societies.
5.24 pm
Mr. Michael Morris (Northampton, South) : I shall be brief. I support the Bill. Since I entered the House in February 1974, I have watched what has been happening to friendly societies. I certainly recognise that nothing moves swiftly in the House on any front. I disagree with the hon. Member for Brent, South (Mr. Boateng) because, in the past couple of years, a great deal of time, patience and care have gone into the Green Paper. I pay tribute to the Economic Secretary who did so much of the groundwork in preparing the Bill. The size of the Bill is a credit to all those who were involved. A great deal of preparatory work by hon. Members from all parties and by the steering committee has gone into its production. I
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am no expert in financial law, but it seems to me that, unlike many Bills, amendments to this one would be superfluous. I wish it a fair passage.Society is changing. All hon. Members appreciate the role of preventive medicine and, in terms of social welfare, the role of the friendly society is to provide preventive medicine. The success of the societies is based on mutuality, the involvement of members and the societies' personal involvement with their members in terms of social and welfare need. That applies especially to death benefits, sickness and accident insurance.
The friendly societies add a much-needed dimension to our society. As we approach the general election, it is important to give a common message to the British people, which is that there is a future role for friendly societies. I hope and pray that the Bill will be given the green light by all hon. Members.
5.26 pm
Mr. Ian McCartney (Makerfield) : I shall be brief, mainly because my hon. Friend the Member for Brent, South (Mr. Boateng) in his excellent speech spoke for me as well, so I do not want to repeat what he has said. Like the hon. Member for Northampton, South (Mr. Morris) but probably for different historical reasons, I am a firm supporter of the Bill. It is a tragedy that it will be stillborn because we shall run out of time. From the wide expanse of the Back Benches, I should like to pose a question to Front-Bench spokesmen. Irrespective of the result of the general election, will they make a commitment to reintroduce the Bill at the earliest opportunity?
Mr. McCartney : The friendly societies have spent eight years campaigning for the Bill and I hope that we shall not have to wait another eight years for its proposals to reappear. If we are serious about the development and promotion of the friendly society movement, and are committed to its long-term future, we should not be prepared to wait another eight years for legislation on its relationship to other financial institutions. Warm words of support for friendly societies in the House and in the marketplace are not enough because, as a result of inactivity, friendly societies have been undermined. There must not be further diminution of their activities, to the point where they could be confined to the dustbin of history. I come from a mining community, and I am proud of it. I was brought up in that community which lived on five basic principles. They were : the church, the miners' welfare hall, the National Union of Mineworkers--before that the federation of mineworkers--the co-op and the friendly society. I do not put them in any particular order, but they formed the bedrock of the mining community into which I was born. My grandfather worked in it and my grandmother raised a family there, as did my parents. Therefore, friendly societies, and the concepts and principles of them, were an essential part of mining communities.
I may represent a mining community in England rather than a mining community in Scotland, but those concepts are as relevant today as they were then. The priorities may be different because of the social changes brought about by campaigning--for example, the creation of the national health service--but, as the hon. Member for
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Northampton, South realises, friendly societies were set up to provide benefits in mining communities, such as sickness and accident benefits. Those who control the mining industry had no real interest in the protection and maintenance of the health and welfare of those in the mining communities.My constituency is suffering not just from the closures in the mining industry but from structural unemployment and structural poverty. Therefore, I shall base my remarks on clause 10 and I hope that the Minister will comment on this important clause. I shall deal with friendly societies as credit unions. Those of us who represent, on both sides of the House, both small and large pockets of poverty realise that those who live in them are at risk from loan sharks and the activities of those who prey on people with low incomes or no incomes, or people who, because of the circumstances in which they find themselves, are unable to secure loans from recognised financial institutions. They rely on people, either within the community or outside it, who prey on them--loan sharks.
In my community, we have had serious difficulties with loan sharks. Three years ago, with a grant from the Department of the Environment, we developed a network of credit unions throughout the borough. Recently, the Department recognised it as one of the most successful stories of a self- help group involved in the community, handling its debt crises, evolving alternative ways to deal with debt and enabling people to save and to take out loans without the consequences that come about when racketeers prey on people desperate for additional financial resources.
Clause 10 is a general clause. I hope that the Minister will tell us whether friendly societies will be able to maintain and develop in communities such as those that I have described the credit unions and the work that they do. Credit unions are the one way, in areas where there is desperate poverty, to prevent people falling into the debt trap or not being able to save because they have such a small income. When breakdown takes place, criminals move in. Not only are extortionate rates of interest charged but physical violence and intimidation are used on those individuals unfortunate enough to get into the clutches of loan sharks.
Recently in my constituency a loan shark was taking from my constituents income support books and, in the case of those who were chronically sick and disabled, attendance allowance books. He was keeping them and cashing them until the loan had been paid off. He is now being sought by the police and the Department of Social Security on fraud charges, so I shall not name him, but that is an example of what can and does take place when poor people do not have an effective way to approach financial institutions to obtain financial advice and help, and loans and small saving schemes. Therefore, credit unions are a vital part of the development of the role of friendly societies. I would like the Minister to give a commitment that clause 10 is about developing a range of services, including, at a local level, activities such as credit unions.
I also ask the Minister to look into the historical system of bereavement benefits in mining communities. Because of the major changes in the past three decades, with the splitting up of mining communities and diversification, many friendly societies are run by an aging population with a small number of beneficiaries, spread not only throughout the coalfield in which they joined the scheme
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but throughout Britain. In my area, there have been difficulties under current legislation. I do not say this to criticise the friendly society registrar--it is a complication of the rules which means that it is difficult to wind up these small and dying funds and to disburse what is left of them to those who still remain members of them.Irrespective of the passage of the Bill, will the Minister look at this issue? I am prepared to provide the Government with additional information about this problem in the mining communities. Sometimes bereavement schemes are 50, 60 or even 70 years old and the people running them are elderly pensioners with no resources, and they have great problems in administration. Because of the rules, they also have difficulty in winding up the schemes and disbursing the small amounts of cash left in them.
It is ironic that this Bill, whose 126 clauses make it one of the largest Bills to be brought before the House during the five years that I have been here, has the unanimous support of the House. This is the only time I can remember a Bill this large having such support. Therefore, without making any party political or partisan points, I ask the Minister to ask the Leader of the House to organise discussions between both sides of the House to see whether there is some way in which the Bill can be granted a swift passage through the House. I can see no reason why not.
Irrespective of the battle that will take place in the country at the general election, the last memory of this House could be one of unity in passing a Bill that has the full support not just of the House but of the country. That would be a fair epitaph to what has been one of the most turbulent parliamentary Sessions. I ask this genuinely because I am certain that the Bill could be through the House and on to the statute book within 48 hours.
5.36 pm
Mr. John Watts (Slough) : The hon. Member for Makerfield (Mr. McCartney) is to be commended at least for addressing his remarks to the substance of the Bill, in stark contrast to the hon. Member for Brent, South (Mr. Boateng). We listened to a remarkable speech, which lasted for 55 minutes and seemed to take longer, and which included a 20 minute preamble in which he managed to make no reference to the content of the Bill. It is a tribute to his professional training as a barrister that he can speak for so long about nothing. In the remaining 35 minutes of his speech, while he took us into some interesting territory, its relevance to the contents of the Bill was, at best, minimal.
The hon. Gentleman professed not to understand the connection between the criminal activities of Mr. Maxwell and the political philosophy of the party that he supports. Let me enlighten the hon. Gentleman. It is at the centre of socialism to take money away from the people to whom it belongs and to spend it. Admittedly, it is normally done by Governments, not by individuals spending as they would wish, but none the less that is the connection between criminal activity and the underlying political philosophy.
The hon. Member for Makerfield introduced, in an intervention in the speech of the hon. Member for Brent, South that made his speech more interesting, the question of timetable motions. I deduced from the absence of substantial comment about the content of the Bill from the hon. Member for Brent, South that the Labour party does not oppose the Bill and does not wish to see it amended.
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If that is so, I am puzzled by the reference to timetable motions. If the Bill is agreed to by all parties, even if we were to hear an announcement later this week of an event that would bring this Parliament to a fairly speedy end, it might be possible still, with the good will of the business managers on both sides of the House, for the Bill to pass on to the statute book.I noted that when the hon. Member for Makerfield asked the hon. Member for Brent, South for an undertaking that, should there be a Labour Government after the election, they would bring forward a Bill on these lines at the earliest opportunity, although the hon. Member for Brent, South sat there "hear, hearing", he did not say yes. I do not know whether he would like to take the opportunity now of clarifying whether this Bill, which he has said is important, would be regarded as a high priority. I note that the hon. Gentleman still remains silent.
Mr. Boateng : I do not understand what the mystery is all about. I can give a clear, unequivocal assurance, as I already have, that the Bill will be brought forward in substantially unchanged form as soon as parliamentary time can be found for it. We can be certain that the Bill will be dealt with more expeditiously by a Labour Government. About that there can be no doubt. What greater assurance could the House have from so humble a personage as myself?
Mr. Watts : I think that that counts as an assurance from the hon. Gentleman. I understand his reluctance to commit himself. I recall that he found himself in deep water earlier in the year over assurances about relief for those who incurred losses at Lloyd's. Against that background, I understand his reluctance to step out of line with his bosses.
The House will know that I am the parliamentary adviser to the Institute of Chartered Accountants in England and Wales. My hon. Friend the Economic Secretary referred--
Mr. McCartney : What happened to the building society? Has the hon. Gentleman given it up?
Mr. Watts : The hon. Gentleman is referring to an organisation called the Kenton and Middlesex building society, which is dormant. It has never traded and therefore I have no financial interest to declare in it.
My hon. Friend the Economic Secretary referred to the consultations that have been undertaken with accountancy bodies, which have been welcomed and valued. However, there are still three concerns that need to be resolved the first of which involves systems of internal control.
My hon. Friend the Economic Secretary said that there would be a requirement that friendly societies should have adequate systems of internal control, and in general that would be welcomed by professional accountants. There is, however, a problem of scale. For a friendly society to operate a system of control as envisaged in the Bill, it would need to have at least three accounting staff involved in internal accounting procedures. The threshold at which the society would be required to meet these requirements is income or assets of only £5,000. It would clearly not be a practical proposition for a small friendly society to
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employ three accounting staff to operate an adequate system of internal control. Indeed, my institute doubts that even a society with a gross income of £100,000 a year would have the necessary resources to provide for that level of accounting staff, at least not without undue cost, which would be to the disbenefit of the members of the society.My hon. Friend the Economic Secretary explained that the Bill contains provisions to enable amendment by means of delegated legislation. It may be appropriate for thresholds to be raised by making use of such powers once the Bill reaches the statute book, if there is not time for amendments to be made at an earlier stage. Secondly, societies that carry on insurance business will be required to have a sure and fair opinion on their accounts. My hon. Friend the Economic Secretary will be aware that at present there is no agreement on how a true and fair requirement for companies conducting long-term business can be determined. As this is a problem for the life assurance industry generally, it will be a problem also for friendly societies conducting such business until such time as these matters are resolved. It seems likely that they will have to be resolved before the European Community's insurance accounts directive is implemented.
Thirdly, it seems that the definition of subsidiary in the Bill differs from that which is used in the Companies Act. There seems to be no good reason why the wheel should be reinvented. Why is there a different definition of subsidiary in this Bill from that which has been used in Companies Acts or in building society legislation? I shall be grateful if my hon. Friend the Economic Secretary gives further consideration to these matters. If they are taken up, I think that they will enhance the Bill. They will make it more likely that friendly societies can continue to thrive.
5.44 pm
Mr. Tim Smith (Beaconsfield) : I welcome the Bill. Before I say anything about it, however, I wish to comment on one or two matters raised by the hon. Member for Brent, South (Mr. Boateng). First, the hon. Gentleman seems to be unaware that in respect of home income plans the Securities and Investments Board has made an announcement that will make it much simpler for people to complain. Instead of there being a range of regulators to whom complaints can be made, there will be a simple channel. In other words, the process has been simplified. I am sorry if the hon. Gentleman does not know about that. As I have said, the announcement has been made. It includes a clear description of the compensation arrangements. The process has been considerably improved.
The hon. Member for Brent, South referred to home repossessions and debt. Last week, I went to St. George's house, Windsor, to speak at a conference that was taking place over two or three days, at which were represented leading banks, building societies, other financial institutions, the Bank of England and the Director General of Fair Trading, who chaired the session which I attended. Also present were many people representing borrowers and others representing advice centres. Important discussions took place, yet there was nobody representing the Labour party. The organisers made a great effort to arrange for somebody from the Labour party to speak at the conference, but it seems that no one was available to
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do so. That shows how much the Labour party cares about these issues. It was an important conference at which we were able to discuss the measures that the Government have taken to help those who have had problems with home repossession.The hon. Member for Brent, South complained that the Government had delayed introducing the Bill. That is why I asked him to give a clear undertaking that the Bill would be reintroduced quickly if we had the misfortune to have a Labour Government. He has given no such undertaking. Instead, he has used the standard form of words about parliamentary time permitting.
I remind the hon. Gentleman that in 1973 a companies Bill before the House fell because of a general election. One of the Bill's key provisions was designed to make insider trading a criminal offence. For five years the then Labour Government did nothing about it. We had to wait for a Conservative Government to reintroduce the measure. It did so and insider trading was made a criminal offence. Indeed, that Labour Government did nothing to improve things in the City. There was the short Companies Act 1976, which related solely to the books and accounts of companies. There was nothing else. Since then there has been a series of companies Acts, which have implemented European Community directives. We have had the Building Societies Act 1986, the Banking Act 1987, and the Financial Services Act 1986. A range of measures has improved regulation in the City. In my view, there are now only two important omissions, of which the Bill is one. It will fill a gap. I recognise that there is a need for it and that is why I welcome its introduction. Pensions legislation is another gap. The hon. Member for Brent, South should recognise that my view was not widely held.
I have always believed trust law to be inadequate to monitor pensions. The hon. Gentleman referred to the Wilson Committee and the various reports of the Occupational Pensions Board. If he reads the OPB report of as late as 1988, the recommendations of which formed the basis of changes to occupational pensions legislation which appeared in the Social Security Act 1988, he will find that the OPB recommended--this was only four years ago-- that there was no need to change the basis of the law on which pension scheme regulation is based. Those who say now that the law is inadequate are doing so entirely with the benefit of hindsight in the light of one major scandal in which a former Labour Member--a supporter of the Labour party--ran off with pension scheme money. Although it was a major incident, it was an extremely isolated one, fortunately.
I have only one minor concern about the Bill, and that is about cost. As my hon. Friend the Member for Slough (Mr. Watts) said, some of the societies are very small. He made an important point about internal control costs and the number of staff that might be needed to implement an adequate system.
I am concerned about the cost of regulation. My hon. Friend the Minister will be aware that all friendly societies--certainly those which do investment business--are already authorised under the Financial Services Act 1986 and are paying the costs of complying with that legislation. Now, we are told that the cost of this Bill will be £1 million a year, and a further levy will be made on friendly societies to meet that cost. It is important, especially for the small
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societies, that there are not excessive regulatory costs, otherwise the costs will exceed the benefits to the customers of such societies.I am sure that my hon. Friend is aware that one detailed point has been put to me by the Association of British Insurers--the question of the Policyholders Protection Act 1975. If that Act is extended to friendly societies, not only are the benefits extended, but the costs. The ABI says that because of the definitions in the existing legislation large partnerships in Canada and the United States are making claims under the Act, for which insurance companies--and, if the Bill is passed, the friendly societies--will have to pay. I should be grateful for my hon. Friend's response to that particular concern.
5.51 pm
Mr. Boateng : With the leave of the House, Madam Deputy Speaker. This has been a good debate, in which enthusiasts and hon. Members committed to the progress of the Bill have taken part. I hope that the Economic Secretary will give a clear undertaking, along the lines that we have given, that in the event of there not being time--and I fancy that there will not--for the Bill to complete its stages in this Parliament, in the next Parliament, when the Government will be the Opposition, they will do all that they can to give the Bill, as reintroduced by a Labour Government in substantially the same form, a fair wind. If the Economic Secretary can give that assurance clearly and unequivocally tonight, I have no doubt that, at an early date, the Labour Government will find the opportunity in the parliamentary timetable, which we all seek, to get this important and long-overdue Bill on the statute book.
5.52 pm
Mr. Maples : With the leave of the House, Madam Deputy Speaker, may I say that I am surprised that this humble and uncontroversial Bill should have given rise to 55 minutes of coloratura oratory from the hon. Member for Brent, South (Mr. Boateng). At first, I felt that I should sympathise with him for having such a small audience, but I remembered from previous occasions that he does not really need an audience for his speeches--he enjoys listening to them himself. I wish quickly to deal with the points raised in the debate. The hon. Gentleman welcomed the Bill and, by and large, agreed with its provisions. We welcome that. The hon. Member for Makerfield (Mr. McCartney) suggested that the Bill might have been guillotined. I hope that that will not prove necessary. In the unlikely event of our proceedings being foreshortened by a general election being called, this is one of the Bills that will have to be discussed between the usual channels. My understanding is that there is very little, if anything, between the parties. I hope that the usual channels will be able to ensure that the Bill becomes law.
Mr. McCartney rose --
Mr. Maples : The hon. Gentleman spoke for a long time and I have dealt with his point.
Mr. McCartney : There is no need for the Minister to be tetchy ; we are trying to be helpful. If, last week, the Government could introduce guillotine measures a week from the election being called, why cannot they now give
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an assurance that they will introduce proposals to guarantee the Bill's passage through the House? That is all I am trying to say.Mr. Maples : The hon. Gentleman invites me to repeat my joke, which was that even the right hon. Member for Blaenau Gwent (Mr. Foot), when he was Leader of the House, did not guillotine a Bill before its Second Reading. I have no reason to suspect that such action would be necessary. There is little of controversy between us on the content of the Bill. If time permits, I am sure that we can get through the remaining stages quickly. If time does not permit, I hope that the usual channels can arrange matters so that the Bill becomes law. The hon. Member for Brent, South criticised what he called the delay in introducing the Bill. He said that we could and should have introduced it earlier. We could not have done so. The Bill was presented to the House and printed within about two days of its drafting being completed. The final delay was just one week, when there were some points that needed clarification. The Green Paper was published in 1990 and there was an extensive period of consultation because it is a very long Bill. The result of all that consultation has been that not only the Opposition but the friendly societies are happy with the Bill. It is a long and complicated Bill which we believe is in as near a perfect form as we could get for a Bill this long. It should proceed through the House without amendment, so the delays in bringing it forward were worth while.
The hon. Gentleman also criticised us for reducing the friendly societies tax exempt limit. That begged some interesting questions. It may be another uncosted Labour party promise, but to what level should it be raised, and would that privilege also be extended to the life insurance companies? If not, and if it began to overlap their business, they would claim that friendly societies had an unfair advantage. If the hon. Gentleman considers the issue, I am sure that he will agree that the tax exempt limit must be set at about the bottom of the limit for life insurance companies if it is not to create an unfair competitive advantage for friendly societies. If it were to be much higher than that, it would cost a great deal of money. As we know, the Opposition are pretty cavalier with the way that they spend £1 billion here and £1 billion there. Perhaps £50 million or so spent on such a provision would not really matter. The hon. Gentleman referred to home income schemes. My hon. Friend the Member for Beaconsfield (Mr. Smith) effectively answered that point. Action has been taken by the appropriate self-regulatory organisations on the marketing of home income schemes. The Building Societies Commission has tightened the capital adequacy requirements relating to mortgage lending associated with equity withdrawal and action is being taken to help those unfortunate investors-- and I have some in my constituency--in the schemes. Last week, the SIB announced a one-stop complaints procedure to facilitate compensation claims, providing a free alternative to legal action and so simplifying the process for elderly investors.
One substantial building society is effectively committed to making arrangements to ensure that those investors are not subject to repossession and, whatever happens, are able to stay in their homes. If the hon. Gentleman is aware of any facts or problems that contradict what I have said,
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