House of Commons Hansard Debates for 28 Apr 1995

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House of Commons

Friday 28 April 1995

The House met at half-past Nine o'clock

PRAYERS

[ Madam Speaker-- in the Chair ]

Civil Rights (Disabled Persons) Bill

9.35 am

Mr. Harry Barnes (Derbyshire, North-East): I have a petition in support of the Civil Rights (Disabled Persons) Bill.

As you will be aware, Madam Speaker, it was the hope of the supporters of the Bill that it would have been placed before the House today for its Report Stage and Third Reading, but, as a result of action that has been taken elsewhere throughout the House, and because of its procedures, it has been blocked.

I therefore have a petition, signed by several organisations, which organised itself in 24 hours, when it was finally discovered that the Bill had been stopped in Committee, or kept in Committee rather than being brought before the House.

The officers and officials of the organisations concerned represent the Muscular Dystrophy Group of Great Britain, MENCAP in Northern Ireland, Suffolk and Cambridgeshire and its northern division, Lambeth Accord, Artsline, Scope, the GRAEA Theatre Company, the Greater London Association of Disabled People, React, the Disability Alliance, the United Kingdom Coalition of People Living with HIV and AIDS, the NAZ Project, the Denholm Elliott Project, DART and the All Aboard Campaign, the Centre for the Study of Integrated Education, the Trades Union Congress, the Carers National Association, People First, the Royal Association for Disability and Rehabilitation, the Royal National Institute for the Deaf and the National Federation of the Blind of the United Kingdom.

The petition reads:

To the Honourable the Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament assembled

The Humble Petition of the officers and officials of organisations of, and for, disabled people

Sheweth that the principles and provisions contained in the Civil Rights (Disabled Persons) Bill, particularly its proposed strategic enforcement authority, the Disability Rights Commission, to provide practical assistance to those seeking redress and the establishment of legal precedents for others, represents a better means of moving towards equal rights for the United Kingdom's 6.5 million disabled people than the Government's alternative Disability Discrimination Bill

Wherefore your petitioners pray that your Honourable House will urge the Prime Minister, his Government and its supporters not to impede the passage of the Civil Rights (Disabled Persons) Bill And your petitioners, as in duty, will ever pray etc. It is signed by Sahra Ahmed and the representatives of the organisations I have mentioned.

To lie upon the Table.

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Orders of the Day

Building Societies (Joint Account Holders) Bill

Clause 1

Joint Account holders

Lords amendment: No. 1, leave out clause 1 and insert the following new clause--

Rights of second-named joint shareholders--

(".--(1) After section 102 of the Building Societies Act 1986 there shall be inserted the following section--

"Rights of second-named joint shareholders.

102A.--(1) This section applies where the terms of a transfer of business by a building society to the company which is to be its successor include such provision as is mentioned in section 100(1). (2) If--

(a) a person (`A') held shares in the society throughout the requisite period;

(b) any shares in the society held by A were jointly held for any period (`the joint ownership period') constituting the whole or part of the requisite period;

(d) no person who has priority over A for the purposes of this section held shares in the society throughout the requisite period, the jointly held shares shall be treated for the purposes of subsections (8) and (9) of section 100 as having been held by A alone.

(3) The following persons shall have priority over A for the purposes of this section, namely--

(a) where A was not the first-named holder of the jointly held shares for any part of the joint ownership period--

(i) any person who was the first-named holder of those shares for the whole or part of that period; and

(ii) where A was the second-named holder of those shares for part only of that period, any person who was the second-named holder of those shares for a later part of that period; and

(b) where A was the first-named holder of the jointly held shares for part of the joint ownership period, any person who was the first-named holder of those shares for a later part of that period. (4) If a person dies during the requisite period at a time when he is named in the records of the society as a joint holder of any shares jointly held, this section shall have effect in relation to any later time as if he had never been so named.

(5) In this section--

`the first-named holder', in relation to any shares jointly held, means that one of the joint holders who is named first in the records of the society, that is to say, the person by whom alone, apart from this section, those shares would, by virtue of paragraph 7(5) of Schedule 2, be treated as held for the purposes of section 100; `qualifying day' has the same meaning as in subsections (8) and (9) of section 100;

`the requisite period' means the period beginning two years before the end of the qualifying day and ending immediately before the vesting date;

`the second-named holder', in relation to any shares jointly held, means that one of the joint holders who is named second in the records of the society;

`the vesting date' has the same meaning as in section 100."

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(2) In paragraph 7 (joint shareholders) of Schedule 2 to that Act (establishment, incorporation and constitution of building societies), after sub-paragraph (5) there shall be inserted the following sub-paragraph--

"(5A) In its application to section 100, sub-paragraph (5) above shall have effect subject to the provisions of section 102A." ") 9.37 am

Mr. Douglas French (Gloucester): I beg to move, That this House doth agree with the Lords in the said amendment.

The first amendment gives the impression of being draconian. It introduces a new clause that replaces the whole of the original clause 1 of my Bill, which I introduced into the House on 17 January 1995. I emphasise that that is not a classic takeover operation. It reflects, rather, different schools of thought on drafting. The Building Societies Act 1986 is an extremely complex piece of legislation. Tampering with one part causes repercussions elsewhere. Although the aim of my Bill was simple, the task of giving effect to it on paper was the reverse.

Therefore, although the principal clause, the new version of which we are debating first this morning, is drafted differently from the one that I placed before the House on 17 January, I emphasise that its legal effect is almost the same as that which I originally tried to achieve. There are a few tiny modifications, which I shall mention later.

That is important, because the House did me the honour of permitting my Bill to pass through all its stages on 10 February without debate. I therefore believe that the House might have had legitimate difficulty in accepting from the other place a Bill with amendments that substantially altered its effect. I am pleased to confirm that no such dilemma exists.

The central aim of my Bill and amendment No. 1 is to facilitate the payment of bonuses to second-named account holders when building societies are taken over or merge. Naturally, there is a current interest in the case of the Cheltenham and Gloucester building society. The Bill is also relevant to the proposed merger of the Halifax and Leeds building societies, and any other building society mergers or takeovers by banks that may happen in due course. Under the Building Societies Act 1986, bonuses to savers with investment accounts can be made only to a sole account holder or to the first-named person of a joint account, and then only to those who have invested continuously for two years. I support, and do not seek to change, the two-year requirement, which rewards loyalty for long-term saving. Their Lordships took the same view.

What I seek to change, and amendment No. 1 changes, is the restriction of bonus entitlement to first-named account holders only, which discriminates unfairly against several sorts of saver. First, it is grossly unfair to widows who have had a joint account with their husbands. If the husband dies during the two-year qualifying period, the bonus dies with him, even though the same account may continue in the widow's name alone, with the husband's name deleted. It makes no difference how many years the wife has previously contributed to the account: she gets no credit for it. The two- year qualifying period has to begin all over again.

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An example could be given in the case of the Cheltenham and Gloucester building society, where the qualifying two- year period is from December 1992 to December 1994. If a husband on the account--the first-named account holder--died during that period, the widow would be denied the bonus entitlement that she would otherwise have received had her husband lived.

Secondly, the 1986 Act is unfair to newly marrieds. A single woman with an investment account savings history that qualifies her for a bonus in her own right, will fail to qualify if, on marriage, she redesignates her account jointly in the name of her new husband and herself. Her new husband, as the new first-named account holder, must begin a two-year qualifying period in his name. His wife's savings history no longer counts.

Thirdly, the 1986 Act can be unfair to those who get divorced or separated.

Fourthly, there are cases in which it has proved unfair to couples where the husband's name was deliberately taken off a joint account for sensible tax-planning reasons, consequent upon the introduction of separate taxation. I could give the House instances of where that has been done on the specific advice and recommendation of a building society branch. That well-intentioned step, made during the two-year qualifying period for quite different reasons, can result in the account holder losing his or her bonus entitlement.

The new clause in amendment No. 1 can put right those injustices. I am bound to admit that it does so with greater certainty and precision than did my original clause.

In the original drafting, I had the benefit of advice from three extremely distinguished firms of solicitors. I should like to record my thanks and pay tribute to them. I shall, however, refrain from mentioning them by name. I do not believe that they would thank me for doing so as, in the event, their efforts turned out to be capable of improvement. I suspect that taking advice from three firms of solicitors simultaneously-- heavyweight firms, at that--may be a temptation best resisted.

9.45 am

Mr. Bernard Jenkin (Colchester, North): Does not my hon. Friend's experience suggest that, where two lawyers disagree, one might assume that one of them might be correct, but where three lawyers are in agreement, they are all bound to be wrong?

Mr. French: I think my hon. Friend makes an extremely good point, reminiscent of what is frequently said about economists--

Mr. Dennis Skinner (Bolsover): Especially when the three solicitors are in the Cabinet.

Mr. French: I do not agree with the hon. Gentleman's sedentary comment.

When the Bill was originally drafted, we turned first to the second schedule of the 1986 Act, which is where the provisions relating to joint account holders are to be found. We set about amending the schedule. In doing so, we produced, I freely confess, some unintended and unexpected results, including some risk that certain account holders might qualify for double entitlement. That was never our intention.

I shall illustrate how that happened by reference to the original sub- paragraph (5C). In the case of divorce, where the wife was the second-named account holder, if the two

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of them opened separate accounts with the same building society, the wife would not qualify for a bonus, whereas, if the husband moved his account to a different building society, she would. Similarly, if the husband's name was taken off the joint account for some other reason, the wife would be entitled to a bonus if the husband had no other account with the society, but she would not if he did. Clearly, that was not what was intended. That example is one of a number of reasons why we are now discussing a redrafted clause, and it shows why that redrafting was essential.

Parliamentary counsel wisely advised that, instead of amending the schedule, it was better to tackle the qualifications for cash and share distributions, as set out in section 100. There is little drafting that cannot be polished up by parliamentary counsel if they put their minds to it; and they did so in order to produce the new clause in amendment No. 1.

The amendment, which becomes new clause 1, consists of a new section, section 102A, to the 1986 Act, and replaces clause 1 as originally drafted. Subsection (2) sets out four conditions that a mythical person--whom we shall call A--has to meet before he or she can qualify for cash distribution. First, he or she must have met the two-year qualifying period. Secondly, he or she must have held a joint share account. Thirdly, he or she must have been the second named person on that account. Fourthly, and rather importantly, there must not be anyone with a prior claim over his or hers. That is why subsection (3) is needed.

If the first named account holder qualifies, it is important that the second named account holder should not qualify. It is not our intention that both should qualify. The first named takes priority over the second named, but, in the case of a widow, there is no first named, and the second named therefore qualifies.

Subsection (3) sets out cases where another account holder has priority-- where there is a prior claim over the bonus. Subsection 3(a) covers the situation where the mythical person A has never been the first named holder of jointly held shares. In the first example, she marries, she closes her account and opens a joint one on which her husband is the first named account holder. He then has priority over her. If he meets the qualifying period, he receives the bonus, but if he does not, she receives it. That avoids them qualifying twice, but ensures that one of them qualifies on behalf of their joint ownership of the account, which is what has always been intended.

Mr. Alan Duncan (Rutland and Melton): My hon. Friend's logic is absolutely impeccable, and I have been following it step by step. Are there circumstances in which there may be more than two account holders, and what would happen in that event?

Mr. French: The Bill does not provide for circumstances where there are more than two account holders. I originally decided to address the subject of second named account holders, and the Bill's limitations are set by its long title. Ideally, I should also like to address the position of third, fourth, fifth and subsequent named account holders. However, that would require a more broadly drawn long title.

In so doing, many complex issues that a small Bill of this type could not reasonably tackle would have come into consideration. The almost certain result would have

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been that, because the Bill had been cast too widely, the House would not have felt able to give it the fairly speedy passage that it has enjoyed so far.

Mr. Quentin Davies (Stamford and Spalding): I am grateful to my hon. Friend for giving way, and I thank him for his interesting explanation of the point raised by my hon. Friend the Member for Rutland and Melton (Mr. Duncan).

My hon. Friend the Member for Gloucester (Mr. French) has obviously become an expert in the field, and he will have thought through the different aspects of the Bill very carefully during its long and successful passage through both Houses. Can he therefore inform the House to what extent he thinks that practical injustices and problems will be created by the Bill's failure to cover the theoretical existence of third, fourth and subsequent account holders? What kind of family or other circumstances does he envisage may arise whereby third, fourth and subsequent account holders may have an equity interest in the account which ought to be recognised in the event of the acquisition of a building society but, as a result of the restrictive scope of the Bill which my hon. Friend has explained, would not be enfranchised as a result of the legislation's passage into law?

Mr. French: My hon. Friend makes a very important point, which I shall approach from a different direction. A significant number of people will benefit if the House approves the Bill's passage, including a substantial percentage of those who are currently excluded under its provisions.

The number who will not benefit because of the example given of third and subsequent account holders is very small. I fully accept that there is an element of unfairness in such cases, many of which have come to my attention. However, I argue that the Bill deals with the overwhelming number of injustices. I should have liked to see the very small number of remaining cases dealt with as well, but in the circumstances that does not seem to be a practical proposition. My hon. Friend the Member for Rutland and Melton (Mr. Duncan) has asked for examples of cases in which third, fourth and fifth named account holders could suffer. For example, if an account had six named account holders and, for whatever reason, the first three names were removed, the account would not qualify for a bonus.

There are many variations of that example, and I could provide my hon. Friend with letters explaining them. However, in reality, the number of people involved is very small. When my hon. Friend the Minister of State introduces a more broad-ranging review of building societies--he has announced that that is his intention in due course--we will have the opportunity to address the remaining anomalies, of which the case of the third, fourth and fifth account holders is one, at that stage.

Mr. Anthony Coombs (Wyre Forest): Many hon. Members are relying on the Library's excellent brief which explains the effect of the Bill. On page 16, it says that, on Report in another place, Lord Inglewood addressed the case of multiple accounts, particularly where an account is held by a mother, father and a child, and where both parents die. Lord Henley also referred to that case when he introduced the amendments to which

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we are now referring. For purposes of clarification, will my hon. Friend explain how the Bill as it is presently drafted will deal with that situation?

Mr. French: I propose to address that question a little later. That is the closest that the Bill gets to dealing with the position of someone who might be interpreted as a third named account holder. A clause was introduced in the House of Lords to deal with the subject of orphans. For example, if a mother and father die in an accident, the position of a child who may be named on the same account will then be brought forward to take the place of the first two account holders whose names have been removed. I shall address that one exception a little later in my speech.

Mr. Quentin Davies: I am grateful to my hon. Friend for giving way again, and I am very glad that his Bill addresses the case of orphans. That is obviously a rather dramatic example of an injustice that may have been created if the Bill had not addressed that sad eventuality.

I put to my hon. Friend another case, which I think that he will agree is not entirely theoretical, where an injustice might be created. If six people decided to open a joint account for some common purpose, perhaps in connection with a society or association--

Mr. Deputy Speaker (Mr. Geoffrey Lofthouse): Order. The Chair finds it very difficult to hear the hon. Member for Stamford and Spalding (Mr. Davies) when he faces away from the Chair. His remarks are not catching the microphone and it is very difficult to hear what he is saying. I ask the hon. Gentleman to face the Chair.

Mr. Davies: I apologise, Mr. Deputy Speaker.

I was putting a case to my hon. Friend which I think he will agree should be examined, because it could arise in practice. A group of people--half a dozen, 10 or perhaps more--may decide to open a joint account with a building society for some common purpose, perhaps in connection with an association, club or some other venture in which they are involved.

As I understand my hon. Friend's legislation, if the building society where that account was opened is the subject of a bid, only the first named account holder would benefit from the bonus for the recognition of equity interest that that account represents. It may be a coincidence as to which of the individuals involved in that joint account--

Mr. Deputy Speaker: Order. I did not call the hon. Member for Stamford and Spalding to make a speech; I called him to make an intervention.

Mr. French: I shall respond to my hon. Friend's query in so far as I understand it. In that case, the account would qualify for the bonus entitlement via the second named account holder.

Mr. Davies: But not the third or subsequent account holders?

Mr. French: The account itself would qualify, and, if it is a joint account, it is right that all the account holders should receive one bonus which is shared among them.

Mr. Davies: Will my hon. Friend give way?

Mr. French: I think that I should make some progress.

I turn to subsection (3)(b), which covers the case where a wife may have been the first named account holder for part of the period of the joint account. For example, a

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wife and a husband may change the order in which the names appear on the account--Mr. and Mrs. could become Mrs. and Mr.; but it is more likely that John and Joan would become Joan and John. Therefore, both will have been the second named account holder at some stage. In that case, the subsection provides that the one who is the first named holder for the later part of the period will have priority. However, if the later first named holder has not held shares for the two-year qualifying period and the second named holder has, the latter would benefit.

Subsection 4 is a provision that was added to the original Bill on Report in the House of Lords in response to suggestions made by Lord Eatwell. It is the provision relating to orphans that my hon. Friend mentioned a moment ago, and I welcome it. For the sake of clarity I shall briefly explain the background again.

10 am

The measure deals with cases of multiple accounts held by a mother, a father and a child. When both parents die--it is deliberately limited to circumstances of death alone--the child account holder moves up to fill the space, and is allotted a position as if he or she had been the second named account holder. Effectively, it regards the two parents as one account holder and the child as the second named account holder, although the child's name may appear third. For that reason, in those circumstances, the account qualifies for distribution.

Hon. Members will realise from that that there are many variations and permutations, and I do not want to trouble the House with any more of them. Those who enjoy the minutiae will find much to savour in the speech of Lord Henley, in column 915 of the Lords Hansard of 15 March. Indeed, there was a suggestion that his Lordship's speech should become a schedule to the Bill. I have drawn on it fairly heavily, although I suspect that it is not necessary for it to become a schedule. However, it is there to be read, and I am grateful to those who drafted it for bringing clarity to what the House can see is a complex matter.

Mr. Nigel Evans (Ribble Valley): If three people held the same account--mum, dad and a son--and the mother and father separated and then the mother, for whatever reason, died, would the son automatically become the first named account holder?

Mr. French: I think that in that case, if I understand the facts correctly--I would be happy for others to put their thinking caps on, because we are dealing with highly technical issues--the son would qualify in those circumstances if the father did not. I believe that that is right, but it is worth spending some time on such matters. Perhaps the Minister of State may wish to turn his attention to such examples when he speaks to us later.

I am deeply conscious that neither the new clause nor my original Bill attempts to cover every anomaly. Some have been mentioned, and in all fairness I should mention a few of the others. Obviously, the Bill does not cover cases in which there has been no continuity of saving through the two years. I never believed that it should do that, because the two-year requirement recognises loyalty, which is a sound principle.

Borrowers are not covered, either--that is a whole debate on its own, in which I suggest the House should not become involved today, if it wishes to complete

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proceedings on the Bill. The Bill does not cover personal representatives of deceased account holders, other than in the examples that have been mentioned.

Mr. Duncan: It strikes me that this is primary legislation designed to overcome a simple case of unfairness arising from the peculiar circumstances of a merger of building societies in my hon. Friend's constituency. As some instances are not covered by the new clause-- inevitably so--does my hon. Friend think that the work of the building societies ombudsman, who was authorised by the 1986 Act which my hon. Friend's Bill would amend, could be enlarged so that his decisions could in future include the individual cases not covered by the Bill?

Mr. Alistair Darling (Edinburgh, Central): On a point of order, Mr. Deputy Speaker. I may be doing Conservative Members an injustice, but I detect a whiff of a filibuster. Although the Government have restored the Conservative Whip to the hon. Member for Billericay (Mrs. Gorman), I gather that they are anxious not to hear her speak later.

My point of order arises from the fact that we are discussing building societies, while the Minister of State, Treasury, who is responsible for the regulation of building societies, is here. If the Government want to discuss building societies at length, and perhaps the ombudsman as well, would it be in order for the Minister to make a statement on the Office of Fair Trading report on endowment mortgage sales that was published today?

Perhaps the hon. Gentleman would say whether he agrees with our call for an inquiry by the Personal Investment Authority, and for full regulation of the sale of mortgage business? The House would be better employed discussing issues of concern to the public and to those who may have been mis-sold endowment mortgages, rather than engaging in a filibuster to prevent the hon. Member for Billericay from speaking later.

Mr. Deputy Speaker: It is up to the Minister to decide whether to make a statement, and then it would be up to the Chair to decide whether it was in order. So far, the debate has been in order, and if it ever gets near being out of order, I can assure the hon. Gentleman that it will be ruled out of order.

Mr. French: I am grateful to you, Mr. Deputy Speaker. We are dealing with complex matters, and as the House did not have the opportunity to debate them on Second Reading, I felt that it was right to go through the new clause and explain its effect. Perhaps I have been more indulgent than I should have been in accepting interventions, but if I may now proceed, I shall finish what I have to say on the new clause.

The point that I was endeavouring to emphasise is that a reasonable balance has to be struck to focus upon the worst injustices with a reasonable expectation of success. That appeared to me to be a more attractive proposition than trying to put right every injustice related to building societies, and then failing altogether. My aim has always been limited.

The substantial correspondence that I have received, and the cases drawn to my attention by people throughout the country, lead me to believe that I have struck the balance appropriately. I leave the remaining injustices to be tackled in more comprehensive legislation at a later

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