House of Commons Hansard Debates for 28 Apr 1995

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stage. If the Bill had been too wide- ranging, we would probably not be debating it today; it would not have got as far as it has. At this stage, I remind the House of what Lord Hayhoe, who piloted the Bill so ably through the other place, said. He wisely and prudently advised that to introduce more complexities could have placed the entire passage of the Bill in jeopardy. That view was confirmed by Lord Henley, to whom I am grateful for having introduced the amendment, and amendment No. 2, which we shall debate next. Their Lordships agreed with the good sense behind that approach, and I believe that they were right.

The passage of the Bill, and of the clause which lies at its heart, have been followed closely in the country. The British like fair play, and the Bill seeks to deliver it. I have a particular interest in fair play for the widows in my constituency who save with the Cheltenham and Gloucester building society. If the clause and the Bill are accepted, some of them will receive substantial sums, ranging from £500 to many thousands of pounds, under the terms of the Lloyds bank takeover of that building society. The House should be clear that those widows will not get the money if the House does not approve the Bill today. They will be direct beneficiaries of the legislation.

The Bill's scope does not stop at the Cheltenham and Gloucester building society: it will also help members of the Halifax and the Leeds Permanent building societies, which have announced plans to convert to a bank after they have merged. Those societies have said that they will take advantage of the measure to give shares to second named joint account holders.

In that context, perhaps I should declare an interest as a small saver with the Halifax and the Leeds, although I emphasise that I am not one whose position would be changed by the Bill.

I must give other categories of hopeful recipients something of a warning. The Bill is permissive, not mandatory. It makes it lawful to distribute bonuses, but does not compel building societies to do so. One cannot know what other building societies may decide to do in the future.

As for the Cheltenham and Gloucester, its transfer document confirmed that it would include widows in its distribution if the law permitted it to do that; but the transfer document makes no mention, and therefore would appear to have no intention, of including the other categories that this Bill will make lawful. That is, of course, a matter entirely for the boards of Lloyds bank and the Cheltenham and Gloucester to decide. One has to assume that they had their reasons for excluding newly-weds, divorcees and separate taxation people. One can only speculate on what those reasons are, but I wish to record my disappointment with their approach.

One 1 February 1995, the Cheltenham and Gloucester announced that Lloyds bank had set aside £10 million, to be made available to second named account holders. Speaking in another place on 27 February, Lord Dubs--

Mr. Deputy Speaker: Order. The hon. Gentleman must not quote from the Lords Hansard , unless he wants to quote a ministerial statement.

Mr. French: The noble Lord's point was that he hoped that the Cheltenham and Gloucester intended to include all second named account holders, not just widows.

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By the time of the publication of the transfer document, the sum of £10 million had risen to £25 million, in recognition of the realistic approach that the C and G was taking to its responsibilities which might arise under the new legislation. But, sad to say, the restriction confining the society to cases of death only remained firmly stated.

As this debate and the one that follows it will deal with the improvements which, I submit, their Lordships made to the Bill, and since I know that proceedings in this House on Fridays can be rather peculiar at times, perhaps this would be the right time to place on record my thanks to Lord Hayhoe for piloting the Bill so ably through the Lords. I also record my thanks to Lord Henley, who tabled the amendments and explained them clearly and comprehensively. It was especially gratifying to find that, at all stages, support for the Bill in another place came from all parties.

Before concluding, I should also like to record my thanks to Lord Dubs, who introduced a similar Bill in another place in January, but who kindly withdrew it to support mine. We both had the same idea independently at the same time, and I am grateful for his support. I should like especially to thank the Minister of State, Treasury, and his team of advisers. He will introduce his own comprehensive measures relating to building societies in due course, but he has been extremely supportive and helpful to me in assisting the Bill to make the progress that it has made.

I am also grateful to representatives of the Building Societies Commission, especially Commissioner Geoffrey Fitchew and Terry Matthews, who has been enormously helpful. I also record my thanks to Ron Armstrong of the Building Societies Association; he, too, has been most helpful.

Most of all I should like to thank the hundreds of people who wrote to me, sometimes supporting the broad principles in the Bill, sometimes setting out their own circumstances. The letters took a great deal of reading and replying to, but they were all interesting. If the House gives its approval to the Bill, I hope that, in some small measure, that will represent a response to the many people who wrote to me and who will benefit. This has been a team effort, to which I hope the House will this morning give its final approval.

Mr. Quentin Davies: I congratulate my hon. Friend the Member for Gloucester (Mr. French) on his initiative. I was pleased and proud to be associated with it as one of the original sponsors of the Bill. I congratulate him on his success in bringing it this far, and on the great expertise and astuteness with which he has steered it through. This Bill goes to the heart of the notion of equity interest in a co-operative or mutualised venture. It is perhaps rather unfortunate in this country that we have limited our consideration of this principle--an important one--to building societies, because they are only one type of co-operative venture. Indeed, they are only one possible type of mutual bank.

10.15 am

Unlike many other countries, in this country we do not have provision for mutual banks--apart from building societies. That is an unfortunate distortion and restriction in the framework within which deposit-taking institutions

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exist here. In the rest of the European Union, there are substantial mutual banks. Cre dit Agricole is a mutual bank--a building society writ large--and is one of the largest deposit- taking institutions in the world.

The essential principle at which the Bill is directed is whether someone who opens an account at a deposit-taking institution which is a mutual institution, not a joint-stock company, has the equivalent of an equity interest in that business. My hon. Friend's Bill came into being to deal with what happens when someone acquires such a business and, naturally, wishes to make a payment to acquire the equity interest in that building society.

Then, to what extent and on what principles should the cash sum that that person pays over to acquire the equity interest be distributed between the customers or depositors of the mutually owned institution? In this case, we are talking about a building society, but I think that we can agree that this is the heart of the matter. One aspect concerns what happens when there is more than one account holder. To what extent can we say that all the account holders have an equity interest? Logically, I should have thought that they all do. There is considerable artificiality in starting by looking at the first account holder and then extending the definition-- in line with the terms of the Bill--so that, in certain circumstances and conditions, subsequent account holders can be taken into consideration. In certain very limited circumstances, such as those of the orphan about which we heard this morning, the third account holder can have his equity interest recognised--but no other account holder can.

Earlier, I asked my hon. Friend the Member for Gloucester a question which I believe was pertinent: what happens when several people come together to open a joint account in a building society? They may do that for any number of purposes--we do not need to go into them, because we live in a free society, in which it is quite natural that people should come together for some collective purpose. Many collective purposes involve opening bank accounts, so there may be an account with a mutual bank or building society under a large number of names--10, 20, 200 or possibly even 2,000, at least theoretically. In those circumstances, only the first named account holder would be recognised as having an equity interest, and would receive a sum in consideration of that interest in the event that someone acquired the equity of the whole building society. I think that I properly understand the purpose and sense of the Bill before us.

The person who happens to be the first named account holder does not necessarily have a greater interest than the other account holders. The first named account holder might be there because he put down his name first or was the founder of the particular association, group or enterprise which caused the account to be opened. Perhaps his name starts with the letter A, and it was simply convenient to list the account holders in alphabetical order.

I think that my hon. Friend might be about to tell me that the answer is that the first named account holder would in such circumstances be compelled to account for any bonus received by way of transfer equity interest to the other account holders.

Mr. French: If I may say so, my hon. Friend is putting the position in a rather artificial way. The bonus

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entitlement does not get credited to the first named account holder as an individual but to the account. The eligibility for the bonus is determined by the position of the first named account holder, or, in the case of the Bill, the second named account holder.

Mr. Davies: Indeed, but if for some reason the first named account holder is not in a position to collect the bonus, all the other account holders would lose the entitlement to it, as I understand it, except in the narrowly defined circumstance when the second named account holder is a widow, or in the other circumstances that are foreseen in the Bill.

A separate point, perhaps, is the entitlement to equity in a building society. That raises wide issues--perhaps we should look at them in another context--which arise naturally out of our consideration of the Bill. We have already heard that the Bill is permissive. It does not establish what the rules are for recognition of equity interest by customers or depositors of building societies. The Bill does not establish what rules have to be adopted on that matter by all building societies or mutual banks in this country. It simply permits building societies to extend the rules for recognising second, or subsequent, account holders, in very limited circumstances, as entitled to that equity.

I support the Bill. Indeed, as I have said, I was pleased and proud to be a sponsor of it, but we must recognise--I hope that it will complete its passage through the House this morning--that we have really only just begun to touch the very edge of this important issue. Everybody in this country, when establishing a relationship with a mutual bank or building society, whether as a borrower or lender, should know ab initio precisely what are the rules of the game, to what extent he or she is merely becoming a borrowing customer or depositor, and to what extent he or she is taking an equity interest in that particular bank or building society. If the rules are different from one building society to another, that is far from ideal. That is known in technical parlance as an informational problem. It is extremely difficult for the ordinary unsophisticated customer to know, when he is offered 5.75 per cent. on his deposit by the Halifax and 5.3 per cent. for the same term and on the same conditions by the Nationwide, the Cheltenham and Gloucester, the Swindon, or whatever. The equity interest that he or she is acquiring by placing a deposit on particular terms may be different in different societies.

It is possible to brief a lawyer to advise whenever one makes a deposit or gets a loan from a building society. Indeed, if one has the enviable financial resources that my hon. Friend possesses, one might even ask three lawyers to give an opinion on that subject--and no doubt get three different opinions as a result. That is not really a desirable situation for the ordinary citizen of this country who wishes to make a deposit.

It would be ideal if it were plain beyond peradventure precisely how one creates an equity interest in a mutual bank or building society; what activity and under what conditions and terms creates that equity interest; and what activity or relationship with those institutions does not create that equity interest. In that case, the Bill would not be necessary, because it would be defined in advance exactly who had an equity interest.

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A shared equity interest would be exactly the same as if a share is held in joint names--something with which company law has been familiar in this country for many centuries. As far as I know, no problems, ambiguities or informational gaps exist in that field. That would be a great improvement in the law.

Perhaps my hon. Friend the Minister of State will tell us later that we cannot go that far, for whatever reason, and that what I have outlined would be a rather prescriptive and sweeping form of legislation. If we cannot go that far, the next best thing would be that every building society--I imagine that this could be done simply by secondary legislation or by the kind of rules that my hon. Friend the Minister of State can simply promulgate--should be compelled to hand over to any potential depositor or borrower a clear set of rules setting out precisely at the beginning what rights are being created when a business relationship is started between any citizen and a mutual bank or building society. That is a slightly different position, in which the rules of the different societies remain different.

I suppose that one can say that we should not be too prescriptive in a free society. We should allow mutual organisations to be established on different principles and according to different rules. I find that argument, in many ways, seductive, although it conflicts with the earlier argument that I was making. At least it would be clear beyond peradventure, when somebody enters into a business relationship with a building society, whether an equity interest is being created, how it will be recognised, and, indeed, what it will be worth.

That brings me to my next point: there is an unfortunate degree of confusion at present. There is regrettable obscurity about how one evaluates those equity interests. We are spending a lot of time this morning deciding whether first or second named account holders, whether they are widows, orphans and so forth, should be recognised as having an equity interest in the event that a building society is taken over. We have already agreed in the House that that is an important matter that must be looked at carefully and deliberated thoroughly, which we are doing as a result of the initiative of my hon. Friend the Member for Gloucester.

All that is academic if we do not understand exactly how an equity interest is to be quantified. What is the principle on which it is to be determined? What level of bonus is to be shared out, and on what principle, to the various deposit holders or borrowers in a building society in the event that it is taken over?

It is all very well telling our constituents--those who hold joint accounts, perhaps husband and wife or the other eventualities that we have discussed--that they can rest assured that, in the event of a takeover of their society, both named account holders will stand to benefit, but what really matters to them, if they have a £2,000 deposit, is whether that means that they are likely to get £20 or £200.

Mr. Deputy Speaker: Order. I have been tolerant of the hon. Gentleman, but he is going rather wide of the debate. He must bring himself back to it. He knows the point I am making. The debate is not about all building societies or about what should be done in the future. We are debating the Bill in front of us.

Mr. Davies: I have the highest regard, Mr. Deputy

Speaker--accumulated over the years I have been in this

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House--for your judgment in these matters. I stand very much corrected, and I shall try to narrow the focus of my comments. I have set out the broad lines of the three main points that I wanted to make. I hope that my hon. Friend the Member for Gloucester agrees that one of the valuable results of his initiative in bringing the Bill before the House has been our consideration of the whole area relating to the rules affecting building societies, the framework within which individuals conduct their business with building societies and the extent to which the notion of equity in building societies or mutual companies is recognised in law. That area will now receive the attention it deserves as a consequence of it having been discussed both here and in the other place. It will be difficult to forget about it now, in the way that we have done for a number of years.

10.30 am

The debates on the new clause, both here and in the other place, represent several good days work by Parliament. We began with the initiative of my hon. Friend the Member for Gloucester, which I much admire. He took outside legal advice from his three law firms. I hope that he and his family remain solvent and that generations of his descendants will not labour under the burden of the enormous liabilities that may have been incurred to pay for the quite awesome degree of professional advice. However, the fact that my hon. Friend was prepared to do that in the interests of better legislation counts enormously in his favour.

However, not content with that, we have also had the benefit of the expertise of many other people--for example, the noble Lords in the other place, parliamentary draftsmen, a Treasury Minister and various officials. We feel a sense of awe when we think of the intelligence that has been mobilised and focused on the text before us. When I rose modestly to my feet today to make a few general comments on the issues raised by the Bill, I found myself somewhat intimidated in taking on such an enormous corpus of wisdom.

The Bill has been carefully and thoroughly considered, and I hope that it proceeds to Royal Assent without delay.

Several hon. Members rose --

Mr. Deputy Speaker: Order. Before I call the next speaker, I warn hon. Members that they must stick to the amendment we are considering, or my patience will become insolvent.

Mr. James Clappison (Hertsmere): I shall certainly follow your stricture, Mr. Deputy Speaker.

I welcome the opportunity to make a brief contribution to the debate. Some of what I wanted to say has been covered already and my concerns have been allayed. Nevertheless, it is worth spending some time examining the provisions relating to joint account holders. The Bill went through its stages in this House very rapidly. It then went to the other place, where it received quite radical surgery. It is a technical Bill with drafting complications. Therefore, it is worth taking time to examine the way in which it would remedy injustices.

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The time spent examining the Bill in another place was well worth while. It would have been a shame if the debate there had been foreshortened because it produced this important new clause, and in particular subsection (4), which will assist orphans and others in particular circumstances.

It would be churlish of me not to congratulate my hon. Friend the Member for Gloucester (Mr. French) on the Bill. It is an important and worthwhile measure. It is a good example of how private Member's legislation can pass through the House, remedy injustices and help a number of people. As my hon. Friend said, it will assist many widows in particular, often at a time in their lives when they may be short of money and needing assistance.

We need to consider whether other injustices might arise. As I have said, the Bill presented considerable drafting difficulties. I want to make two points. The first and obvious one--although it is not my main point--is the definition in new section 102A(2) of "requisite period", which is set at two years. I appreciate that the purpose of the distributions is to reward loyalty and, as an important part of policy, to prevent the destabilising flow of funds between financial institutions and building societies on the basis of market rumours. I well recognise the importance of that, but is it really absolutely necessary to provide for a period as long as two years? By the time two years has passed, any market rumour will have been lost in history. In this day of electronic communications, rumours pass very quickly.

I am aware that my hon. Friend the Minister of State is conducting a review of building societies. Will he consider whether the two-years provision is necessary? I understand that a line must be drawn somewhere, but the provision might create an injustice for someone who has taken out an account for perfectly proper reasons--taking a long-term view, rather than on the basis of any rumour--within the two-year period. Would not such a person feel aggrieved at being excluded from any distribution?

Mr. Anthony Coombs: My hon. Friend touches on an interesting point that was raised by my hon. Friend the Member for Stamford and Spalding (Mr. Davies). It is difficult to quantify exactly what is an equity interest in a mutual society or company. It is possible that, 18 months before the merger or takeover, somebody might have deposited a large amount of money in a mutual society as a share account holder, but he would not be rewarded, whereas someone putting in a nominal amount of money, who could therefore be said to have less of a quantifiable stake, would benefit.

Mr. Clappison: I am grateful to my hon. Friend for his comments, which add force to my point. It is an example of how someone who is a serious, long-term investor in a society could lose out.

Although the new clause remedies the problem of orphans, concern remains about the position of married women and divorcees. I want to give the House an example of that, which was also touched on by my hon. Friend the Member for Gloucester. It is clear that we need to read subsections (2) and (3) together to judge their effect in a particular case. My reading of them may be wrong--I am often wrong--but in this case I take some consolation from the fact that the issue has taxed very much better legal brains than mine, in very eminent firms of solicitors. I want to explore, in a brief example, the

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effect of the two subsections on marriage and divorce. If a woman is an account holder in a building society and marries, she will create a joint account with her husband. It is a common- place point, but I suspect that that is the way in which the overwhelming majority of the population will create a joint account--as Mr. and Mrs. Under the amendments, the wife would--to begin with at least--remain entitled to a distribution for two years. Although her husband would be the first-named account holder, he would not qualify until the account had been in joint names for the full two years. That is how I interpret the effect of new section 102A(2)(d).

Under new section 102A(3), the husband would have priority, but he would need to have held the shares for the full period of two years. After two years, he would qualify under paragraph (d) as the person entitled to a distribution, and he would take precedence over his wife, even if she had been the original account holder and had decided, after marriage, to put the account into joint names. My argument may imply a comment on relations between the sexes, but as long as they remained married a problem would not arise because of their joint arrangements.

My concern involves the effects of divorce on the arrangement under the clauses. The position that I have described may be fairly common. After two years of marriage, divorce may take place. Under subsections (2) and (3), if the couple divorce and split the joint account the husband remains the account holder. As he has held the account for more than two years, he would clearly qualify as the first-named account holder. He would therefore be entitled to any distribution that might take place. A potential injustice exists. As long as he maintains his account with the building society, the wife will not benefit from any distribution, however long she holds the account, or however much longer she held her account at the building society than her former partner.

Under subsections (2) and (3), the only way in which the wife would benefit from a distribution would be if the husband decided to close his account with the building society and take his money elsewhere. She would then become the joint account holder and would be entitled to receive a distribution. That seems to leave the matter, at least as far as the wife is concerned, if not in the lap of the Gods, entirely at the discretion of her husband's decisions. Why should that be? Why should not the wife have a moral entitlement to receive the distribution as the longer account holder? Why should she be put at a disadvantage merely, first, because she placed the account in joint names, in which her husband comes first, as so often happens, and, secondly, as a result of her husband's decisions after divorce? The amendments leave a potential injustice at large.

10.45 pm

I listened carefully to the excellent exposition of the Bill given by my hon. Friend the Member for Gloucester. I accept his explanation about the amendments and about the way in which they came to be drafted. As always happens with such legislation, the more one spreads the net in trying to remedy injustices and prevent potential injustices, the more complications and situations arise. Those who seek to remedy injustices eventually must seek to remedy just some of the injustices, and they may leave further injustices at large.

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A problem still exists in relation to divorce. I invite my hon. Friend the Minister to consider that carefully. I know that he is conducting a review of the Building Societies Act 1986. The problem is well worth considering. I do not see why divorced women should, potentially, be put at a disadvantage by the clauses. I wonder whether some other way exists of dealing with the question of distributions, perhaps taking a radically different approach from that proposed in the amendments and going much further towards a recognition of shares.

Obviously, one cannot give people more than one entitlement through an account--that would be unfair to all other account holders. A way must exist of dividing the account to prevent the injustices that I have outlined and other potential problems.

That is the reservation that came to mind after I carefully considered the amendments. It is difficult to draft a Bill such as this and to effect the worthy intention of my hon. Friend the Member for Gloucester, but a better way could be found, perhaps by better legal brains than mine, to deal with the matter so that we remedy potential injustices comprehensively. That should concern the House and is well worth considering.

Otherwise, I warmly welcome the amendments. As I have said already, they will remedy the injustice faced by widows, which is probably the most common injustice arising from the Building Societies Act. It is salutary to think that, I believe, 3 million widows live in this country and that 500 women are widowed every day. A large number of them will hold building society accounts; quite a lot of them will benefit from the Bill because they have been widowed within the past two years. The amendments will do a good job of remedying injustice for many people. My hon. Friend deserves warm congratulations on introducing the Bill.

Mr. Piers Merchant (Beckenham): I should start by declaring a minor interest: I hold a small amount of money in a Halifax building society account. As the Halifax is merging with the Leeds building society, I hope that I might benefit by a small sum. Needless to say, the Bill and the amendments from the other place will not benefit me or alter that position.

I congratulate my hon. Friend the Member for Gloucester (Mr. French) on introducing the Bill under the ten-minute rule procedure. It was apparent that something needed to be done to right what had clearly been an injustice. It is a shame that we did not have an earlier opportunity to debate the Bill in this place, even though a fairly full debate has taken place in another place.

It is disgraceful that no Liberal Democrat Members are here today, bearing in mind the fact that the impact of present provision is felt by members of the public throughout the country and in all constituencies. It is important for the benefit of those people and for the many who may be affected by future building society mergers and changes of ownership that the law should be amended. For that reason, I strongly support the Lords amendments and the Bill. I should like not only to support the amendments but to raise some questions on the clauses that cause me a little concern. I do not wish to frustrate the passage of the Bill, because it will put right the problems to which I have referred and which have become apparent only recently.

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It is worth noting that those problems were caused, as my hon. Friend the Member for Hertsmere (Mr. Clappison) so ably explained, by the artificial limit enshrined in the Building Societies Act 1986--the arbitrary two-year period. In other words, the deregulation proposed in the new clause will solve a problem caused by regulation in the first place.

Although I do not want to discuss the two-year limit in depth, it is relevant to the Bill. Its ostensible purpose was to prevent funds from being moved around in anticipation of takeovers. If such a legal requirement was binding on equity transfers in the stock market it would create a ludicrous situation and would totally change existing processes. Why such a limit, which is far too long, should apply to building societies completely escapes me. To suggest that "rumours", two years before a potential takeover might influence investing habits is difficult to accept in practice. That theory bears no resemblance to reality.

I first learnt about the impact of the 1986 Act when I received a letter towards the end of last year from Mr. Mahoney, of Village way, Beckenham, a certified accountant. He enclosed a letter that he had written to the Cheltenham and Gloucester building society as a result of its takeover by Lloyds bank. It aptly describes the difficulties that the new clause is designed to correct. He wrote of the different criteria that applied:

"Is this fair in husband and wife cases, where there has been support for the Society for many years and unfortunately the husband dies--as opposed to the wife dying? You would give with one hand now and take it back at the worst possible time.

How will a widow feel towards the Society if she is cruelly denied the expected `cash payment', and, moreover, how do I plan for my other clients where the husband may be unwell and may not live until completion day?"

That professional cited a real problem created by the 1986 Act. My hon. Friend the Member for Gloucester introduced his Bill to remedy such problems.

I took up that case with the Minister of State, Treasury, who wrote back in less co-operative terms than are now apparent from the Treasury and said:

"For the reasons I have set out, we have decided that the controls on takeovers imposed by Parliament in 1986 should remain in place."

I am glad to note that the Government have since realised that there is an urgent need to improve matters. I am glad that they support the Bill.

The background to the need for the Bill is the rapidly changing circumstances affecting building societies. There was a time when one was hardly aware of changes in the ownership of building societies. If such changes took place, they were often the result of quiet mergers between small and larger building societies. That pattern started to change with the flotation of the Abbey National. Since then, two major changes have taken place--the takeover of the C and G by Lloyds and the proposed merger between the Halifax and the Leeds building societies. There seems little doubt that that changing pattern in the operation and ownership of building societies will continue. The difference between building societies and banks is now so blurred as almost to eliminate that distinction in the foreseeable future. The law must now address the fact that many more takeovers

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and changes in ownership will occur in the future. The 1986 Act is therefore now anomalous because it has failed to match reality. The new clause specifically recognises reality by protecting second account holders. The existing law discriminates against women in particular. I am sure that it does so through default and that that was not the intention of the 1986 Act. That discrimination may have arisen just because of the convention for the man's name to appear first in joint accounts held by married couples. It is purely a clerical device, yet it has caused legal complexities. It is right to end that active discrimination against women, as set out in the 1986 Act, as urgently as possible.

As I have already demonstrated, the 1986 Act allows for specific practical discrimination against widows--that group in the population who are in most need of support. The account that falls to them might be their only major asset on which they are relying absolutely. The proceeds of the joint account may become more significant to the widow than they did before her husband's death. Such an account is often more important to widows than other accounts are to most of their holders, not least because, apart from all the emotional trauma of widowhood, women often face financial hardship as well. It is grossly unfair for that group of people, of all groups, to be discriminated against. I am glad that the new clause will correct that.

My hon. Friend the Member for Hertsmere quoted examples of problems that have arisen because of divorce. Problems also arise when a newly wed couple separate after two years. A single woman may have held an account at a building society for many years. On marriage, she may decide, for convenience, to put that account in joint names. Should that marriage unfortunately fail and should that woman seek to revert to being a single account holder, she will find that, under existing law--and even, I fear, under the new clause--she will suffer discrimination, should her former husband maintain his account at the building society. That woman may have held that account with the building society for many years in her own name, but by virtue of that sudden change in the title of the account, through marriage, she will, on separation, lose all her rights. My hon. Friend the Member for Hertsmere did the House a service when he drew attention to the problems for women who lose their rights as a result of separation or divorce. I hope that a device will be found to rectify that problem before too long.

Although the new clause gives building societies the power to act differently and to pay out in the cases that I have described, particularly to widows, I regret that that is not a duty on them. The final choice is still left with the building societies. When my hon. Friend the Member for Gloucester referred to the C and G takeover, which was the impetus behind his Bill, he said how, originally, that building society demonstrated a willingness to pay out to all those people to whom the law could enable it to do so. It encouraged a change in the law, so my hon. Friend felt that it would be pleased with the proposed new clause. He then said how the C and G was beginning to step back from meeting that guarantee.

I received a letter from Mr. Evans, the divisional manager of C and G, who had written to Mr. Mahoney. He said:

"C and G shares your views on the `unfairness' of the situation where a first-named joint account holder dies."

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Later, and somewhat erroneously, the letter continues:

"The situation is regrettable, but must have been the Government's intention when passing the Building Societies Act. It is not the fault of C and G."

It is true that the situation is not the fault of C and G, but I am not so sure that it was the Government's intention when the Act was passed. The problem is more a consequence of other intentions in that Act.

The letter continues:

"Unfortunately, there appears little that C and G can do about this situation and I hope that you will recognise that it was always C and G's intention to allow as many investors as possible to share in the Lloyds Bank payment."

As the society has made that clear statement, I hope that it will, once the Bill is enacted, honour its pledge and use the legislation to enable payouts to be made to all those who are defined in the Bill.

11 am

I shall now raise a few other questions, which my hon. Friend the Minister may be able to address, about the full scope of the proposed clause, the extent to which it operates and why it does not operate a little more widely. My hon. Friend the Member for Hertsmere raised the question of the difference between share and deposit accounts. It seems anomalous that people, whether joint or single holders of accounts, should find themselves in a different position as regards bonuses because of the name of their account.

Mr. Clappison: I am grateful to my hon. Friend for raising that point. He may know that before one of the building society takeovers, the society in question, before news of the possible takeover had come to light, urged investors to switch from share accounts, which would have given them an entitlement, to deposit accounts which did not. That action was urged on some building society members.

Mr. Merchant: That is an interesting revelation and adds strength to the need for further changes to do away with the legal distinction between share and deposit accounts, at least when bonus payments are made as a result of takeovers. From the point of view of the ordinary investing public, there is no discernible difference. I doubt whether many building society account holders are aware whether their account is technically a share account or a deposit account. It is true that building societies sometimes encourage investors to swap from one type of account to another without the investor knowing the full consequences. That point has some relevance to the proposed clause and I hope that my hon. Friend the Minister will address it. I hope that my hon. Friend will also address, at least to a limited extent, the impact of the two-year limit and why it exists. I hope that further scrutiny will be given to the position of third, fourth and even subsequent names on accounts. I also hope that further scrutiny will be given to the exact definition of eligibility for bonus payments.

In the long term, it may be better if rather than tackling the problem via a complex, technical and narrow Bill--I accept that that is necessary in the short term--we deal with it by legislation that clearly defines who should have the rights and on what basis they should have them. In other words, there would be a positive definition bestowing rights rather than a negative set of regulations

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which seek to protect individuals and building societies when they wish to exercise the powers that the law gives them.

The simplest way in which to achieve our aim would be to give a clear right based on an account rather than a name. Whoever happened to be in charge of the account would thereby get the benefit of a bonus payment made when there were takeovers.

I have some reservations about the limited scope of the Lords amendments and I believe that more needs to be done. However, I do not want to be carping about the very real achievement of my hon. Friend the Member for Gloucester in getting his Bill this far. I have no argument with the need for the Lords amendments because I recognise that from the point of view of drafting they are necessary to achieve my hon. Friend's purpose. For that reason, I very much welcome them. I wish the Bill a hasty final passage into law.

Mr. Tom Clarke (Monklands, West): On a point of order, Mr. Deputy Speaker. Would you allow me to inform you and the House that, during a debate that has been drawn out and repetitive, many disabled people are here in the Palace of Westminster expecting what is called the Barnes Bill- -the Civil Rights (Disabled Persons) Bill--to be debated on Report? That will not happen because, yet again, the Government have contrived to defeat the Bill, and--

Hon. Members: This is not a point of order.

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