| Previous Section | Index | Home Page |
4 pm
Mr. Mike O'Brien (North Warwickshire): Discussions on the progress of the Bill may well be taking place as we speak. There will be a further business statement later
in the day. My hon. Friend the Member for Great Grimsby (Mr. Mitchell) need not be too despondent. There is reason for hope yet. We, the Opposition, are actively supporting the Bill. I retain the hope that it will become law.
I declare an interest before speaking to the amendments. I have an account with one of the converting building societies. I would not be surprised if it were the one not too far from the hon. Member for Eltham (Mr. Bottomley). It is, in fact, the Woolwich.
As my hon. Friend the Member for Burnley (Mr. Pike) said, there are strong arguments for a two-year rule. During consideration of what became the Building Societies Act 1986, the Government were strongly in favour of a two-year rule. Why have the Government changed their mind on that ground given the strong arguments that were advanced by Lord Brabazon of Tara in another place in July 1986? He said:
The Labour party has said that it sees strong arguments for that. We have, however, discussed the issue of the two-year provision at some length with various mutuals. On balance, the Building Societies Association and other mutuals, although they would prefer a two-year clause, are concerned that nothing should be done to jeopardise the Bill. In the present circumstances it is important that we should press on with the Bill.
I have been persuaded that the BSA wants to see the Bill through Parliament as a priority. It regards the measure as essential. It has asked that Labour takes no steps that might jeopardise the Bill by way of introducing a substantial amendment. I have listened carefully to those representations and have decided to accept them.
We want to see the Bill become law as soon as possible. It is right, however, that Parliament should be able to express its views, especially on a two-year clause. Before I ask the Minister some questions about such a provision, I acknowledge that my hon. Friend the Member for Burnley (Mr. Pike) has agreed to withdraw the amendment. At the same time, my hon. Friend the Member for Grimsby has strong concerns. It is right, therefore, briefly to mention technical deficiencies.
I am concerned that the amendment would not achieve the end that my hon. Friend the Member for Burnley seeks. The intention appears to be to ensure that only
those who have been members for two years on completion would benefit. That is not precisely the effect of the amendment. It is unsatisfactory, therefore, from a drafting point of view. The amendment states, in effect, that someone can be a member of a society only if he has been a member for two years. Presumably the aim is to deny benefit, but the amendment appears to deny membership itself. Furthermore, the phrase "two years' standing" is rather vague. It presumably means two years from opening an account, but it does not say that. On drafting grounds alone, the amendment is questionable.
Mrs. Gwyneth Dunwoody (Crewe and Nantwich):
It is odd to me--I have been here only a short time--to hear hon. Friends on the Front Bench talking about drafting. I should have thought that as we are the Opposition, we would be concerned about the principle. I have listened with great care to my hon. Friend the Member for North Warwickshire (Mr. O'Brien) saying that we must not accept any substantive change because we would otherwise lose the Bill. I ask him to think seriously about what he is saying. Is he saying that even though there may be substantial difficulties with the legislation, we would prefer it to go ahead?
Mr. O'Brien:
We are saying that the Bill is essential to safeguard the future of mutuals. It may be desirable to have a two-year provision; that is a point that hon. Members are quite properly discussing and I intend to return to the principle in a moment. We have, however, to bear reality in mind in view of the announcement made today.
My hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody) will know that as a result of that announcement, there is enormous pressure on the timetable. As we want the Bill to go through, maximum agreement is needed between Opposition Front-Bench Members and Ministers. I hope that the Bill also has the support of the House as a whole. Getting the Bill through is our objective, which has an effect on the way in which we are dealing with the two-year provision and later amendments.
Mr. Austin Mitchell:
We are in a negotiating situation. In those circumstances, it seems rather misguided to give away our hand before we are told the Government's position. The Minister may accept the two-year principle; there is still time for her to do that. Whatever deficiencies the best drafting brains in the House of Commons--I refer to the Clerks and not to me--have left in the amendment, the principle is important. If we accepted the amendment this afternoon, the Bill would not be delayed seriously unless the Government chose to make an issue of it and to dredge up their troops, thus wasting the time of the House. We should not think that we have a weak hand.
Mr. O'Brien:
My hon. Friend's views will be taken on board by those of us who are dealing with the Bill. We want the Bill to go through, however, and the sooner the better for the sake of the mutuals and building societies as a whole.
I now turn to the issue of principle. In 1986, the Government supported a two-year rule. It was the bad drafting of the 1986 Act, however, with which we are now dealing, that meant that during the Halifax merger with the Leeds, the decision was made that the normal
two-year qualifying rule could be circumvented if the distribution was made in shares and structured in a certain way.
It is clear that in 1986, Ministers intended that a two-year rule should be effective, but legal judgments in the early conversions and takeovers widened the interpretation of the statute to allow changes of status based on offering pay-outs to members on a scale and in a manner that were not intended in the 1986 legislation. That has encouraged mere speculators--so-called carpetbaggers--to open many accounts.
The building societies' response has been to raise the threshold for new accounts, but that has prejudiced, as has been mentioned by the hon. Member for Bournemouth, West (Mr. Butterfill), the interests of many low-income people who want to open an account for a non-speculative, bona fide reason. Do the Government consider that speculation desirable? Will they now explain why they have changed their mind and oppose a two-year clause? Do they intend to allow the queues of speculators and the high thresholds to remain? Do they consider that building societies' assets that were built up over generations belong to the members who have an interest in the long-term future of those building societies? At the moment, they are often expended to those who have little claim to building societies' assets. Do the Government find that satisfactory?
In other cases, the Government have accepted qualified membership, for example in terms of calling emergency general meetings and, in clause 37, for obtaining particular information. Why was that justified, yet the Government have changed their mind and now say that qualified membership under a two-year rule is no longer right in respect of benefits?
Speculation is still an enormously serious issue. The head of corporate relations at the Birmingham Midshires building society wrote to me recently as follows:
Mr. Douglas French (Gloucester):
Is the hon. Gentleman aware that some building societies, such as the Portman, have found it possible to deal with speculators not by raising the minimum deposits on their account, but by welcoming anyone who wishes to open an account on the basis that the society is firmly committed to mutuality and no speculation will yield any benefit to the speculator?
"It is important that the conversion provisions work to prevent speculative flows between societies on rumours of an impending conversion. I gather that is what happened in America in certain situations, and that is what we seek to avoid happening in this sort of situation."
He added:
"It is clearly important that"
there should be some legislation in relation to transfers of societies. He explained:
"Otherwise, for example, a society could tempt investors into it in order to vote in favour of a conversion with the promise of an immediate cash bonus; or just such speculative flows as I just mentioned might be started if it seemed a society might transfer to an existing company."--[Official Report, House of Lords, 10 July 1986; Vol. 478, c. 539.]
Those were the reasons why the Government, at that stage, were strongly in favour of a two-year provision whereby those who were members of building societies would not receive benefits unless they had been members for two years.
"We opened some 80,000 speculator accounts in 1996 and, year-to-date since January, we are opening three times normal levels per week compared to the pre-speculation days of 20 months ago. In addition, to counter those who think it has peaked, it is worth noting that around £145 billion of savers' cash has been locked up with the converters for the past two years or so. This will now become unlocked, creating a new wave of speculators given that distribution plans have now been unveiled by the converting societies."
There is clearly an issue for the Minister to address.
| Next Section
| Index | Home Page |