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Mr. Butterfill: I am extremely disappointed by my hon. Friend's response. She said that there would be complaints if we were to give protection, which tells me that she is missing the fundamental point. The bodies concerned have the protection now, and have enjoyed it since 1986. To my knowledge, there have been no complaints of abuse by them of that protection or abuse
by any of the societies that have already converted. My hon. Friend is raising a false hare when she speaks of abuse. The system has existed since 1986 and it has not been abused.
We are seeking to give transitional protection and no more. My hon. Friend suggests that the hon. Member for Normanton (Mr. O'Brien) is confused, but it would seem that the confusion lies with my hon. Friend. It is inevitable that converting societies that are anxious to change their businesses rapidly will go on the acquisition trail. If the amendments are accepted, they will not go on that trail for mutual building societies, friendly societies or mutual insurance companies. They will confine their activities to businesses that will not lead them to the risk of losing the limited protection that is proposed.
I am sorry that my hon. Friend the Minister does not accept the amendment. Those in another place may take a different view. In the meantime, as I accept that there may be drafting defects, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 41 agreed to.
Clauses 42 to 47 agreed to.
Mr. Austin Mitchell:
I beg to move, That the clause be read a Second time.
The Chairman of Ways and Means (Mr. Michael Morris):
With this, it will be convenient to discuss the following: new clause 2--Demutualisation: proceeds for charitable purposes--
Amendment No. 9, in schedule 5, schedule 5, page 70, line 42, at end insert--
Mr. Mitchell:
Given the heavy, serious and prolonged consideration that we are giving to such an important Bill, it is a pleasure to introduce the new clause. I do so while making the usual protest about the pressures that have been put on us to speed the Bill through its parliamentary passage. These pressures are effectively turning the House of Commons from the Mother of Parliaments into an abortion clinic. We are being asked, potentially, to kill infant Bills so that the mother Bill may live.
Another pressure is being brought to bear on the Committee. The Whips are saying, "Keep it short because we want to get the business statement." Younger Members such as myself have hopes of high office in the incoming Administration, and against that background it is important that Members's names are being taken. I shall, of course, comply with this pressure. At the same time, I congratulate the Minister. I hope that she gets her Bill. She has shown great perseverance, effort and charm in plucking this brand from the Prime Minister's funeral pyre. That is effectively what the hon. Lady is doing. Given the haste with which the Bill is proceeding through Parliament I have only to say, "Sister, this Bill had better be good", as we say in the new Labour party.
The Chairman:
Order. The hon. Gentleman is supposed to be speaking to new clause 1.
Mr. Mitchell:
I am the chair, brother.
New clause 1 is before us, Mr. Morris, and we know what is happening. We must accept that the Bill is word perfect in a way that no other Bill has been. That reflects the pressure that is upon us.
The new clause represents an attempt to introduce a greater check on the process of demutualisation. I am speaking of the transfer of mutual societies into other businesses, such as public limited companies. The process has been overhyped, with the result that the mutual principle has been grievously wounded. That is a principle that we must keep alive. It is important that we have variety and pluralism. Mutuality should be maintained as a system of corporate government because it holds out great benefits. It brings important services to both borrowers and lenders, such as better rates of interest to those who lend money to a society. The advantages of demutualisation, as I have said, have been overhyped by an organisation that was desperate to take that course.
Shareholders have been asked to believe that the money that they have been given in the form of bonus shares comes from nowhere. That is not so. The money comes from the capitalisation of the efforts and investments of previous generations. Shareholders are being asked to believe that demutualisation will revitalise the society but it will not. Instead, it will enable the society to continue in much the same fashion.
There has been no sudden or dramatic change in any of the societies that have been demutualised. Instead, they have spread into new services and new areas of business, which means meeting new risks. New status equals new risk. That could be the basis of an advertising slogan throughout the country. The process is taking societies away from their core business, which they know well,
and encouraging delusions of grandeur, which are easily encouraged in building societies on the part of top brass, including directors.
Effectively, the shareholders have been conned. The real dynamic is the desire of the top brass, including the directors, to enrich themselves by increasing their salaries and returns within the new companies. To do that, they are putting over a story that is enormously exaggerated and distorted.
It is a story that can fool the shareholders. At the Halifax conversion meeting, the light of greed was glittering in shareholders' eyes. They were being given £1,000--in some cases more--for nothing. It seemed that the money was being plucked from the air. I seek a breathing space through the new clause so that the alternative view might be put more effectively.
In some respects, new clause 2, tabled by my hon. Friend the Member for Birkenhead (Mr. Field), is even better than new clause 1. My hon. Friend asks that there be actuarial advice on financial gains and losses, and in this instance it is easy to deceive shareholders.
When the Halifax conversion took place I received great wodges of documents and financial statements from the society advancing the case for demutualisation. The process was presented as the opening of a glittering future. There was little to represent the alternative argument. There was no opportunity to provide a costed and calculated reply underlining the disadvantages of demutualisation while at the same time stressing the strengths of mutuality. It was not possible to present that argument to the shareholders with the same power and effectiveness as was enabled by illustrated lectures and overhead projection to support the case of demutualisation. The alternative argument should be advanced on an alternative footing.
Investors are being conned by glittering financial prospects in a series of unsubstantiated claims and statements by the top brass in building societies, including directors--those who will be the principal beneficiaries from the process of demutualisation. We should be suspicious. Even better, information should be provided to support the other side of the argument. Let us impose a delay so that we ensure that financial calculations are properly undertaken. I do not want the mutual principle to be weakened and cut any further by the Gadarene rush of investors in large building societies such as the Halifax. That process of weakening and undermining encourages others to go the same way and get the same rewards.
My hon. Friend the Member for North Warwickshire (Mr. O'Brien) will not want to reply at length to this debate. I hope, however, that he will use a tactic different from the one he used earlier. I hope that my hon. Friend will sit and growl, and look as though he supports the new clause, gives it his good will and thinks that it is damned good--it is a damned good new clause. If he does that, we may frighten the Minister into giving us a concession.
'.--After subsection (4) of section 97 of the 1986 Act (transfer of business to commercial company) there shall be inserted the following subsection--
"(4A) The Commission shall not confirm the transfer and its terms unless it is satisfied--
(a) that a period of not less than six months has elapsed between the date of the first notification to the members of the society of the proposal for the transfer and the date when the members of the society were required to vote on the transfer resolutions; and
(b) that the directors of the society provided reasonable facilities for communicating to the members of the society any statement of reasons, submitted in writing by a member of the society, for opposing the transfer resolutions.".'.--[Mr. Austin Mitchell.]
Brought up, and read the First time.
' --After subsection (4) of section 97 of the 1986 Act (transfer of business to commercial company) there shall be inserted the following subsection:
"(4A) The Commission shall not confirm the transfer and its terms unless the terms include provision for the application of not less than 15 per cent. of the realised capital value of the society to charitable purposes appropriate to the society's existing business and geographical location.".'.
'5CC. It shall be the duty of a building society receiving a transfer proposal to appoint independent financial advisers representative of the interests of the members of the society, to obtain from those
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