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Mr. David Drew (Stroud): As a fellow co-operator, I think that my hon. Friend is making an excellent case. Does he agree that the Curry commission, which will report on food and farming shortly, is likely to recommend that we bolster co-operatives in agriculture to bring us into line with Europe, and that the introduction of the Bill is particularly opportune because it could provide that bolster?

Mr. Thomas: I do agree. Interestingly, the National Farmers Union, which I consulted about the Bill, supports it. It took some delight in giving me the example of the United Pig Marketing co-operative, which I am told is the largest pig marketing co-operative. Its members benefit from savings of 25 per cent. off breeding stock, 15 per cent. off compound feeding stuffs, 30 per cent. off the cost of power supply and, for those Members who are

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interested, 33 per cent. off the cost of artificial insemination. I am sure that all hon. Members have an interest in reducing the long-term costs of the great British breakfast, and United Pig Marketing and, I am sure, other agriculture co-operatives will help to do that.

If the mutual sector is to develop, further sensible protection and reform of the rules will be needed. The Bill does not solve all the problems of the industrial and provident society model, but it does, I hope, provide an opportunity to make significant progress. One of the genuine joys of preparing for the Bill has been to understand and be impressed by the sheer range and diversity of organisations—and the considerable commitment of their members—which are rooted in our communities and use the industrial and provident society model.

I have consulted the various parent bodies of industrial and provident societies, and I am grateful for the time and support of the National Housing Federation, the Rugby Football Union, the Co-operative Union, the National Farmers Union, the Village Retail Services Association, the Community Transport Association, the Committee of Registered Clubs, the Women's Institute country markets, the Abbeyfield Society and the Association of British Credit Unions.

Surely the continuing strength of industrial and provident societies is the defining proof, if there is any doubt, that there is such a thing as society. The Bill seeks to strengthen our industrial and provident societies, and I hope that the House will give it a Second Reading.

10.4 am

Chris Grayling (Epsom and Ewell): I congratulate the hon. Member for Harrow, West (Mr. Thomas) on introducing the Bill. It is somewhat ironic, and probably against the expectations of many outside the House, that a Bill on this subject should be promoted by the Member for Harrow, West and immediately supported by the Member for Epsom and Ewell because the traditional image of industrial and provident societies is very different from the reality. The hon. Gentleman has rightly highlighted, by making clear the range of organisations from which he has secured support for the Bill, how diverse those societies are and in how many parts of our society, and indeed how many of our constituencies, they have a presence.

My constituency has industrial and provident society representation, most particularly in the form of the successful and hospitable Epsom Conservative club, which is in a prime location and has assets that could be exploited by a carpetbagger—a danger that the hon. Gentleman has rightly pointed out. I pay credit to the Bill because it will protect such societies, as well as other organisations throughout our society, and I encourage the House to give it a Second Reading, subject to caveats and provisos that will need to be dealt with in Committee to ensure that the final legislation is a proper and fit response to the needs of the sector.

The hon. Gentleman introduces his Bill in a turbulent time for mutual organisations which began with changes in the building society sector, which I appreciate is not covered by the Bill. What happened in that sector, and more recently in the mutual sector of the financial services industry, has set a precedent that could now be followed by those looking to exploit the value and assets of mutual and provident societies of all kinds.

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That process began with conscious business decisions in the 1980s by organisations such as Abbey National to move from a mutual status to being fully commercial listed companies. They took those decisions for straightforward commercial and strategic reasons. Many organisations have followed suit in the past 10 or 15 years. No legislation should seek to prevent that from happening in future.

At the same time, we saw in that sector the emergence of carpetbagging. Groups of people who had joined the boards of building societies, including Nationwide, Britannia and others, proposed at annual general meetings a ballot of the entire membership on the proposal to sell the society's assets and generate a windfall for members of the public. In some cases, the organisations' members may want to pursue that route, but they must proceed with the utmost caution because nothing comes without a price, and such organisations often secure a short-term payment at the expense of the long-term growth of their financial portfolio. Such decisions must be made in the full knowledge of the implications of the action.

More recently, we have seen different types of organisations, such as clubs, begin to dispose of their assets. The highest profile example was the RAC's decision to sell its assets, generating a substantial windfall for members. The same route has been taken by smaller clubs, such as the St. Stephen's Constitutional club, just up the road from this place. All that highlights the fact that industrial and provident societies and other mutual organisations have assets that can be exploited by those who seek to make a quick return.

The hon. Gentleman mentioned the attack on the Co-operative Wholesale Society by Andrew Regan a few years ago. That was clearly an attempt to extract commercial and financial value. That may be in the interests of members on some occasions, but in that case there was great hostility within the movement, and the proposal was rejected. That underlines the need for societies of the kind covered by the Bill to be given the same level of protection as building societies from anyone who seeks to exploit their assets.

The principle of mutuality epitomised by the societies has been an important part of our business and social life in this country since Victorian times. It began with the friendly societies, which were the first kind of organisation to bring financial services to the poorer areas of the country, and indeed in many areas they still do so. With the loss from some areas, both rural and inner-city, of financial services institutions such as local banks, we are seeing a resurgence of mutuality.

The friendly societies were followed by the building societies, which encouraged home ownership through mutuality, and the co-operative societies, not only the Co-op itself, the visible presence in our high street, but several smaller co-operative organisations that served individual neighbourhoods. In a previous guise, I did quite a bit of local history work in the north-west of England; the role that co-operative societies played in the development of society in Liverpool, Manchester and elsewhere is evident.

As I said, it is not just in areas such as the north-west that those organisations play an important role. In my constituency there are two branches of the Co-op which make a significant social contribution, as well as a business contribution, to the area. One branch is in

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Stoneleigh, a 1930s suburban area with a sizeable shopping centre which, typically of many smaller retail centres on the fringes of major cities such as London, has lost ground in recent years to a few principal shopping centres in my area such as Kingston and out-of-town supermarkets. We must not allow those smaller centres to disappear. In my constituency, the Co-op is a linchpin of Stoneleigh broadway and probably does more than any other shop to ensure that that shopping centre thrives and continues to attract people. It is therefore fundamentally important that it should remain and flourish.

Such outlets are particularly important to the elderly. I received a letter from an elderly lady in my constituency who said:

I echo that. The two branches in my constituency do an excellent job of serving the community.

The branch at Tattenham Corner, at the top of Epsom Downs, is a community centre in its own right. The beat police officer in the area uses it almost as a stopping-off point or a local branch office while on the beat. The shop owners have given tremendous support, both to him and community activities in the area. It is a central point in an area that does not otherwise have shops nearby for the elderly. It therefore makes sense to give those organisations the same protection as building societies, so it is important that the Bill goes into Committee and receives the depth of study that it deserves.

When the Bill was introduced, naturally I thought that it applied to friendly societies and organisations such as the Co-op, but I have been surprised by the breadth of organisations covered by it. They include not just retail societies and wholesale and productive societies but, as the hon. Member for Stroud (Mr. Drew) said, agricultural societies, as well as fishing societies, clubs, general service societies and, importantly, housing societies. There is no doubt that registered social landlords play an increasingly important role in our society. Many of them would be covered by the Bill; my points about giving protection to co-operative societies apply equally to RSLs categorised as industrial and mutual building societies.

In the past decade, there has been a significant transition from predominantly council-owned and controlled housing to much greater control of our social housing stock by RSLs. That is a very positive step indeed, which began under the Conservative Government. In general, RSLs make an important contribution to that housing sector; they upgrade stock effectively and manage it better than most local authorities. On the whole, tenants receive a more responsive service from RSLs. In my constituency, the Rosebery Housing Association does an

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excellent job of managing its staff. Such organisations should receive encouragement and should able to develop to the benefit of all their tenants.

More and more local authorities are taking the decision to dispose of stock, and pass council houses into the control of RSLs. Epsom and Ewell borough council in my constituency has done so; Reigate and Banstead borough council is in the process of doing so; Merton borough council, on which I remain a councillor for a few weeks, is looking at transferring its stock into the hands of an RSL. Ironically, in my area, that transition is making a difference; the biggest council housing estates in my constituency, for odd historical reasons, were divided between three different boroughs, which has caused great confusion for the residents and made it harder to maintain the area properly. I hope that, at the end of the process, we shall have a single RSL able to control the whole area, develop it properly and provide a much better service to the people who live there.

I do not want housing societies of the kind encompassed by the Bill, including RSLs, to be vulnerable to carpetbaggers. RSLs have a major asset base; indeed, it is substantial. There are circumstances in which, conceivably, they could be exploited by people wishing to realise some of the value of their asset base. RSLs play an essential social role, which should be protected; if nothing else, the extra protection that the Bill gives them is extremely important. Organisations with a significant asset base that come into the ambit of the Bill are particularly vulnerable, and protection is particularly appropriate for them.

It is easy to target an organisation with significant assets; it is easy to sell them and raise money; often, it is easy to make a case to members of the organisation that they can get a quick windfall from what is being proposed. We should not prevent that from happening, as the hon. Member for Harrow, West rightly said, but it should happen only with overwhelming support from the membership. The hon. Gentleman's selection of 75 per cent., to match the building societies' figure, is right. Everyone will never be brought on board, but 75 per cent. is an overwhelming vote, and can be said to represent the views of a society if it takes the decision to change its status, the nature of its asset base and so on. Reading about the Bill, it is surprising that it has taken four years from the launch of the Treasury's consultation paper for anything to happen. When something did happen, it took a Back Bencher to introduce the measure; I am sure that that is a disappointment for the hon. Gentleman.

I should like to discuss a couple of areas about which the Committee will need to think carefully, if the Bill completes its Second Reading, as I hope it will. I have a problem with the hon. Gentleman's comments about provisions for the future use of assets and, in effect, the ability to set in stone the way in which they will be used. I understand the nature of his concern, but we have to be cautious about constraining future developments by organisations in a society that can change rapidly. I hope that, in Committee, that aspect of the Bill will be given careful consideration to try to ensure that there is a balance; organisations should be allowed to determine their core purpose, but should not be forced it into an environment where, if they need to change in future, they do not have the legal option to do so. The hon. Gentleman, and Members who serve on the Committee with him, need to be extremely careful about that.

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In his original speech on the issue to the House 12 months ago, the hon. Gentleman referred to the benefits that some mutual organisations have secured from debt finance. That may be true in some cases, but the hon. Gentleman should not forget that equity finance can often be much cheaper than debt finance and provides a much more solid, long-term foundation for organisations, which is one reason why building societies have chosen to move away from mutuality. That needs to be borne in mind when framing specific provisions for the sector.

In that speech, the hon. Gentleman mentioned regulation and argued that it has sometimes forced organisations away from their core business to the detriment of their customers; he mentioned the water industry in particular. I do not necessarily share his analysis on that issue, but he made an important point about appropriate regulation. Whatever happens in terms of the status, legal rights and provisions that are associated with these organisations, the one caveat should always be that one should not compromise on regulation where it is appropriate. I am not a great regulator. I do not believe in regulation for its own sake, but minimum standards need to be met, especially in financial services, housing and so on. I would not want any change to be made in respect of regulation on organisations that enjoy such status, as opposed to their counterparts that do not. We must be careful to ensure that that does not happen.

As I said, I am impressed by the range of organisations that support the Bill. Clearly, there is a need to address the issue. Clubs, leisure and housing organisations and the traditional organisations in the sector—the friendly societies and co-operatives—all have realisable assets and could be vulnerable to carpetbaggers. I have no doubt that their members should be free to dispose of those assets if they choose to do so. They should also be free to move beyond mutuality and to change their purpose and the nature of their operation in order to meet changing circumstances in society. We should be careful to bear that in mind when we consider the Bill, but at the same time, it is right and proper that these organisations should make such changes only with the support of a substantial majority of their members, and that they should do so with the same sort of safeguards that protect their counterparts in the building society sector.

Given the impressive backing that the hon. Gentleman has secured for the Bill, and as it represents a sensible step for the sector, I am happy to offer to him my support for its Second Reading. I hope that detailed work in Committee will shape a measure that the Government will help on to the statute book and that will deliver significant improvement for the sector.

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