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9.45 am

Phil Hope (Corby): My hon. Friend is over-optimistic in his remarks about the Welsh rugby team.

Is my hon. Friend satisfied with the amendments that have been tabled, and can he explain what he expects from the House as regards the point that he is making?

Mr. Gareth R. Thomas: I am advised that these relatively minor amendments will help us to achieve a sensible modernisation of the industrial and provident society legal form. Some aspects of the I and P legal form differ from the company model. None of the changes is

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especially radical; they have been included in company law and friendly society and building society law for a long time. Sensible reform has not been possible in a number of areas thus far, so the sum of those parts means that when people have to decide which legal form is most appropriate for their community business they are put off using the industrial and provident society legal form. The new clause offers the possibility of achieving modernisation further down the line through those sensible changes, if the House is so minded.

New clause 1 overcomes the problems that I outlined because it gives a wider definition of the relevant statutory provisions. In the light of that, I hope that the House will support the change. By way of reassurance, I remind the House that during the debate on clause 3 in Committee, we discussed what could not be changed under industrial and provident society law. I highlighted aspects that could not be changed under clause 3 and, rightly, they cannot be changed by new clause 1 either. Hon. Members will see that certain key provisions of industrial and provident society law cannot be changed under new clause 1 without primary legislation. To the ultra-critical eye, those provisions might seem relatively narrow; they are listed in subsection (2)(a) to (i) and represent the fundamental differences between companies and industrial and provident societies.

It is worth reminding the House that under new clause 1 the power to amend those parts of industrial and provident society law that can be amended arises only as and when company law is amended in the future. In practice, therefore, only those parts of I and P law that are also covered by company law would be capable of amendment. In Committee, I referred to several sections of the Industrial and Provident Societies Act 1965 that could not be changed. For those Members who want to follow that discussion, it can be found at column 14 of the report of Standing Committee G on 13 February.

I referred to sections 11, 21, 14 and 44 of the Act. None of those sections could have been amended by clause 3 as it emerged from Committee, and it will not be possible for any of them to be amended if the House is minded to accept new clause 1. It remains the case that under new clause 1, the aspects of those sections that have no parallel in company law would be incapable of change.

In the same part of the debate in Committee, we also touched on the Treasury consultation document that was published back in May 1998, which consulted the industrial and provident society sector about a series of possible changes to industrial and provident society law. It heralded the possibility of change to registration procedures. That would require primary legislation. It could not be changed by the previous version of clause 3; it cannot be changed by new clause 1. As I said in Committee, that Treasury consultation document also talked about the possibility of changing the statutory definition of eligible societies that was contained in the 1965 Act. That would have required primary legislation, so it would not have been covered by clause 3 as it emerged from Committee. It still requires primary legislation, so new clause 1 cannot change that situation either.

In short, I recognise that the new clause, by reverting to a wider definition of the relevant statutory provisions that can be amended by statutory instrument, appears to widen the powers of the Executive. I know that there is widespread concern in the House when the possibilities

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of such powers are touted. As a widening of powers in the definition of relevant statutory provisions seems sensible to achieve what we set out to do, I consider it appropriate to narrow the circumstances so that those powers can be used only after company law has been amended. I believe that that is a balanced approach, and it is used in friendly society and building society law. Section 104 of the Building Societies Act 1986 and section 102 of the Friendly Societies Act 1992 have similar provisions. As those two forms of mutual have that facility in place already, I hope that the House will be minded to recognise that a similar provision is appropriate for the industrial and provident society sector too.

I understand that change to company law is on the agenda, so further progress to modernise the industrial and provident society legal form is possible soon. The Enterprise Bill proposes modifications to corporate insolvency law and director disqualification provisions, which could sensibly be read across into industrial and provident society rules.

More important, perhaps, I understand that the company law review is complete and that legislation to put into effect some of its recommendations could come before the House during this Parliament. In those circumstances, I hope that the House will feel that the new version of clause 3—new clause 1—provides an acceptable compromise between the need for assimilation of industrial and provident society and company law in many areas, such as insolvency, capacity, audit exemptions—which my hon. Friend the Member for Edmonton (Mr. Love) flagged up in Committee—and other aspects of corporate governance and, of course, legitimate concern in the House not to give excessive powers to the Executive.

I therefore commend the new clause to the House.

The Paymaster General (Dawn Primarolo): I shall briefly express the Government's support for new clause 1 and amendment No. 4. I congratulate my hon. Friend the Member for Harrow, West (Mr. Thomas) on his excellent, detailed explanation of the provisions. The Government are keen that industrial and provident societies should benefit from a measure that would make it possible to update their legislation in line with company law. The Building Societies Act 1986 and the Friendly Societies Act 1992 contained similar powers and we welcome the opportunity to create the means of levelling the playing field among these different types of mutual organisation in this regard.

My hon. Friend was very careful, particularly in his last few sentences, in delicately explaining to the House that the scope of the proposed power, as originally drafted, for industrial and provident societies would have been much broader than that for friendly and building societies. In particular, it would have allowed the Treasury to amend industrial and provident society legislation at any time, independently of any modification of company law provisions. The version of clause 3 that was substituted in Committee is broader still.

Some hon. Members might be surprised to hear a Treasury Minister explaining to the House that such a power is considerably wider than would normally be conferred on any Minister or Department. Obviously, the movement realised that it could perhaps benefit more

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speedily from modifications to legislation under such an enabling clause. Although we support that sentiment in principle, we need to ensure that subsequent secondary legislation is enacted with the appropriate checks and balances that Parliament would normally expect for such delegated powers.

My hon. Friend's amendments will bring the powers to update industrial and provident society law into line with those applicable to other mutual societies. I believe that they are appropriate amendments, which will level the playing field for industrial and provident societies and create a mechanism whereby we can ensure that the societies do not fall behind any important developments in the framework of company law that are also relevant to the societies.

I thank my hon. Friend for being ever vigilant on the power of the Executive and congratulate him on his presentation thus far of this important Bill. I have no hesitation in supporting the amendments on the Government's behalf.

Mr. Thomas: I am grateful to the Paymaster General for those comments. As I said in Committee, I can see no logical reason to oppose giving the Treasury additional powers, given the quality of its performance since May 1997. However, I have been advised that such an ambitious provision might offend against the constitution—

Mr. Stephen Pound (Ealing, North): A trifle.

Mr. Thomas: In reality, it is not such a trifle. It is important that we seek to achieve modernisation of industrial and provident society law in the appropriate constitutional way. As I said, there is the possibility of company law reform. Fairly soon, the prospect of change to company law through the Enterprise Bill holds out genuine prospects for further change to industrial and provident society law. I am delighted that the Government feel able to support new clause 1 and I again commend it formally to the House.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 2

Channel Islands

'(1) Her Majesty may by Order in Council direct that any of the provisions of this Act or any instrument made under it shall extend, with such modifications (if any) as may be specified in the Order, to any of the Channel Islands.
(2) An Order in Council under this section may make such transitional, incidental or supplementary provisions as appears to Her Majesty to be necessary or expedient.'.—[Mr. Gareth R. Thomas.]

Brought up, and read the First time.

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