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Mr. Greg Knight: The hon. Gentleman is right that the fees were higher, but those organisations paid an annual fee of £25. Most right hon. and hon. Members would regard that as a reasonable amount. To go from £25 to £200 in one leap is surely most unreasonable.
Mr. Thomas: I strongly share the right hon. Gentleman's view. He is right to make that point and I have profound sympathy with it. I think that we both want the same outcome. Unlike him, however, I do not think that the Bill is the appropriate vehicle for that change, which is why I have set up the meeting with the FSA to press the case.
Mr. Knight: The hon. Gentleman says that the Bill is not the right mechanism to resolve the problem. May I draw his attention to the long title of the Bill of which he is the promoter? It refers to
- "the Industrial and Provident Societies Act 1965 to be amended so as to bring it into conformity with certain aspects of the law relating to companies".
Mr. Thomas: I understand the right hon. Gentleman's point. The fact that the Speaker has allowed the new clause to be discussed suggests that it is relevant. However, a system of financing is in place for the FSA, and it is in that context that it is appropriate to consider the sums that are charged for the registration of industrial and provident societies.
10.45 am
Mr. Butterfill: Does the hon. Gentleman accept that the FSA is circumscribed by the legislation that established it? The worry is that unless we use the Bill to change the way in which the charges are made and give the Government a basis on which they can vary the charges, they may find that although they are sympathetic to the case, they have no mechanism to make that change short of introducing primary legislation.
Mr. Thomas: I do not accept that legislation constrains the FSA from changing its fees. That is why it is appropriate for us to address the problem by holding direct discussions with it.
There is another reason why the new clause is inappropriate other than the need to introduce a stronger regime for monitoring industrial and provident societies than we have for companies. We need to recognise what my hon. Friend the Member for West Bromwich, West said about how industrial and provident societies vary enormously in size, turnover and assets. It is appropriate for some industrial and provident societies, such as the larger co-operative retail organisations, to pay higher charges because it often requires more work to monitor them than it does to monitor the smaller organisations, such as social clubs.
Mr. Chope: Surely the annual return that is sent to the FSA to continue an existing registration does not require monitoring. All that is needed is a tick in the box and continuation of the registration.
Mr. Thomas: I have considerable sympathy for the concern about the huge hike in the cost of the annual return. Nevertheless, the direct comparison with companies is unfortunate. Perhaps a more flexible wording of the new clause would have been more appropriate, and I accept that my hon. Friend the Member for West Bromwich, West attempted to introduce that greater flexibility in new clause 4. We need to remember that because industrial and provident societies hold assets for the community, the regulator has to take a greater interest in them, so a more appropriate regulatory structure needs to be in place. That inevitably costs more than the regulatory regime for companies.
I accept that there is no justification for the huge hike in the charge, but I encourage hon. Members who are tempted to accept the new clauses to understand that the best way forward is to deal with the FSA face to face in order to make it clear that hon. Members on both sides of the House have huge concerns about the issue.
Dawn Primarolo: I congratulate all hon. Members who have participated in this important debate on putting before the House some of the clear issues that relate to the fees charged. Although I will explain why the Government do not think that the Bill is the appropriate way to address the problem, we do not want to undermine the important points made about some sections of industrial and provident society legislation.
The Government are well aware of the concern that has been expressed by some in the movement about the fee structure that is being developed by the FSA in relation to its duties under the relevant industrial and provident societies Acts. This debate takes forward many of those issues.
I stress that the final level of the fees that will apply over the coming year has not been finalised, and the FSA's consultation with the movement has only just drawn to a close. I note what my hon. Friend the Member for Harrow, West (Mr. Thomas) said about his meeting with the FSA on Monday. The figures proposed in the FSA's consultation document are illustrative, as is often the case with such documents, and we have heard other figures quoted publicly in connection with the matter.
The FSA ensures that registrations conform to the legislation and that any changes to societies' rules, registered offices and so on are appropriate. In discharging its obligations as the regulator, the FSA has to take account of the tremendous variations across the movement. Hon. Members have demonstrated the range of societies and clubs that can fall within this category. In the event of mergers or windings up, the FSA must ensure that the relevant legislation has been respected. It also ensures that societies submit regular accounting returns.
The transfer of functions from the Registry of Friendly Societies to the FSA occurred in December 2001. It worked to the benefit of societies in that it permitted access both to a pool of experienced former registry staff already working in the FSA on building society and friendly society regulations and to a broader range of expertise. It is important to balance the mix between obligations on regulators, access to expertise and costs to societies.
I do not believe that it is appropriate to make a straight comparison between the fees payable by societies and those due from companies. Although I accept that valuable points were made in the submission, it is not comparing like with like. Registration obligations on the Companies House registrar are less onerous than the equivalent obligations on the FSA. It is inappropriate to link fee levels for societies with those of companies, as the new clause proposes.
Mr. Butterfill: Of course it is right that mutual societies dealing with the funds of their members should be properly regulated, but does the Paymaster General agree that it is equally right that companies that can hide behind the benefits of limited liability, leaving behind creditors littered all over the place, require an even greater degree of regulation?
Dawn Primarolo: It is somewhat unusual to hear a Conservative Member, even one as knowledgeable as the hon. Gentleman, pressing the Government on the need for greater regulation of companies, but I shall take his point in good faith and resist any further jibes. I promise never to quote his suggestion. [Interruption.] No, perhaps I will not make that promise.
The hon. Gentleman is concerned about appropriate regulation and safeguards. The basis of the current debate about the mutuals—how to devise appropriate legislation to deal with protection—applies equally to companies.
Mr. Love: Will my hon. Friend give way?
Dawn Primarolo: In a moment, when I have finished this point.
There has been a great deal of discussion about reviewing company law and how to modernise it, and I understand that a report is due soon. We have to strike a balance between appropriate safeguards and allowing these organisations, which have different structures and fulfil different obligations, to develop and expand. The Bill is about mutuality, the industrial and provident societies and how to assist their growth and development.
Mr. Love: Although my hon. Friend says that a direct comparison cannot be drawn, does she accept that there is considerable evidence, especially from the worker co-operative sector, that some small organisations are choosing to register as companies rather than industrial societies because of the differential, and will she bear that in mind when considering the matter in the future?
Dawn Primarolo: That is indeed an issue of which we must be aware, as we must be aware of the differences between companies that choose to be incorporated and unincorporated and of the different structures that are available to companies, societies and clubs in providing safeguards for their members or shareholders while allowing the development of their organisations.
New clause 3 raises the broader question of what type of registration procedures are appropriate for industrial and provident societies. Through changing the relevant Acts, the FSA could be required to undertake fewer checks and verifications during the registration process. However, that may not be in the best long-term interests of the movement, especially as recognition of and confidence in the society organisational form needs to be enhanced, not reduced.
I thank my hon. Friend the Member for West Bromwich, West (Mr. Bailey) for the way in which he presented his arguments. I hope that the House will be seen to have paid proper attention to the issues, although we may not necessarily agree that the Bill is the appropriate way to advance them.
New clause 4 would link the level of fees charged for carrying out regulatory functions to the size or profitability of the society's operations. New clauses 3 and 4 demonstrate the complexity of the sector, in that it was necessary to try to find an approach that would not cause problems elsewhere. I appreciate and am sympathetic to their underlying rationale, but we must take other factors into account.
The FSA has been developing the fee structure, following consultation with interested parties, including all sponsoring bodies, trade associations and principal legal advisers to the sector. Three separate consultation papers have been issued and workshops have been held to hear the movement's views. The FSA has considered various options. One was to base the fee structure on size. However, the size profile of societies is heavily biased, as many hon. Members have pointed out, towards smaller societies, so the burden on the larger societies would be unreasonable. For example, the FSA estimated that if a larger society were to pay an annual fee of £10,000, the fee payable by other societies would reduce by about £1. That is unacceptable.
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