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31 Jan 2003 : Column 1124—continued
Mr. Bercow: My hon. Friend describes the position pithily. Does he agree that those excellent organisations form part of what Edmund Burke famously described as the "little platoon", which constitutes civil society and is the middle way between an atomised individual and the state?
Mr. O'Brien: My hon. Friend generously describes my contribution as pithy, but it does not come more pithy than that. I not only endorse what he says, but recognise how critical the little platoons are for this country to move forward. They help to ensure that we balance the dignity of individual families and communities against what is, at times, an over-mighty state and the arrogance that goes with it.
I am sure all hon. Members are aware that co-operatives and community benefit societies provide essential services and amenities to communities. The list of the societies is diverse, ranging from housing associations to football supporters trusts, to social clubs and home care providers. It is helpful to have in mind the football trusts, be they rugby or soccer—as I still, perhaps anachronistically, call that form of football—and the Royal British Legion clubs. It is important to have in mind those examples as we go through the more detailed aspects of the Bill. For instance, perhaps one of the least controversial types of club is the British Legion club. It is hard to imagine that the purpose of such clubs would ever cease to exist. They not only give support to those who have served our country so well in the past; they honour the memory of those who made the ultimate sacrifice. That sacrifice has enabled us to be in this House today under the freedom of the rule of law, which our generation is lucky enough to enjoy in this democratic and civilised society.
However, what if, over time, the membership of a British Legion club were to fall to such a level that it became important to review its operation, and the supporting assets given in perpetuity for that purpose? It is important to ensure that no one generation of membership can remove a benefit that is provided not
only for past generations, but for future generations. None of us can ever know how the future will work out, or the extent to which those assets might prove of benefit to future generations.The voluntary sector has a key role to play in the renewing of our society. As my right hon. Friend the Member for Chingford and Woodford Green (Mr. Duncan Smith) has said, the Conservative party will work with voluntary groups and other groups of all types, including co-operatives and community benefit societies, in breaking down the constraints that are currently applied to this sector. We have been listening, and will continue to listen, to the problems that such groups face, and we will seek to identify the solutions. The Bill before us today is a solution, and it defines the problem that it seeks to address well.
To the extent that this Bill has not already done the work on co-operatives and community benefit societies, and in the hope that it does become an Act, we will build solutions to the problems faced by the voluntary sector into a voluntary society Bill, which we will lay before Parliament in the first Queen's Speech of an incoming Conservative Government.
I want to look at the Bill in a little more detail. As has already been made clear, we are in broad agreement with its contents and intent. I should like to acknowledge the helpful advice that I was given by Mr. Martin Beaumont, a constituent of mine who is the chief executive of the Co-operative Group. Until last September, he was also chief executive of United Co-op, which serves the citizens of the north-west, including the local village shop in Bunbury, in my constituency, where my family and I shop every week. It is apparent that the governing legislation is outdated in comparison with company law, and it can be argued that that acts as a disincentive to wider use of industrial and provident societies, as they are still called, as a form of enterprise and organisation.
The hon. Member for Harrow, West, who has already intervened, should be congratulated again on his efforts to reform the situation. The Bill before us attempts to move the law on, building on the industrial and provident societies legislation that he introduced so successfully in the previous Session. As I have said, the reasoning behind the Bill is sound and well-intentioned, but I have a few minor reservations and certain questions, which I hope the Government are ready to answer in summing up today's debate.
It is perhaps easiest if I discuss the Bill's clauses, if I may, in reverse order. We support clause 3, as it will remove an often onerous and cumbersome regulation from the day-to-day running of such societies. It seems somewhat strange that, in a modern society, the formalities for executing documents still require the use of an authenticating stamp. I am old enough—as the colour of my hair perhaps displays, I am afraid—to remember what used to happen. Even in the late '80s, when I was acting group secretary of a large FTSE 100 company with 44,000 shareholders on its membership register, we would spend many hours signing share certificates individually. Nothing has changed to the detriment of those shareholders by the fact that that system is no longer current practice, and has quite properly been consigned to history, important though it
was. The measure in clause 3 is an equivalent one, and it is therefore wholly appropriate and does not carry grave risk.Of course, the continuing justification for the use of seals is that they provide protection from wrongdoing. During the Committee stage of the Industrial and Provident Societies Bill, which was enacted last year following the hard work of the hon. Member for Harrow, West, the Government expressed sympathy with an amendment tabled by the hon. Member for Edmonton (Mr. Love)—he, too, has intervened today—the aim of which was similar to clause 3. Have the Government reviewed this procedure as part of the charity law review or the strategy unit's report, and in terms of protection against wrongdoing, what are their views on the use of seals and the replacement of that process?
A great deal of work is going on in connection with the strategy unit's report. Does this Bill pre-empt proposals that the Government have yet to put forward, and which arise from recommendations by the strategy unit that are still being consulted on? Have the Government established what effect this change in the law might have on societies, and are they—as I hope they are—expressing towards it more than the mere sympathy that they expressed towards the amendment, to which I have referred, tabled by the hon. Member for Edmonton?
We support clause 2, which will bring the law applying to societies into line with company law. It is essential that all parties dealing with co-operatives and community benefit societies can rely on the usual rules of ostensible authority, without risking being ultra vires. This is working well for companies under current companies legislation, and before such changes were introduced there was considerable discussion about the potential for abuse. In my business and professional career before being privileged enough to be elected to this place, I worked for a large manufacturing company with many subsidiaries, all of which had to comply with the Companies Acts. When the procedures for the use of seals and certification were relaxed for such companies, there was no demand, in the absence of evidence to suggest an increase in wrongdoing or uncertainty, to return to the status quo ante or an equivalent. So it is important to recognise that the track record should encourage support and acceptance of clause 2.
This issue was examined before. In 2000, the Government reviewed the situation through a Treasury consultation on the proposal for a new industrial and provident societies Act. Paragraph 22 of that consultation states:
- "This aspect of the ultra vires rule no longer applies to companies, following enactment of the Companies Act 1989. There seems no reason why societies should not have an equivalent legal capacity to deal with others. So it is proposed to cease to apply this aspect of the rule to societies."
Clause 1 offers the most potential for debate, as the hon. Member for South Derbyshire pointed out in his introduction and the time and detail that he devoted to
that clause. The Government's strategy unit report, "Private Action, Public Benefit", recommended that community benefit societies should be permitted to protect their assets—this is the crucial point—in perpetuity for a public purpose. That is the nub of the matter. It is that important purpose that underpins the rationale and intent of the Bill.As the law stands, societies and the communities that they serve could easily be vulnerable to asset stripping. If a society converts to a company, it will be easier for the members to alter its rules and to allow distribution of valuable assets to members without thought of the consequences for the greater community. The Bill relates to assets that have been granted, or given, in perpetuity for the community, so it is right to protect such assets from distribution to members of a community at a given time. For these purposes, it is the community that evolves and changes, not the asset base that was granted to benefit that community generation after generation.
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