Co-operatives and Community Benefit Societies Bill

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The Chairman: Order. I am a little concerned that the hon. Gentleman is prejudging what might become legislation and is starting on that basis. I am sure that he will take that into account.

Mr. O'Brien: I am grateful. It is slightly awkward in that I am trying to tease from the Minister what I hope will be her prepared answers. My point in mentioning three potential pieces of legislation is that I anticipate, in addition to Bills from both the Home Office and the DTI, a Treasury Bill.

The Chairman: Order. There might well be a Treasury Bill, but that is not what is before us today. We need to return to the clause and the new clause.

Mr. O'Brien: Given that the Treasury Minister is here—I understand that, although this is a private Member's Bill it has benefited from consultation with the Treasury—I shall mention the third piece of legislation so that you can tell me whether I am genuinely out of order, Mr. Stevenson. The third piece of legislation is an industrial and provident societies Bill. Can the Minister tell us whether this Bill anticipates that one, in which case it is important for the broad sweep of what we are dealing with, or whether the Bill is, as lawyers would say, sui generis? Does what we are dealing with have implications for something that is already in the legislative pipeline?

I hope that the Minister's ultimate reassurance will be forthcoming on that, because new clause 1(5)(a) contains a power to introduce regulations that ''impose criminal liability''. As all hon. Members know, it is one of our important duties to scrutinise legislation properly where we are imposing criminal liability on any person or entity. I should like the Minister to look carefully at what is intended by ''criminal liability''. Is that in line with current

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companies law liabilities that the criminal law encompasses, or is something more imposed?

Mr. Simon Thomas (Ceredigion): As the potential new regulations under the new clause could, as the hon. Gentleman points out, impose criminal liability, it is surely important to tease out once again whether resolutions before both Houses would be made by the affirmative or negative procedure.

Mr. O'Brien: The hon. Gentleman raises an important point and anticipates where the argument was leading me. Any imposition of criminal liability under secondary legislation would obviously have to be made under the affirmative resolution procedure. I dare say that the Minister anticipated that question, and I look forward to her response.

I could go into the clause in great detail, but I am mindful of what we all said at the outset of the Committee. However, I am concerned only that, although the legislation attempts to describe and prescribe what will give effect to the worthy intent of the Bill's promoter, the provisions are in the nature of a blank cheque to the Government, which is a little dangerous. That is so in relation to criminal liability, the point which the hon. Member for Ceredigion (Mr. Thomas) joined me in making, which also leads to concerns that the Bill is a bit premature, given the Government's current thinking, although I hope that it is not. Given that the promoter has raised the issue, I hope that the Government have had the opportunity to think such matters through carefully. I look forward to the Minister's reply.

The only other point that I flag up, and which the Minister may deal with today or later, is whether there is a potential for tax-driven transactions. In my experience of sitting round company board tables, whenever assets are involved there is always a great danger that some people—often advisers with vast fees—will come up with clever schemes. Those schemes often need a great deal of numerical analysis in order to establish whether they are a genuine benefit to the enterprise, or whether they are driven by tax and tax savings. From what I have read in the Bill and the new clauses, I am unclear as to whether a tax attractiveness element could enter into transactions. From my initial reading, I see nothing to suggest that a tax-saving opportunity deriving from secondary legislation should not be a reason for an exemption under the asset lock.

A potential tax saving or benefit should not drive the process. The assets must ultimately not only be made available to the communities that they serve but be seen in that light, rather than be friable, so to speak, across various entities in order to save tax. I rather suspect that the Treasury would endorse my view on that. However, there is no limitation or express provision, and I therefore look for some reassurance on the matter.

The Financial Secretary to the Treasury (Ruth Kelly): I take this opportunity to welcome you to the Chair, Mr. Stevenson. I look forward to serving under your chairmanship.

I congratulate my hon. Friend the Member for South Derbyshire on not only securing his private

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Member's Bill but the way in which he constructively set out the purpose of the new clause and why it is to replace the original clause. I also thank him for the co-operation that he has shown since Second Reading. He ably set out not only the purpose of the clause but the very subsections and how they apply. I do not intend to repeat his arguments; rather I will confine myself to answering some of the specific points made by the hon. Member for Eddisbury (Mr. O'Brien), who speaks for the Opposition. I was slightly surprised that he suggested that the Bill may be premature, given the backing that he expressed for it on Second Reading. However, I interpret his tone as fairly constructive, and I am happy to answer some of his detailed points.

Mr. O'Brien: If clarification is needed, it is purely in relation to the strategy unit's report and my concerns about what is likely to flow from that, and whether the Bill is anticipating it, rather than standing on its own.

Ruth Kelly: We are certainly not anticipating the strategy unit's report. This is a fairly complicated area of policy. It takes time to get all the details right and it is not possible within the timetable set down by Parliament to consider all the details within the framework of a private Member's Bill, which is why the Government are happy to support new clause 1. We will certainly be happy to publish a regulatory impact assessment of the Bill. In fact, we look very carefully at the regulatory impact of all Bills and we hope to have one in the public domain before we come to debate this Bill in the future.

The hon. Member for Eddisbury asked what we needed to consider in detail that has not already been examined by the strategy unit report. We must consider the need for robust mechanisms to ensure that takeovers, mergers and dissolutions of societies are fair and transparent. We need to decide which society should be able to take advantage of the asset lock-in regime; for example, whether asset transfers should be allowed between very different types of community benefit societies such as housing associations and social clubs. We need to ensure that societies with the lock-in can continue to evolve and change their purposes and activities appropriately.

To help with those issues, we must also consider whether we can prescribe for all possible circumstances in the legislation. If not, we may need to consider setting up a supervisory body or giving the powers to the Financial Services Authority. We will think very carefully about whether a supervisory body is needed, and if so, who should carry out that function. That will be subject to further detailed consultation, and there is no presumption about it at this point.

The hon. Gentleman suggested that we examine this in the context of the Financial Services and Markets Act 2000 review. Clearly, many matters will be looked at in the context of that review, but it is not essential that all matters are considered within that context, so I will not say today whether we would use that vehicle to examine the scope of the FSA regulations that he suggested.

The hon. Gentleman also suggested that implementing the reforms through secondary legislation could somehow lead to increased rather

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than reduced uncertainty. I do not see any reason why that should be the case. Secondary legislation is just as clear and concrete as primary legislation. The principle behind the Bill has already been accepted. We are just putting the details in place. I can confirm that the Bill will be subject to affirmative resolution. Safeguards are already in place. The enabling power to introduce legislation is limited by subsection (1) of the clause, the two specific purposes of which are linked to establishing an asset lock-in regime for community benefit societies. We are committed to ensuring full and proper consultation on the provisions that we will eventually introduce.

Mr. Simon Thomas: Can the Minister confirm that she will include the National Assembly for Wales in that consultation? The Bill covers both England and Wales, but there are particular concerns and differences in some community organisations in Wales, which is the home of the co-operative movement, and it would be good to know that she will consult the National Assembly.

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Ruth Kelly: I am happy to give the commitment that we will take into account the situation of Wales when carrying out the consultation.

It is true that subsection (5) of new clause 1 allows the Treasury to impose criminal liability through secondary legislation. I have already said that such legislation would be subject to affirmative procedure, and it will be considered in conjunction with the movement and other interested parties. Penalties are already an important part of the legislative framework governing societies and the checks and balances that exist ultimately to protect the interests of societies, their members and those who deal with the sector. If we want an effective asset lock-in regime, we will have to examine criminal liability together with the other details that need to be worked through, but I confirm that the provisions are in line with existing company and society law.

I will be happy to write to the hon. Member for Eddisbury with the precise definition of ''dedicated assets'', and I am sure that we will debate that definition further on Report.

 

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Prepared 18 March 2003