Draft Friendly and Industrial and Provident Societies Act 1968 (Audit Exemption) (Amendment) Order 2006 |
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Mr. Mark Todd (South Derbyshire) (Lab): I promoted the private Member’s Bill that provided the basis for one of the statutory instruments and it is welcome to see the regulations being enacted. The asset lock was a response to a perception of risk, rather than reported abuse. During the passage of the Bill, I found no evidence that there was carpet bagging of that sort, but it was certainly possible, and therefore the asset lock could be a deterrent in the context of the use of this particular instrument for promoting ways of engaging the community and controlling various assets and delivering services. The measure is extremely welcome and I am not all surprised that the consultation produced unanimous support for it. In response to the remarks made by the hon. Member for Chipping Barnet, the discussion about human rights did not feature in the passage of my Bill. The Bill was first in the ballot, so it received rather more scrutiny in the House of Lords. It caused some difficulties because it returned to the House of Commons for further amendment after being in the Lords, which is unusual. That particular feature, which I would have expected to have been raised, was not one of those that caused comment at the time. The reason for that is almost certainly that there is a democratic framework of option available in which members make a choice over the possibility of imposing an asset block, which I think essentially addresses that particular need. My last remark is one of welcome, which does not come as a surprise to me. My Bill enjoyed all-party support in the House of Commons and in the other place. There is a general recognition that these provisions are useful tools for developing community
Football trusts were mentioned by the Minister as one of the users of the particular mechanism that we are discussing. That is true. The Rams Trust, which seeks to develop some influence over the affairs of Derby County, is a community benefit society. A number of other examples have more genuine control over a football club. There are also cases in which the societies have built up quite substantial assets and therefore the risk was certainly not one that could be seen as merely conceptual and theoretical—it genuinely had to be addressed. I am delighted that the regulations have been put forward and they will have my endorsement this afternoon. 5.7 pmSusan Kramer (Richmond Park) (LD): First, may I give the Committee the apologies of my hon. Friend the Member for Eastleigh? I was able to share with him quickly the Minister’s damning him with faint praise, which he was delighted to hear about since in The Guardian today he is rumoured to have had the praise of the Prime Minister. That could be career-stopping at this point in time. I congratulate the hon. Member for South Derbyshire, whose private Member’s Bill was the progenitor of sensible legislation. My party is pleased to support the statutory instruments. We have long had an association with the friendlies and the providents, and we very much support the kind of service that they give to the community. While we see great opportunities for that in the future, there is also a long history in that respect. I will raise a few quick points that the Minister might wish to answer. The first returns to light-touch enforcement, which is a sensible approach. The sanctions that are to be applied—essentially, a cessation order or, if necessary, restitution from a director—went out for consultation. The Minister will be aware that some were concerned that perhaps there needed to be stronger sanctions, particularly given the framework of light-touch regulation. One proposal was that the board of directors ought potentially to be liable to criminal sanctions and that there might be other kinds of enforcement. Will the Minister spend a moment or two answering that point? Once the regulations are in force, a large number of the existing friendlies and providents will have the opportunity to introduce an asset lock. How is the Minister ensuring that they are aware of that possibility, given that they might be in the unfortunate position of not reading about statutory instruments? It would be interesting to know how that is being communicated. There have been proposals—again associated with the consultation—for a branding scheme, so that potential investors could identify whether an asset lock was present and whether it met the necessary standards. Will the Minister comment on that? Column Number: 13 On the order raising the audit threshold, I have been involved with many small groups over many years and I am very much in favour of raising the threshold. However, will it be accompanied by a more general message that it is still important, even for a small society, to pay attention to ensuring that its finances are in order and are understood? Although the audit is a heavy-handed approach, in some ways it has provided an instrument to ensure that even relatively small groups hold themselves to fairly high standards of financial prudence. While we take away that constraint, can we ensure that the message of prudence still goes out? Those are my issues; will the Minister take a moment to address them? 5.10 pmPeter Bottomley: I congratulate my hon. Friend the Member for Chipping Barnet on the way she has led for the Conservatives in this debate. I also pay tribute to my hon. Friend the Member for South-West Bedfordshire (Andrew Selous), who pays a great deal of attention to the statutory instruments that pass through our Committees. I will not get involved in the question of where the hon. Member for Eastleigh is, and whether he is right to regard his personal future as more important than the future of the friendly societies and their audit requirements. On the audit statutory instrument, we should note that the turnover limit going from less than £400,000 to more than £5 million is a large hike. We can understand that it is a reasonable turnover limit, but whereas the asset limit has merely doubled, this has gone up by more than 10 times. I do not ask the Minister to comment on that, but it is worth putting on the record. The explanatory notes for both statutory instruments are useful, but there is one detail on devolution that the Minister might wish to confirm. In respect of one of the statutory instruments, because the legislation is a reserved matter that will apply in Scotland and Wales as well as in England, the note states, somewhat delphically, that
and then it goes on to address how they will be discharged. However, there is no mention of Northern Ireland in the other statutory instrument. I take that to mean that the Bill promoted by the hon. Member for South Derbyshire did not extend to Northern Ireland, but if I am wrong, perhaps that point could be answered, or a note could be sent to us if we do not get the answer right away. This is not a vital matter that must be answered today, but that is a difference between the two statutory instruments. Let me move on to a sentence in the explanatory memorandum on the statutory instrument introducing an asset lock. On page 7, under chapter 4 on benefits, option 1:1.21 states:
Column Number: 14 That ought to go into a collection of good sentences. I think that it would mean the same if instead it stated, “There are no benefits to giving community societies the option to lock in the value of their assets”, because the sentence finishes
That is a little gem of a sentence that Lynne Truss would probably be pleased to come across. My final point is to do with a matter of procedure. In both explanatory memorandums there is a final page that states:
In neither case does the Minister appear to have actually signed the document. Does it get signed later, or has it been signed on another page? Mr. Lewis: I commend the Committee on what has been a mature and constructive debate. Every contribution was valid. I also pay tribute to the work that my hon. Friend the Member for South Derbyshire has done on these important issues. We in my party are not new to supporting industrial and provident societies and the contribution that they make to the fabric of our communities. That is ingrained in the history and development of our party and of the Labour movement. We welcome it when any political party comes forward and supports the strengthening of the social fabric of our communities. That is why our party has existed and been so successful in transforming society over such a long period. That takes me nicely on to the contribution and questions of the hon. Member for Chipping Barnet. She raised a number of important issues. On whether this infringes or contravenes human rights legislation, I know that that is not the case, as members may withdraw from a community benefit society before the asset lock takes effect. In a sense, that removes the concern that there might be a contravention. The hon. Lady also asked why the lock is voluntary for community benefit societies, when it is required for community interest companies. Community benefit societies are owned and run by their members, so it is consistent with their democratic ethos that they should be able to choose whether or not to acquire the asset lock. In themselves, CICs are not mutuals. The hon. Lady questioned whether the sanctions or the penalty were too draconian. A lock on that is that any officer will have the right of appeal to the High Court against a penalty imposed by the FSA which it considered unreasonable. She referred to the difference between charitable and non-charitable limits. It is a reasonable point to raise. However, it is not possible to align them completely because of the differences in accounting treatment between companies and I&Ps. However, the provisions in the draft order will make the thresholds more consistent and, by doubling the assets, thresholds for charitable I&Ps will provide significant deregulation. It will not be possible to align them entirely, but I still think that it is the right way forward. Column Number: 15 Both the hon. Lady and the hon. Member for Richmond Park asked what checks were in place to prevent fraud in respect of the smaller I&Ps. They will be subject to regulation by the Charity Commission. At present, they are required to send annual financial returns to the FSA. They are subject to the usual criminal law, but are exempt from regulation at present. The hon. Member for Richmond Park suggested that more severe penalties are needed in the event of officers infringing the law. We believe that the sanctions that we have laid down are proportionate. There is no right or wrong; it is a matter of looking at the law and making judgment and, in our judgment, the sanctions and consequences are proportionate in the circumstances. She asked how we were alerting I&Ps to the changes. We have been in regular contact with Co-ops UK on such matters. Obviously, it has a massive network to make I&Ps aware of the changes. The information is available also on the Treasury website. I am not suggesting that many officers of the organisations are glued regularly to the Treasury website, but we need to respond positively to the hon. Lady’s comment and give some thought to how we make sure that there is appropriate awareness. Column Number: 16 The hon. Member for Worthing, West (Peter Bottomley) raised an important point about Northern Ireland, to which we do not have the answer. We shall respond to members of the Committee on the issue. He referred to a grammatical issue that I cannot contest. Perhaps the hon. Gentleman should be made right honourable for spotting that. It might be a little easier to become right honourable in his party than it is in ours. I have tried to respond constructively to the comments that have been made. I believe that there is significant consensus on the orders and, on that basis, I commend them to the House. Question put and agreed to. Resolved,
Use of Assets) Regulations 2006 Resolved,
Committee rose at nineteen minutes past Five o’clock. |
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