That there be laid before this House a Return of the Report by the Comptroller and Auditor General of a review under section 12 of the Financial Services and Markets Act 2000. [Kevin Brennan.]
Mr. David Winnick (Walsall, North) (Lab): On a point of order, Madam Deputy Speaker. There will be some surprise, I am sure, that the Freedom of Information (Amendment) Bill is not to be debated today. It was due to be the second item, as you know. There is a feeling that it has been withdrawn. Will you confirm that the Bill has not been withdrawn, and that it has been deferred to 18 May? Many of us believe that that is just a ploy to bring the troops in on 18 May so that there will be more than 100 Members present to try to pass the private Members Bill introduced by the right hon. Member for Penrith and The Border (David Maclean). Those of us who are opposed and consider that it would be a disgrace if the Bill were passed will be here on 18 May.
Madam Deputy Speaker (Sylvia Heal): Yes, I can confirm that the Freedom of Information (Amendment) Bill is deferred until 18 May, but that decision is entirely up to the Member in charge of the Bill. It has nothing to do with the Chair.
Simon Hughes (North Southwark and Bermondsey) (LD): Further to that point of order, Madam Deputy Speaker. It is entirely proper that Members can use the procedures to move the date for a private Members Bill. There are two Bills in relation to which that happened yesterday: the Housing Association (Rights and Representation of Residents) Bill, which was put back to 15 June and, as the hon. Member for Walsall, North (Mr. Winnick) said, the Freedom of Information (Amendment) Bill, which was put back to 18 May. I have no objection to that. However, will you ask the appropriate authorities to consider whether, when a Bills debate date is changed by any process, there is a way of making that generally known, other than by Members going to the Table Office? People other than Members who are in the House on the day have an interest.
Madam Deputy Speaker: I can confirm that, as the hon. Gentleman says, nothing irregular or improper occurred in changing the date for those Bills to be debated. It is incumbent on Members who have an interest in a particular Bill to keep in regular contact with the Table Office to find out when it is to be debated.
The consideration in Committee was not particularly long, but it was comprehensive. The Bill was altered quite substantially, not in its objectives, which remain the same, but in the legal basis of the clauses. The Bill was an extremely complex matter. It meant changing a large number of existing areas of legislation, and the way in which they interacted was complex, hence the comprehensive redrafting of the Bill since Second Reading, and also its change in name to the Building Societies (Funding) and Mutual Societies (Transfers) Bill. That was needed to bring greater clarity to what the Bill was intended to achieve.
I pay tribute to the work of all who were involved in the Committee stage, in particular to the groups of lawyers who worked hard together to come to a conclusion. Without the diligent efforts of the Treasury solicitors, that would not have been possible.
There is one remaining area of the Bill that we were unable to cover in Committee: the position of mutual insurers. It was felt that the Bill as drafted could contravene European Union company law. The remedy that was chosen to enable the Bill to proceed quickly was to remove mutual insurers from the transfer arrangements that apply to all the other mutual societies. That is not a particularly happy situation, andthe Minister confirmed this in Committeeboth sides of the House would prefer them to be included, if that is possible.
I understand that the Royal London mutual instructed solicitors to consider how the situation could be remedied. It instructed Herbert Smith, which has come up with some ideas that are now being discussed with the Treasury solicitors. Between them, they may reach a conclusion that would enable mutual insurers to be included in the scope of the Bill. If the Bill is passed today, that can be achieved only by an amendment in another place, which would mean the Bill coming back here again. I would not be unhappy with that procedure, if I was sure that time would be made available to consider the amendments. I understand that there is a possibility that the Government
might be prepared to assist in that matter, and no doubt the Minister will confirm or deny that information shortly.
Susan Kramer (Richmond Park) (LD): Will the hon. Gentleman confirm that credit unions, which are mutual in character and crucial to coping with financial exclusion, fall within the scope of the Bill? I was unable to understand that point from reading it, and his confirmation would be exceedingly helpful.
Sir John Butterfill: I cannot help the hon. Lady, because credit unions are not in the scope of the Bill. Their activities are peculiar to that particular group of mutuals. They understand that it is not possible to include them, and I gather that they are perfectly happy with the situation.
In conclusion, I am grateful to the Government and the Treasury solicitors for their assistance. I am also grateful to Mutuo, which gave me a great deal of help in the initial drafting of the Bill and subsequent discussions with the Government, and to Members of all parties in this House, who have been extremely supportive. I therefore trust that we can deal with the remaining stages of the Bill in the course of this morning.
Mr. Adrian Bailey (West Bromwich, West) (Lab/Co-op): As chair of the all-party group on building societies and financial mutuals, I am pleased to see the Third Reading of the Bill, even in its adapted and modified form.
I, too, congratulate the hon. Member for Bournemouth, West (Sir John Butterfill) on taking up the issue and navigating it through some tricky waters where there were plenty of obstacles, some of which were below the waterline and had not been seen. On Second Reading, I said that we were lucky to have somebody who had already achieved the objective on other occasions with private Members Bills and who is well versed in the art of navigation. When I said that, I did not realise how important those skills would be, given the problems that have arisen.
I endorse the hon. Gentlemans remarks about the support and co-operation of both the Minister and the Treasury team in ensuring that the Bill, even in its modified form, has arrived where it has today. Its gestation started with the Miles report in 2004, which made what appeared to be a simple recommendation about changing the wholesale funding restraint. The subsequent Select Committee inquiry with the all-party group adopted that particular recommendation and added to it the need for building societies to be able to transfer engagements to another mutual. Again, that appeared to be a simple and logical step to take through legislation. However, when the complexities of financial regulation are merged with the complexities of corporate legislation, all sorts of problems arise, which is why the Bill has had such a difficult passage, albeit that everybody has tried to overcome the legal and financial complexities.
I endorse the hon. Gentlemans comments about insurance companiesagain, that point was not foreseen. I hope that the good will and commitment behind the other provisions in the legislation will prevail once again, and that the problem will be overcome by the commitment and expertise of those involved.
On Second Reading, I commented that in my locality, the black country, we are blessed by having a number of the smaller mutualsthe West Bromwich building society would call itself a medium-sized mutualthat represent the historical root of the building society movement. The Tipton and Coseley and the Dudley are small building societies, and they have provided a service to local people in one of the most deprived areas of the country for many years. The Bill will enable them to continue to offer the sort of service that they provided for the community in the past.
When the all-party group investigated the relative competitiveness of the banking and building societies sectors, it became quite obvious that the advantage that mutual organisations have in not having to pay out dividends to shareholders enables them to provide better value and cheaper products to local people. In an area such as mine, where incomes are still lowhistorically house prices were low, but that is changingthe ability of local financial service providers to offer good-quality, low-cost products to people who may have lower incomes is absolutely essential and complements the Governments desire to ensure that areas of this country are not financially excluded.
Building societies have the advantage of having trusted brand names, and because of their historical root in local communities, they are well known and understand the communities that they serve. By passing this legislation and removing the wholesale funding restraint, or at least modifying it so that building societies can borrow more money, we will enable building societies to produce products that are even better tailored and suited to the needs of their local communities. Despite its complexity and its rather arcane nature, the Bill could have a significant part to play in helping people in lower income communities to develop their quality of life and get on the housing ladder.
From the perspective of the all-party group on building societies and financial mutuals, I reiterate my thanks to the hon. Member for Bournemouth, West for taking up the Bill, which could have quite profound long-term consequences. I also thank the Treasury team again for being prepared to embrace it and the principles behind it.
Dr. Vincent Cable (Twickenham) (LD): I should like to say a few words in support of the Bill, of which I was one of the original sponsors, and to congratulate the hon. Member for Bournemouth, West (Sir John Butterfill) on taking it through almost to its completion. I have apologised to him and other members of the Committee for not being here on Second Reading. There are a few comments that I would like to have made then, and would like to make now, but not at inordinate length.
Like several other colleagues in the House, I was a little shocked when I saw the Order Paper this morning. I had been prepared to discuss the Bill at rather greater
length than I now propose to do, and had a long disquisition prepared. Indeed, I was going to try to describe to the House an algebraic model of the funding structure of mutuals, which I thought would have supported the debate. However, it is probably no longer necessary, so I shall save it for another occasion. I also had a new clause, which has not been selected by the Speaker, so I do not need to speak to that at any length. More seriously, however, I would like to pass on to the Treasury the substance of that new clause, which can no longer be moved formally, in the form of a thought.
The point that I was endeavouring to make, which has some validity, is that we need a proper system of reporting on the progress of mutual institutions in a factual, statistical way. One of the points that has struck me throughout the debate is that much in the story about mutuality is of a qualitative kind. I have read the excellent report of the all-party group, of which the hon. Member for West Bromwich, West (Mr. Bailey) is the chair and which is the largest in the House. The group has done sterling work and has made the case for mutuality, but there are no tables in the report. There are a few facts and anecdotes, but there is not a great deal of back-up. If I am asked what share of the British economy is accounted for by mutual transactions, I have no idea. Is it 5 or 10 per cent., or 30 or 50 per cent.? Is it growing or is it contracting?
Madam Deputy Speaker: Order. I appreciate that the hon. Gentleman wished that he had been present on Second Reading, but we are now on Third Reading, so his remarks will have to be about the contents of the Bill.
Dr. Cable: The specific point that I wished to make about the Bill was that, in order to monitor its progress and implementation, we need a stronger statistical base than the current one, which is very fragmented. Under clause 1, for example, it is necessary to have information on the funding requirements of building societies. In preparing for this debate, I looked through all the basic data to try to find out where that information was. There is a wonderful book compiled by the Building Societies Association called the Building Societies Yearbook, which is a real labour of love. Among its many tables, there are none that describe the funding ratios for building societies, unless one looks into the balance sheet summaries for each individual society. If we were trying to monitor the progress of the Bill when it became law, particularly the requirements of clause 1, we would not have a readily available source of material, so somebody somewhere should be collating it.
Similarly, the consolidation element provided for under clause 3 requires some idea of the progress that different segments of the mutual movement are achieving. Are they growing or contracting? How many of them are there? The data on that are very poor. For example, the only source of information that I could find on friendly societies was the annual report on them, which is a very good document. At the back it describes in some detail everything from the Liverpool Victoria, which is the biggest friendly society, right down to a wonderful institution that I would love to know more about, the Grand Order of Israel and Shield of David friendly society, whose total funds are
zero. There is quite a range of institutions, but if we were trying to monitor the progress of the legislation, and mutuals legislation more generally, it would be helpful to have more background information.
Finally, on that specific pointI shall move on to more general considerationsthere are very little data on the industrial and provident societies, which are the most numerous of the mutuals. I have discovered a fine Library paper, drawn up in 2002, giving a breakdown of all the different segments of industrial and provident societies, based on registration information, but I have not seen anything since. The Financial Services Authority, which is the source of the data, does not seem to have published any updates. We therefore just do not have any basis for judging what is happening in the mutual movement, with respect to consolidation and the other issues in clause 3.
I should like to leave the Minister with that thought. Quite apart from whether something could be formalised in legislation, it would helpful if the Government could think of a way of presenting regular reports on the progress of the mutual movement, to which he as the relevant Ministerhe has described himself as the Minister for mutualshas dedicated himself, so that we can assess its progress.
Madam Deputy Speaker: Order. May I remind the hon. Gentleman again that whatever he would wish to have said on Second Reading cannot be rehearsed today, when we are dealing with the Third Reading of the Bill?
Dr. Cable: I fully accept and understand your ruling, Madam Deputy Speaker. I am not entirely sure what the distinction is, because in summarising our review of the Bill in Committee we are, in a sense, going over some of the basic arguments. I am happy to proceed from them, but
Madam Deputy Speaker: Order. I should perhaps have reminded the hon. Gentleman that on Third Reading we are discussing what is actually in the Billin this case as amended in Committeewhereas on Second Reading we were dealing with its general principles.
Dr. Cable: In that case there is no particular reason for me to continue discussing my point, so I shall say a little about the three major components of the Bill as amended. As I understand it, the key component is clause 1, which enables some relaxation of societies funding requirements and updates the Building Societies Act 1997, following the publication of the David Miles inquiry.
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