House of Commons
Friday 19 October 2007
The House met at half-past Nine o’clock
Prayers
The First Deputy Chairman of Ways and Means took the Chair as Deputy Speaker, pursuant to the Standing Order.
9.33 am
Mr. Christopher Chope (Christchurch) (Con): I beg to move, That the House do sit in private.
Question put forthwith, pursuant to Standing Order No. 163 (motions to sit in private):—
The House divided: Ayes 0, Noes 42.
AYES
Tellers for the Ayes:
Mr. Christopher Chope and
Sir John Butterfill
NOES
Baldry, Tony
Brennan, Kevin
Brown, rh Mr. Nicholas
Burgon, Colin
Burns, Mr. Simon
Byrne, Mr. Liam
Clark, Greg
Clark, Ms Katy
Davies, Mr. Dai
Dismore, Mr. Andrew
Evennett, Mr. David
Farrelly, Paul
Fitzpatrick, Jim
Francois, Mr. Mark
Herbert, Nick
Hesford, Stephen
Hoban, Mr. Mark
Hollobone, Mr. Philip
Hoon, rh Mr. Geoffrey
Jenkin, Mr. Bernard
Jones, Lynne
McCabe, Steve
McDonnell, John
McFadden, Mr. Pat
McGovern, Mr. Jim
Merron, Gillian
Miller, Andrew
Milton, Anne
Olner, Mr. Bill
Öpik, Lembit
Prescott, rh Mr. John
Riordan, Mrs. Linda
Seabeck, Alison
Skinner, Mr. Dennis
Smith, Sir Robert
Starkey, Dr. Phyllis
Stewart, Ian
Strang, rh Dr. Gavin
Stunell, Andrew
Ussher, Kitty
Ward, Claire
Wright, Mr. Iain
Tellers for the Noes:
Bob Spink and
Philip Davies
Question accordingly negatived.
Point of Order
Mr. Christopher Chope (Christchurch) (Con): On a point of order, Madam Deputy Speaker. In the light of the news overnight that the Prime Minister has sold out British interests even more quickly than expected in Lisbon in the
“Last Supper for Britain as an independent sovereign state”
in the words of one of our newspapers this morning, have you received notice that the Government intend to make a statement to the House today?
Madam Deputy Speaker (Sylvia Heal): I thank the hon. Member for that point of order. I have not received notice from the Government and, of course, it is entirely up to them whether they choose to make a statement to the House.
Orders of the Day
Building Societies (Funding) and Mutual Societies (Transfers) Bill
9.47 am
Sir John Butterfill (Bournemouth, West) (Con): I beg to move, That the House agrees with the Lords in the said amendment.
Madam Deputy Speaker (Sylvia Heal): With this we may discuss Lords amendments Nos. 2 to 6.
Sir John Butterfill: The amendments arise out of difficulties that we experienced in tabling appropriate clauses when the House first considered the Bill. They do not affect the first part of the Bill, which extends the right of building societies to greater access to capital markets. We are not considering that today.
However, the second part of the Bill was intended to allow all mutual financials to merge with one another without either party losing their mutuality. Until now, if, for example, a building society wished to merge with a friendly society, one of them would have to lose its mutuality en route. That spoils the basis of mutuality.
The Bill allows financial mutuals to merge without either side losing its mutuality. That applies to all mutuals with the exception of credit unions—and, sadly, at the time when the measure left this House, of mutual insurers. The reason for that was that mutual insurers frequently traded as companies and were therefore caught by European Union and European economic area company legislation. It was not possible in the time available for the Bill’s first stages to find a draft wording that would cover that eventuality and be orderly. Happily, after the measure left this place, the Royal London mutual instructed Herbert Smith and Company, which instructed counsel. Between them they managed to produce the wording that we are being asked to consider this morning. Thanks to what happened in another place—I pay tribute to my noble Friend Lord Naseby—if the amendments are accepted, all the original objectives of the Bill will have been achieved.
Philip Davies (Shipley) (Con): In the light of what my hon. Friend has just said, can he confirm whether the new ruling will be subject to a potential test case in the UK courts or the European courts?
Sir John Butterfill: I do not think that there is any likelihood of the ruling being contested in either group of courts. I cannot absolutely confirm that, but I believe that the UK courts would be adequate.
Mr. Christopher Chope (Christchurch) (Con): Paragraph 5 of the explanatory notes, contained in the helpful commentary on the Lords amendments that my hon. Friend has produced, says that Lords amendments Nos. 1 to 3 ensure that
“transfers of mutual societies can apply where the transfer is to a subsidiary of an EEA mutual (which could include a mutual insurer) as well as where the transfer is to a subsidiary of another UK mutual.”
I would be interested to hear whether that works the other way as well. Can that apply to transfers from a subsidiary of an EEA mutual? We have all had experience of what seems to be a one-way process, whereby European organisations can acquire British interests, but we do not seem to be able to acquire their interests in return if we wish to.
Sir John Butterfill: Certainly the provisions would enable that to be the case, but the process would still be subject to the legislation covering the other EEA mutual, following on from the principle of subsidiarity, which I know my hon. Friend keenly supports.
Mr. Chope: I am grateful to my hon. Friend for giving way again. Having answered my question rather succinctly, will he now address an even more significant issue—the ruling out of the use of hybrid instrument procedures? That was touched on in the other place, but can he give any good reason why the hybrid instrument procedure should not apply in the case of provisions under the Bill?
Sir John Butterfill: Yes, because that will not actually occur. If my hon. Friend is concerned about that, he should know that the Bill is simply an enabling Bill. It will enable the Treasury to bring forward proposals from time to time and it will be subject to the affirmative procedure. If he were concerned about an issue, no doubt he could raise it at the appropriate time, but we do not think that the hybridity issue will arise. Because of that, we want to make the position clear in the legislation, rather than having to deal with it at a later date.
Mr. Chope: But surely if the hybridity issue will not arise, there is no need for Lords amendment No. 1. If the hybridity issue arises, that will only be because private interests may be being prejudiced as a result of a transfer. If private interests are going to be prejudiced as a result of a transfer, surely it is right that the hybrid instrument procedure in the other House should be applicable.
Sir John Butterfill: We do not think that that can arise, but we are establishing that beyond peradventure. However, no doubt the Minister will deal with the issue when she addresses the House—the point is very technical, as my hon. Friend will be aware.
Lembit Öpik (Montgomeryshire) (LD): Presumably the progenitors of the amendments, which I understand from the hon. Gentleman to be the industry itself, will have considered the hybridity and European issues. Will he therefore give an indication of whether either or both of those considerations were discussed with the organisations from the sector that were involved in formulating the amendments, and if so, what their view was?
Sir John Butterfill: All the proposals were discussed with the industry quite extensively and were of course dealt with extensively by the Treasury law team. We are all happy with what is before us and I am sure that the Minister will confirm that.
Mr. Chope: My hon. Friend has not dealt with the Channel Islands and the Isle of Man. Why does he think it important that the provisions should be extended to the Channel Islands and the Isle of Man?
Sir John Butterfill: With his usual perceptive nature my hon. Friend will have noted that that issue arises in the next group of amendments, not this one. No doubt we shall deal with it in time—I am sure that Madam Deputy Speaker would be unhappy if I were to deal with it now.
This complex group of amendments has been thoroughly tested before being brought back to the House. We are happy that it achieves the objectives that we all wanted when the original Bill was first introduced in this place. We are now satisfied that the group does just that and no more. I therefore recommend the amendment to the House.
Mr. Mark Hoban (Fareham) (Con): I want to make a few brief remarks about the group. First, however, I congratulate my hon. Friend the Member for Bournemouth, West (Sir John Butterfill) on his success in navigating his third Bill on to the statute book—[Hon. Members: “Fourth.”] My hon. Friend’s record improves by the minute.
The Bill is important and the amendments in the group address a gap that was left unfilled after Report and Third Reading earlier this year. My hon. Friend said that the amendments in the group enable mutual insurers to take advantage of the provisions of the Bill. They also extend the Bill to other mutuals in the EEA. I want to touch on some of the consequences of that, because it potentially brings within the ambit of the Bill a vast range of co-operatives in other EEA member states. We need to understand precisely what the impact could be of Lords amendment No. 3, which introduces the definition of an EEA mutual society.
Before I deal with that issue in greater length, however, I turn to Lords amendment No. 1, which deals with hybridity, which my hon. Friend the Member for Christchurch (Mr. Chope) raised in an intervention on my hon. Friend the Member for Bournemouth, West. As I understand it, the issue arises in part because a number of mutuals are established by private Bill. There was a concern that if an order was introduced to deal with the merger of two mutuals, one of which had been established under a private Bill, the hybrid procedure might apply. Lords amendment No. 1 removes that risk by ensuring that where an order might be treated as a hybrid instrument, another order can be made to ensure that it proceeds through the House without the hybrid instrument process applying.
In the debate on the matter in the other place, Lord Evans of Temple Guiting asserted that the Government believed the amendment to be necessary,
“because an order under Clause 3 could make provisions giving members of a transferring mutual membership and other rights in the holding mutual.”
“That could require changes to the constitution of the holding mutual. Where the holding mutual has a unique legal form—a private Act of Parliament, for example—that could raise an issue of hybridity. The amendment excludes the hybrid investment
procedure so avoiding unnecessary delay and complications in making the instrument.”—[ Official Report, House of Lords, 10 July 2007; Vol. 693, c. 1358-59.]
We understand that the hybrid procedure can add delay. It is a thorough process; the hon. Members on both sides of the House who served on the Select Committee on the Crossrail Bill will remember the thorough scrutiny that that hybrid Bill went through. I am concerned that, by losing the hybrid instrument procedure, we will remove a level of protection and parliamentary scrutiny that would otherwise be available to members of a mutual who were dissatisfied with the proposals.
10 am
Hybrid Bills provide an opportunity for members of the public to petition a Select Committee and appear before it to express their concerns about the Bill and how it will affect them. That gives the Select Committee an opportunity to amend the Bill. If a member of the public was dissatisfied with a proposal and felt that their rights were being impaired, the hybrid instrument procedure would give them some protection. Will the Minister reassure us on this matter? Why does she think that removing the hybrid procedure is in the interest of the mutuals and their members? It offers protection at the moment, which they would lose if Lords amendment No. 1 were accepted today.
Mr. Chope: My hon. Friend is on to a good point here. It is significant that the explanatory notes on the Lords amendments make no attempt to justify the proposal that the hybrid procedure should not be applicable when private interests could be jeopardised. I am glad that he is putting the Minister on the spot and asking her to justify a measure that, while not setting a completely fresh precedent, should be used only in exceptional circumstances—namely, the removal of the hybrid instruments that are available to petitioners in the other place.
Sir John Butterfill: Will my hon. Friend give way?
Madam Deputy Speaker: Order. The hon. Member for Fareham (Mr. Hoban) must reply to the first intervention. Then he might well be willing to take a second.
Mr. Hoban: I am grateful for your guidance, Madam Deputy Speaker.
My hon. Friend the Member for Christchurch makes an important point. The explanatory notes explain clearly what is happening, but they do not explain why it is happening. Considering the Lords amendments this morning gives us the opportunity to give them proper scrutiny and to understand the purpose for which they were tabled. I am sure that the Minister will be able to expound on the merits of removing the hybrid instrument procedure. This debate gives us the opportunity to discuss that point.
Sir John Butterfill: Perhaps my hon. Friend the Member for Christchurch (Mr. Chope) has not read the explanatory notes fully. They clearly state:
“If the EEA mutual has a unique legal form that might raise a question of hybridity.”
That could be a problem. Our difficulty is that we do not know what the precise legal form of other EEA mutuals might be. The amendment has been included to overcome that problem.
Mr. Hoban: I am grateful to my hon. Friend for that clarification. The uncertainty about the precise legal form of an EEA mutual—I do not know, for example, what the constitution of mutuals would be in the Czech Republic or any other EU member state—strengthens the need for a clear explanation of why the hybrid instrument procedure should be removed by Lords amendment No. 1; otherwise, a greater degree of uncertainty could be created. I am sure, however, that the Minister will be able to deal with that question.
Mr. Chope: Does my hon. Friend share my view that there is a distinction to be drawn between the question whether the hybrid procedure is relevant—my hon. Friend the Member for Bournemouth, West (Sir John Butterfill) has suggested that it might be—and the question whether, if relevant, the procedure should be excluded by the provisions of the Bill?
Mr. Hoban: That distinction can clearly be drawn, but I think that my hon. Friend the Member for Bournemouth, West has established why this is an issue. We now need to move on to the second part of the argument advanced by my hon. Friend the Member for Christchurch, and to ask why it is appropriate to remove the hybrid instrument procedure. I have not been privy to the discussions between the very innovative lawyers at Herbert Smith, their counsel and the Treasury, so I rather hope that the Minister will be able to shed some light on both parts of the argument about the hybrid instrument procedure. Why is it relevant, and why should it be removed?
I must point out to my hon. Friend the Member for Christchurch that this is not the only issue that I have with this group of amendments, and I should like to move on to my next point, as I am aware that other hon. Members wish to discuss other business this morning. I want to ascertain whether an order-making power that had been inserted by the amendments would be subject to the negative or the affirmative procedure. My hon. Friend the Member for Bournemouth, West will have a clearer memory of this than I do—indeed, he alluded to it earlier—but my recollection is that, on Second Reading and on Report, he and the Minister’s predecessor, the right hon. Member for Normanton (Ed Balls), emphasised the importance of ensuring that the affirmative procedure was used, as a means of providing further parliamentary scrutiny, given that this is predominantly an enabling Bill.
Lords amendment No. 3 talks about the Treasury specifying by order
“a body which is a cooperative or mutual undertaking”,
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