House of Commons
Friday 12 June 2009
The House met at half-past Nine o’clock
Prayers
The First Deputy Chairman of Ways and Means took the Chair as Deputy Speaker (Standing Order No. 3).
Mr. Andrew Dismore (Hendon) (Lab): I beg to move, That the House sit in private.
Question put forthwith (Standing Order No. 163).
The House proceeded to a Division.
Madam Deputy Speaker (Sylvia Heal): I ask the Serjeant at Arms to investigate the delay in the No lobby.
The House having divided: Ayes 0, Noes 32.
AYES
Tellers for the Ayes:
Mr. Andrew Dismore and
John Austin
NOES
Allen, Mr. Graham
Bellingham, Mr. Henry
Bottomley, Peter
Brown, Lyn
Burt, Alistair
Chope, Mr. Christopher
Davies, Philip
Dunne, Mr. Philip
Fitzpatrick, Jim
Goodman, Helen
Heath, Mr. David
Heathcoat-Amory, rh Mr. David
Hurd, Mr. Nick
Jack, rh Mr. Michael
Jenkin, Mr. Bernard
Keen, Ann
Lammy, rh Mr. David
Lansley, Mr. Andrew
Lewis, Mr. Ivan
Mackay, rh Mr. Andrew
McCarthy-Fry, Sarah
Prentice, Bridget
Rammell, Bill
Ruddock, Joan
Seabeck, Alison
Skinner, Mr. Dennis
Smith, Angela E. (Basildon)
Spellar, rh Mr. John
Sutcliffe, Mr. Gerry
Thornberry, Emily
Timms, rh Mr. Stephen
Wicks, rh Malcolm
Tellers for the Noes:
Helen Jones and
Mark Tami
The Deputy Speaker declared that the Question was not decided because fewer than 40 Members had participated in the Division (Standing Order No. 41).
Co-operative and Community Benefit Societies and Credit Unions Bill
Consideration of Bill, n ot amended in the Public Bill Committee.
Queen’s and Prince of Wales’s consent signified.
9.50 am
Malcolm Wicks (Croydon, North) (Lab): I beg to move, That the Bill be now read the Third time.
As I trooped through the No Lobby, I reflected that, given the fervour for the modernisation of Parliament, I hope that the modernisers will look critically at the way in which we spend our Friday mornings. The shenanigans that go on are not fit for purpose in a serious parliamentary democracy.
It is my pleasure to present the Bill for its Third Reading. I thank hon. Members for their useful contributions on Second Reading on 24 April. I am grateful for all their comments and questions, and encouraged by the unanimous cross-party support for the measure. We had an equally useful, albeit short, exchange in Committee, and I am impressed with the commitment that hon. Members continue to show to the cause of mutuality and co-operation.
The Bill represents something of a rebranding of societies. It provides for all new societies registered under the Industrial and Provident Societies Act 1965 to be registered as co-operative or community benefit societies and it sets out the basis on which societies may be registered. The criteria are essentially those in existing legislation and no major change is made to the qualifying criteria.
The introduction of the registration requirement will also ensure that societies can be properly supervised by the Financial Services Authority, thus improving corporate governance over the sector. By modernising the name from “industrial and provident society”—which, I admit, has a historical resonance and status—to terms which are, in any case, in common usage, we can help the sector adopt a modern 21st century status and persona.
Societies that are already registered do not have to register again. If my Bill becomes an Act, societies that register before it is implemented will not be affected by the definitions of “co-operative society” or “community benefit society” in the measure.
The Bill also deals with circumstances in which a society’s registration may be cancelled so that it reflects the new registration provisions. The FSA, as registrar, will be able to cancel a society’s registration when it does not meet the new statutory definitions. Again, the Bill caters for the status of societies registered, or treated as registered, under the current section 1 of the 1965 Act.
The Bill changes the name of the Industrial and Provident Societies Act 1965 and that of other Acts concerning such societies so that “industrial and provident societies” is replaced by “co-operative societies” in the titles. That is part of the rebranding of industrial and provident societies.
Peter Bottomley (Worthing, West) (Con):
On modernisation, perhaps the right hon. Gentleman will consider, given that “industrial” has gone out of vogue,
whether that also applies to “Labour”, and whether the party should be branded “the Co-operative party” again. Will he remind the House that the registration of credit unions is unchanged, although some provisions affect them? Will he reflect on whether it is right to provide for “the Treasury” to have power to do things when, normally in Bills, power is given to “the Secretary of State”, which allows for greater flexibility in Government in later years?
Malcolm Wicks: I will deal shortly with one or two of those issues, not least credit unions, which both the hon. Gentleman and I regard as particularly important in the current economic climate in some of our poorer communities. On his useful—as ever—advice about the name of the Labour party, as every schoolboy and schoolgirl knows, there is a separate Co-operative party, of which I and many other Members are members. Indeed, some colleagues are returned as Labour and Co-operative Members. However, it is always useful to have a tutorial from the hon. Gentleman about the history of the Labour movement, although it is not the subject of the Bill.
The Bill applies the Company Directors Disqualification Act 1986 to officers of industrial and provident societies, as it applies to officers of companies, building societies and friendly societies. The 1986 Act provides for the disqualification of officers of companies and various bodies when such officers have seriously mismanaged those bodies. Disqualification means being prohibited from involvement in the management of a company or from acting as an insolvency practitioner for a period of time. Under the law as it currently stands, officers of industrial and provident societies who have mismanaged a society cannot be disqualified. Clause 3 will make their disqualification possible.
The Bill provides for greater investigation of societies. It gives the Treasury powers to apply to industrial and provident societies specific provisions of company law on investigating companies, company names, dissolution, and on restoration to the register, which the FSA keeps, of industrial and provident societies.
The Bill also applies part 31 of the Companies Act 2006, which contains provisions to strike defunct companies off the register of companies, to societies. It therefore provides a significantly more streamlined procedure than that which currently applies to societies, and one that will be less onerous on the FSA. The onus to prove that a society is defunct currently rests with the FSA as registrar. The FSA can act only in limited circumstances, frequently after having to devote considerable resources to investigation of a society’s status. The new regime will place the responsibility on a society to demonstrate that it is still active. The Companies Act 2006 provisions also contain related procedures governing voluntary striking off, treatment of the property of a dissolved company and restoration of companies to the register.
Parts 14 and 15 of the Companies Act 1989 also come into play. They cover a power by the Secretary of State—by that I now mean the Secretary of State for Business, Innovation and Skills; I think that is the correct name for the Department, after a period of being Business, Enterprise and Regulatory Reform and a longer period of being Trade and Industry. I have not
walked along Victoria street this morning, but I think I have got the name right this Friday. The Bill gives powers to the First Secretary of State to investigate companies and their affairs, and to requisition documents.
Under the law as it stands, the FSA has certain powers to investigate industrial and provident societies. However, such powers are limited, particularly in respect of those societies that are not regulated by the FSA as providing financial or insurance services. In contrast, the Secretary of State has more extensive powers to investigate companies. That partly tackles the issue that the hon. Member for Worthing, West (Peter Bottomley) raised about the Secretary of State’s powers. The Bill will enable the Treasury to give the FSA powers of investigation of industrial and provident societies, equivalent to the powers that the Secretary of State has in respect of companies.
The Bill also includes important provisions for credit unions. It enables provisions that correspond to building society law to be made for credit unions. The power will allow any provision in building society legislation, which is deemed appropriate, to be mirrored for credit unions. Credit union membership has expanded significantly in recent times; indeed, perhaps I should declare that I have recently joined the excellent Croydon credit union. The best way of allowing credit union law to keep pace with that expansion in membership and operations is to bring it into line with building society law, which is tailored to deal with issues specific to institutions that accept deposits. The power is widely drawn, so as to allow any provisions of building society legislation deemed appropriate to be mirrored for credit unions.
There are restrictions, however, to ensure that specific provisions of existing credit union law cannot be modified. Thus, provisions regarding registration, the use of the name “credit union”, the general prohibition on deposit taking, amalgamations or transfers of engagements and conversion of status between credit union companies are safe. There is a requirement that the Treasury consult with the appropriate persons before using the power, which is a reflection of its potentially wide scope. Depending on which provisions of building society law are converted into credit union law, the Treasury might need to
“confer power to make orders, regulations and other subordinate legislation; create criminal offences; provide for the charging of fees (but not any charge in the nature of taxation).”
On Second Reading, hon. Members raised a number of important points, to which I promised to respond in due course. I would therefore like to take a little time today to put on record my reflections on those questions. The hon. Member for Southport (Dr. Pugh) cited some illuminating research by the Joseph Rowntree Foundation that pointed out some of the risks associated with increasing state and local authority involvement. He wanted assurance that the Bill would not denature credit unions. I think it fair to say that credit unions would welcome the opportunity to attract savings from larger community organisations and local authorities. I welcome that as well, but also recognise the hon. Gentleman’s concern. The legislative reforms that this Bill, and, indeed, the Government’s legislative reform order, seek to introduce will ensure that the role that people play as individual members, contributors and depositors will not be diminished. Individual membership will continue to be the main focus of credit union membership.
When I spoke at the annual general meeting of the Croydon credit union the other day, I was impressed by the fact that 40 or 50 people had gathered there as members of the credit union to spend an hour and a half discussing the affairs of the union and looking at how it could improve itself. That seemed to be self-help—to use an old-fashioned term—at its very best. Certainly, nothing in the Bill will interfere with that. Indeed, I think it will help to maintain and develop that honourable tradition and ethos.
On the issue of informal financial education for credit union members, I know that the Government, together with the FSA, have launched a scheme, under the brand name “Money made clear”, aimed at creating greater financial literacy in education. They have also been working together with credit unions under the auspices of the umbrella group, the Association of British Credit Unions Ltd, to increase financial education among members.
On Second Reading, the hon. Member for Fareham (Mr. Hoban) emphasised the importance of getting the regulatory regime right for societies, citing the recent fate of the Presbyterian Mutual Society in Northern Ireland as a case in point. Indeed, the problems at the PMS have emphasised the need for societies to make absolutely clear to their members the nature of their investment. That also highlights the need for vigilance by the registrar. I understand that the administrator for the PMS is due to present his report on this sad incident, and it would therefore not be prudent for me to comment further on the matter. However, I would like to say that we all sympathise with the plight of that society and its members, and that we hope that the matter ends in a satisfactory resolution for all those affected.
The hon. Gentleman also inquired why the enabling power granted under the Industrial and Provident Societies Act 2002, allowing the Treasury to amend industrial and provident societies legislation using secondary legislation in line with any changes made to companies law, had not been utilised. I am informed by colleagues at the Treasury that there is every intention to use that power at the appropriate time. They explain that it can be exercised only to apply to industrial and provident societies a “modification” of company law—in other words, a new provision. A large number of the provisions of company law covering the areas that the Bill intends to make applicable to industrial and provident societies are not modifications or new law, and these powers cannot therefore be used in this instance.
Based on my discussions with Treasury colleagues, I can also confirm that the Government intend to consult later this year on the application and applicability of the Electronic Communications Act 2000 to credit unions and industrial and provident societies. It is important for the sector to be able to communicate electronically with its members and with statutory bodies, and I am assured that this matter will be dealt with using all the diligence and urgency that it requires.
My hon. Friend the Member for Edmonton (Mr. Love) sought reassurance that the Rochdale principles would be applied when registering industrial and provident societies. The Rochdale principles of voluntary and open membership, democratic member control, member economic participation, autonomy and independence, education, training and information, as well as co-operation among co-operatives, are already enshrined in the
International Co-operative Alliance’s statement on co-operative identity. I am not aware of any provisions in the Bill that will detract from those important central tenets.
The Bill has received all-party support, and I hope that that will continue today. On one level, it is a legal, technocratic Bill. It is about modernising, and about improving what we might call corporate governance. It is also about introducing measures for co-ops and credit unions to bring them into line with best practice in the corporate sector. We have mentioned the applicability of building society provisions for the credit unions in that regard. It might appear to be a rather dry Bill, but it comes at an important time when we are seeing a revival of interest in the principles of mutuality and co-operation. That revival is partly driven by consumers’ concern that goods should be appropriately sourced—without the use of child labour, for example—and by their increasing interest in the quality of products, given rising concerns about health and obesity, for example. The Bill is also being introduced against a backdrop of some corporate financial institutions, not least in the financial sector, having seriously let down the public. It is therefore unsurprising that we are seeing a greater interest in the co-operatives.
Following the historic great leap forward in earlier times, building societies have experienced many years of decline. Sadly, too many of the great societies were de-mutualised and most of them are now totally lost to the benefit of their communities. After that period of demutualisation—which got a lot of excited support at the time from certain segments of society—and a period during which the Co-op shop was simply not competing with the likes of Sainsbury’s and Tesco, we are now seeing a revival. I understand the problems that are affecting some of the building societies at the moment. The West Bromwich building society is a topical case in point. Nevertheless, my guess is that a lot of us are rather pleased that our savings and bank accounts are with the Co-operative bank or with one of the mutual societies, rather than with one of the private sector banks that have run into trouble.
Some interesting developments are now taking place that support my optimism about the co-operative and mutual sectors. First, the whole range of local and regional co-operative societies have at long last amalgamated into one Co-op Group. Some societies are not yet members, but 80 or 90 per cent. have amalgamated. Secondly, the Co-op Group is now taking over the Somerfield retail outlets to make it a significant player in the retail sector. Thirdly, we have seen the Co-op bank—perhaps I should declare an interest as I have been a long-term member or account holder of that bank ever since my student days—merge with the Britannia building society to form what some people are referring to as a “super mutual”. If we also add on the number of small organisations that are co-operatives—in fishing or some of the big agricultural sectors—we can identify a flourishing of this ethos of co-operation and mutuality.
Should the Bill receive support and eventually Royal Assent, and in some small way succeed in improving corporate governance and modernising such societies and credit unions, that would mean progress towards making the mutual and co-operative sector a significant one in the British economy once again. For that reason alone, the Bill will be most welcome.
10.11 am
Mr. David Heath (Somerton and Frome) (LD): I warmly congratulate the right hon. Member for Croydon, North (Malcolm Wicks) on his Bill and on the way he has conducted it through the House. We have seen a perfect example of the right approach, with him answering points that were quite properly raised by other hon. Members in earlier stages and shepherding his Bill to what I hope will be a successful conclusion today.
I do not know whether it is a proper interest, but I should declare that I am a long-standing member of the Witham Friary friendly society, one of the oldest in the country. That entitles me to attend a quinquennial dinner and, should I ever be debilitated and unable to work, to receive the princely sum of six old pence a week. I am sure that The Daily Telegraph will take a considerable interest in that extra emolument available to me if I am ever disadvantaged by illness.
I would like to point to a historical precedent in that one of my most distinguished predecessors as the Liberal MP for Frome was the author Thomas Hughes, who was a great advocate for the co-operative movement. He was the Liberal MP for Frome for only a short time, subsequently becoming Liberal MP for Rochdale, where the connection with the movement is perhaps more obvious. Our part of the world can nevertheless be said to have played its part in the development of the co-operative and mutual movement.
I shall not detain the House with a long speech. The right hon. Gentleman is absolutely right to say that the appetite for mutuality and co-operative arrangements is increasing. A few years ago I was worried, and said so at the time, when we saw the demutualisation of our great building societies. Members of all parties at the time sounded the warning bells that that was an abandonment of the principles under which those organisations had been built up, in an unholy scrabble after major capital for members and the organisations themselves, that could—and, in many cases, certainly did—end in tears. Now, however, there is a real understanding that working in a co-operative way for the common wealth is a beneficial way of organising a business. As the right hon. Gentleman said, we have certainly seen that in the agricultural sector in the selling of produce, but also in other sectors.
I thus greatly welcome further development from the bottom up of these smaller organisations in the financial sector, but they need to develop in some sort of framework—otherwise, they will be open to threats from those who have alternative motives. The right hon. Gentleman’s Bill, small as it is—he is right that this is not earth-shattering stuff; it is in some ways a technical Bill—will help to put the smaller mutual arrangements into a proper system of corporate governance and regulation. That seems to me a worthy aim, so I commend the Bill and I will encourage all my hon. Friends to support it.
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