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The problem was identified as an outstanding gap that needed to be addressed by the credit unions in Northern Ireland being enabled to offer a wider range of services and for them to come under FSA regulation to facilitate that. That approach was identified by the Treasury Committee not only when it visited Belfast last week, but a number of years ago; the approach was identified when the Committee produced its financial inclusion report. The role and potential of credit unions in Northern Ireland was recognised at that stage and attention was drawn to the need to enable credit unions to offer a much wider range of services. It would be perverse if credit unions in Great Britain, which have a much smaller membership base and a much smaller savings base, are facilitated to provide a much wider range of services to their members than the credit unions in Northern Ireland. The Irish League of Credit Unions is part of an all-Ireland league, and the members in Northern Ireland are jealous of not only credit unions in Great Britain, which can provide a much
wider range of services, but their counterparts in the south, which can provide even more services again, including on pensions, wills and community investment.
New clause 10 is tabled not only in my name or those of my party colleagues, but in those of the hon. Member for North Down (Lady Hermon), of the Ulster Unionist party, and of the hon. Members for East Antrim (Sammy Wilson), for Belfast, North (Mr. Dodds) and for Upper Bann (David Simpson), of the Democratic Unionist party. I can assure the House that it is supported by all the other parties in the Northern Ireland Assembly too. On an evening when there is a lot of uncertainty about the future of our devolved institutions in Northern Ireland, when all sorts of brinkmanship is going on and when many lectures will be given about what is in the true public interest and how we must be responsible and reasonable and use political processes to look after people's democratic interests and to focus on the real social and economic agenda, it would be good if this House gave a very positive signal to all the parties in Northern Ireland by supporting new clause 10.
Mr. Hoban: I followed the arguments made by the hon. Member for Foyle (Mark Durkan) closely and I liked his metaphor about the twilight zone, because the Minister and I have discussed the Presbyterian Mutual Society and just where it sits in the regulatory framework. If the hon. Member for Foyle is arguing that the same twilight zone applies to credit unions, he has an important case to make about rationalising the regulation of credit unions and putting credit unions in Northern Ireland on a common footing with those in Britain. The fact that he has been able to demonstrate cross-party support for his initiative, not just by the signatories to his new clause, but by the unanimous report from the Assembly, indicates to me that there is a consensus.
The Minister may have some more thoughts about the timetable point that the hon. Gentleman raised, but my concern relates to the separation between the registration of credit unions by DETI and the ongoing supervision and regulation by the FSA. The Minister will be more familiar with this because of his previous role, but the hon. Member for Foyle ought to bear in mind that in other circumstances the FSA acts as both the body that authorises an individual's registration of a regulated firm and ensures that they meet all the tests on being an authorised person, and the body that conducts the ongoing regulation and supervision of that institution. I am not sure how the divide that he suggested between DETI and the FSA would work in practice, although that is probably my only reservation.
Mark Durkan: Even as it stands at the minute, with the registration and regulatory functions attached to the FSA in Great Britain, they are technically two different functions carried out by separate people, albeit within one organisation. They are separate functions and the one thing that the credit unions in Northern Ireland would like is continuity in the devolved relationship. That is why people like the idea of the registration function-but only the registration function-remaining with the Department and all the regulation going to the FSA.
Mr. Hoban: Let me give the hon. Gentleman an example that we debated in Committee and will touch on later. If the regulator believes that the activities carried out by a credit union are inappropriate or in serious breach of the rules, who will withdraw the permission from the credit union? Will it be the FSA, as would be the case if it was registered with and regulated by the FSA, or will it be the Department in Northern Ireland? We need to tease out some issues if we are to make this change, and I am not sure that I understand how it would work in practice, notwithstanding the widespread support in the Assembly and among all political parties for the hon. Gentleman's proposals.
Mr. Love: I had a credit union in my constituency, which got into trouble some years ago and, sadly, went into liquidation about a year ago. During the time of its difficulties, my constituents could refer to the ombudsman to take up any concerns that they had and when the credit union went into liquidation, there was a compensation scheme. Indeed, I was a small shareholder in that credit union and received prompt compensation. It is those features of regulation by the Financial Services Authority that it is critical for us to extend to members in Northern Ireland.
As was mentioned earlier, the Treasury Committee, of which I am a member, visited Northern Ireland a week ago today. We were there primarily to look at the Presbyterian Mutual Society, but we touched on regulatory and other issues related to credit unions. The debate so far has summed up some of the ambiguities between registration and regulation. That is a feature in Northern Ireland where the local Department, DETI, is responsible for registration. In our discussions in Northern Ireland, people were at pains to point out that the law does not state as clearly as I suspect everyone would like the connection between registration and regulation. We were there to address those issues and our report will come out in the next few weeks.
On credit unions, it is important that we recognise the wider issues involved. Of course, we have to solve the problem of registration and regulation. It has been answered in the context of Great Britain because it comes within the ambit, overall, of the FSA to carry out both functions. As someone who takes an interest in this, I have to say that the FSA has been effective at regulating the diverse credit union movement in England and Wales and has, indeed, been able to ensure that depositors are protected and that the problems that have arisen are taken up. Indeed, it has sponsored bringing credit unions together when that is a more acceptable solution to the difficulties that they might otherwise get into. There are major advantages to extending such regulation of credit unions to the Northern Ireland membership.
It is particularly important, too, to remember that although credit union membership in Great Britain is very low-less than 1 per cent.-in Northern Ireland it is very significant indeed. There is a much longer history of credit union involvement in Northern Ireland and the number of members is significantly greater, yet they do not have as many protections as members in Great Britain. That needs to be remedied.
As has been mentioned, the extension of the services that credit unions can provide into some of the more basic financial services-credit cards and various other
things that have been mentioned-is critical if credit unions are to provide a 21st-century service and are to be allowed to compete with other financial service organisations. I think that I can be confident that, if that were to happen in Northern Ireland, they would be able to compete in a way that the credit union movement in Britain is not, as yet, ready to complete.
For all those reasons-to ensure that the credit unions have those protections, that we clear up this confusion, that everybody is certain that regulation is extended to credit unions, and that we extend the services that they provide so that they can build on their membership and on providing a proper service to many disadvantaged communities across Northern Ireland-I commend the new clause to the House.
Ian Pearson: May I say, first of all, that it was a privilege to serve as a Minister in the Northern Ireland Office for some two and a half years? I thoroughly enjoyed the role, and I would like people to think that I performed it in an effective and diligent manner. I am sorry if I did not always agree with my hon. Friend the Member for Foyle (Mark Durkan), but I made the best decisions, as I saw them, for the people of Northern Ireland.
My hon. Friend is right to point out the importance of the credit union movement in Northern Ireland. As he is aware, at the time of the Financial Services and Markets Act 2000, Northern Ireland credit unions opted out of the arrangements. That is why they have been exempt since 2001. I want to try to be as sympathetic and helpful to my hon. Friend as I can, but I think I need to make a few points to outline some of the difficulties with his new clause.
The new clause is intended to revoke the exemption from FSA regulation that credit unions in Northern Ireland currently enjoy. On a purely technical level, the new clause would not work as intended since it revokes provisions that amended the original FSMA exemption order rather than revoking the exemption itself.
Let me say two more things. First, the transfer of regulatory functions of Northern Ireland credit unions to the FSA is considerably more complex than the removal of paragraph 24A of the schedule to the exemption order. There would have to be changes to Northern Ireland legislation, and because the rules on Northern Ireland credit unions are different to those that govern Great Britain credit unions, there would have to be some significant changes to the FSA's handbook, too.
As my hon. Friend the Member for Foyle mentioned, issues surrounding the interaction between the registration regime, which he still wants DETI to perform, and regulation, which would be the responsibility of the FSA, would also need to be considered and resolved. He mentioned the work of the Assembly Committee and I would certainly like to pay tribute to him in his role as Chairman of that committee. It has produced a very good report. However, I am advised that the relevant Northern Ireland Department, DETI, sees no need for the proposed amendment or new clause because it intends to consult on changes to Northern Ireland credit union legislation later this year-very shortly, I understand. The policy objective of permitting Northern Ireland credit unions to offer additional services to
match those available from credit unions in Great Britain will also require amendment to several pieces of legislation in Great Britain.
I want to be sympathetic, and I appreciate the argument that says, "If you've got a bus coming along, why not jump on it? You don't know when the next one will be." However, my concern is that doing what the new clause proposes would be difficult. There has not been a statutory public consultation in Northern Ireland, even though it was always made very clear to me in my time there that such a consultation should be carried out for every significant issue. It is one thing to have an Assembly Committee-the equivalent of a Select Committee in the UK-with a consensual view on matters, but it is another thing entirely to hold a statutory public consultation before legislation is introduced.
However, if the Government were to receive from the Northern Ireland Executive a request to move forward that was fully backed by the Assembly-and if the FSA agreed that that would be appropriate, and if the Northern Ireland Executive and Assembly tabled any legislative consent motion that might be required-we would want to look at it.
There are a great many legislative intricacies when it comes to allowing the FSA to handle the proposed changes in Northern Ireland as well as in Great Britain. Despite the common agreement on the matter, my suspicion is that too much work probably remains to be done sorting out the nuts and bolts of those intricacies for the proposal to be included in this Bill, although something might be ready in time for a future Finance Bill.
As I said, I will try to be as helpful as I can. I recognise that the credit union movement in Northern Ireland strongly wants to be regulated by the FSA, and I am sure that any public consultation in Northern Ireland would demonstrate that. If there is a way to do what the new clause proposes more speedily in this Bill, we will look at it. However, I suspect that the difficulties involved mean that the process might take a little longer than my hon. Friend the Member for Foyle would like.
Mark Durkan: The Minister has said that he wants to be sympathetic and helpful, and of course that is a euphemism for "No," or "Not now." However, I want to pick up on a couple of the points that he made. He said that the Northern Ireland Executive would have to indicate its approval before any proposal could be implemented, yet the hon. Member for East Antrim (Sammy Wilson), whose name appears on the new clause, is Northern Ireland's Minister of Finance and Personnel. When he was agreeing with me and saying he wanted to support the new clause, he told me so in the company of the Minister of Enterprise, Trade and Investment, who is in the responsible Department, so there seems to be support and will at that level.
I am sure that the Minister is right to suggest that people in that Department are very conscious that putting in place the detailed arrangements-for setting out the precise interface between registration and regulation, and for ensuring that the relevant secondary legislation and other instruments are appropriate and fully in line with the legal requirements in Northern Ireland-may take some time. However, I stress that there is a compelling consensus on the need to establish, as both a principle and a fact, that the position in respect of primary
legislation has changed. That would at least give some force and pace to the need to resolve and clarify these other issues.
People have waited for this for a long time. Everyone has said they agree that the change should happen, but an element of urgency should have been added after all that we learned from the financial crisis and the other questions that arose in respect of deposit guarantee protection and so on. Yet still it appears that the proposal will get a long finger, and that we will be told to look for some other legislation that would be appropriate.
It would help if the Minister could give us a wee bit more of an indication that a signal from the Executive and the Assembly would be well received. For instance, the Assembly Committee last week again endorsed this new clause, and made a point of saying so specifically. It engaged the Department on that basis, and it has encouraged us to pursue the new clause in this debate, so there would be no question of delay in any legislative consent motion.
If we got the necessary motions through the Assembly, I hope that the Minister would be able to tell us that we were on a real mission and that we would not have to wait for a further Bill. If that were to happen, I would certainly work with colleagues, and with him, to try to take forward an issue that is a huge frustration for the many members of credit unions.
Ian Pearson: As I said, I want to be as helpful as I can. If the Government were to receive a formal notification from the Northern Ireland Executive, clearly backed by the Assembly, to the effect that it did not feel there was a need to consult, and if agreement could be reached with the FSA on the level of detail needed to enable the change to be made with confidence that the other elements could be accommodated, by all means let us have a look at it. We do not have a lot of time left, but if my hon. Friend the Member for Foyle can get those messages from the Northern Ireland Executive and Assembly back to us as a Government, we will of course try and look at them and do what we can.
Mark Durkan: I thank the Minister for that indication, which I take to be a bit more positive than what he said previously. We will try to get our skates on at our end if the Minister can continue to be accommodating and encouraging at his.
I want to make it clear that this problem is not of anybody's intentional making. It was created by people who wanted to be helpful. Mo Mowlam deliberately used the Northern Ireland Act 1988 to include the Credit Unions (Northern Ireland) Order 1985 in the scope of devolution. The order was quite restrictive in its own right, but that was what was devolved, not credit unions.
The Minister said that Northern Ireland credit unions asked to be exempted from the Financial Services and Markets Act 2000. Essentially, a sensitivity was created to the effect that it would have been encroaching on the territory of devolution for the regulatory function to reside with the FSA. People now have a different understanding of these issues, but the most important thing is that they want to know that there is a sense of urgency about this matter among all of us in government-whether that be here in this House, or in the Executive or the Assembly.
I take the Minister's remarks as a very good cue for us to move fast on this matter. We need to be firm and secure an outcome that has been long awaited, but there is more work to do and I want the matter to be taken forward later in the Bill. Accordingly, I beg to ask leave to withdraw the clause.
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