Westminster Hall
Wednesday 24 March 2010
[Sir Nicholas Winterton in the Chair]
Presbyterian Mutual Society
Motion made, and Question proposed, That the sitting be now adjourned.-(Helen Jones.)
9.30 am
Sir Nicholas Winterton (in the Chair): This is the last time that I shall chair a Westminster Hall sitting in my House of Commons career. I say to the hon. Gentlemen and hon. Lady from Northern Ireland that it is not inappropriate that I should be chairing a debate relating to the province of Ulster and Northern Ireland. I call Rev. Dr. William McCrea to address the Chamber.
Dr. William McCrea (South Antrim) (DUP): Sir Nicholas, I count it an honour to sit under your chairmanship today. I thank you for the courtesy you have shown to my hon. Friends over the years. I wish you well in your retirement and thank you for your superb chairmanship and leadership. Thank you for calling me to open what I trust will be a profitable debate on a subject that touches the hearts of many of my constituents.
I welcome the opportunity to open this timely debate on an issue that needs to be resolved to the satisfaction of all of the people involved. I ought to start by painting a backcloth to what is an injurious situation that affects the lives of many ordinary people and their families. The Presbyterian mutual society is an industrial and provident society with about 10,000 members. Its aims are
"to promote thrift among its members by the accumulation of their savings; to use and manage such savings for the mutual benefit of members; to create a source of credit for the benefit of its members at a fair and reasonable rate of interest; to procure or provide legal, accountancy, consultancy or secretarial services and advice to members towards assisting them in the establishment, improvement or expansion of their business or financial affairs and generally to undertake all or anything expedient for the accomplishing or incident or conducive to or consequential upon the attainment of all or any of the objects including the acquisition of property and any rights or interest therein."
Membership of the society was obtained by the purchase of shares. The maximum shareholding was £20,000. Members who wanted to place more money with the society could do so by making loans to it. A dividend was paid on shares and those who made loans received interest. The society grew rapidly, with its assets rising by more than 12 times from £24 million in 2002 to £309 million in 2008. It made significant advances for buy-to-let properties, and development and agricultural land.
It is clear from the rules of the PMS that it was intended to be a thrift institution, as it aimed
"to promote thrift among its members by the accumulation of their savings".
That the PMS was accepted for registration with that rule indicates that it was acknowledged by the authorities to be a thrift institution. PMS savers who put in their money as shares had every reason to believe that they
were in the same position as those in credit unions, who likewise deposit their money in the form of shares and are none the less recognised by Government as savers.
PMS members are certainly not shareholders in the ordinary sense of the term. The shares did not derive their value from being traded and were withdrawable at any time at their original value. The value of the shareholding did not determine the voting power of the member; all were equal. As the recent court case indicated, shareholders could turn themselves into creditors at the stroke of a pen by applying to withdraw their shares. As the Treasury Committee report of February put it,
"it is understandable that PMS members considered them as analogous to deposits in a building society".
In the light of that, I cannot understand how the Treasury can justify regarding the members as akin to equity-style shareholders.
Like so many things in life, all went well until circumstances outside the control of the PMS took centre stage. As a result of the collapse of the Icelandic banks, the Government effectively guaranteed all deposits in conventional banks. Although that had a stabilising effect on the wider financial system, it prompted many PMS members to move their money from the society. In the first three weeks of October 2008, the PMS responded to many members' requests for withdrawals, which reduced the balance of the PMS current account from £25 million to just £4 million.
On 25 October 2008, the board met and decided that no further payments should be made to members until it had been professionally advised on the liquidity of the society. By the time of a subsequent meeting on 6 November, a further £50 million worth of requests had been made and three members had announced their intention to commence legal proceedings for the recovery of their investments. Faced with that problem, the priority of the board became asset protection and it was resolved to place the society into administration to achieve that.
Legislation was passed quickly in Northern Ireland by my colleague Arlene Foster, the Minister of Enterprise, Trade and Investment in Northern Ireland. That news was welcomed at the time because it protected the assets of the society and prevented a fire sale that would have resulted in many small savers not getting back any of their invested money.
Bob Spink (Castle Point) (Ind): On the Iceland situation, does the hon. Gentleman agree that, whatever the technical legal position, which we will hear from the Government Front Bench, it is ironic that Government action to help savers in Icelandic banks helped to precipitate the problems in the PMS and caused its members to suffer? Although the Government may make a technical argument for not treating PMS members and Icelandic savers equally, they are real people who depend on their savings. Does he agree that whoever forms the next Government should treat those Irish savers and savers in the Icelandic banks equally?
Dr. McCrea:
I agree wholeheartedly with the hon. Gentleman's sentiments. It is correct that, whatever technical point the Minister may come up with to get out of doing what should be done, it will not rest easy with people in Northern Ireland. Should there be a Government of a different complexion after the election,
I hope that they will consider the matter seriously and prove themselves faithful to the people of Northern Ireland.
Mr. Nigel Dodds (Belfast, North) (DUP): I congratulate my hon. Friend on securing this important debate. He mentioned that the Presbyterian mutual society was allowed to go into administration as a result of action taken by Arlene Foster, the Minister of Enterprise, Trade and Investment in Northern Ireland. As the then Minister of Finance, I was part of a meeting between devolved Ministers and the PMS. Is not the swiftness with which action was taken in the Northern Ireland Assembly an illustration of the benefits of devolution to Northern Ireland, which allows local politicians to respond with flexibility, imagination and rapidity to crises that arise in the affairs of the people of Northern Ireland?
Dr. McCrea: I agree wholeheartedly with my hon. Friend. I will touch on some of his points as my speech develops.
There is little merit in apportioning blame for the PMS's difficulties. Last month, on 18 February, the Treasury Committee, chaired by the right hon. Member for West Dunbartonshire (John McFall), published a report entitled, "The failure of the Presbyterian Mutual Society". Although I welcome the fact that the report highlighted the fact that many people are still suffering, I feel that it entered the territory of who was to blame for the crisis, without finding any solutions. The questions posed when the Chair spoke at Stormont might have added to the debate and, indeed, such finger pointing might have momentarily given a grain of comfort to those who are hurting most. However, the report was disappointing, because it contributed nothing in terms of the real positive solutions that are necessary. That is exactly what I want this debate to touch on today: the positive solutions.
During this morning's debate, I will not be distracted by a blame-game attitude. I will strain every muscle to focus every effort on seeking a quick and genuine resolution to the issue. We must all vigorously pursue such a resolution, so that we can alleviate the distress and hardship that are genuinely being experienced by these savers, many of whom have been caught in the valley of despair. Many ordinary PMS savers are asking how we have got into this situation, and it can be rightly acknowledged that many factors were at play, including the downturn in the property market and the instability of the UK's established financial institutions.
Again, I stress that we need to find a solution for those people who have been affected by the difficulties, rather than simply blaming those at fault. I have no doubt whatsoever that the matter of who is to blame will be a challenge for another day, but it is not something to be considered now. We must recognise the impact that the crisis is having on thousands of savers who lodged money in the PMS. We, as politicians in Northern Ireland, have received hundreds of letters from distressed savers who cannot afford to pay the fees of old peoples' homes, their children's university tuition fees or the tax bills incurred by selling off property and lodging money in the society until they purchased their new home.
Lady Hermon (North Down) (UUP): It is, of course, delightful and regrettable that this will be the last time I will serve under your chairmanship, Sir Nicholas. The hon. Gentleman will be well aware that in North Down I, too, have many Presbyterian savers with the PMS. I am a Presbyterian, but I am not a saver with the PMS. My constituents, like his constituents, were looking forward to a positive outcome from the Prime Minister's working group that was set up on 17 July 2009. A Treasury report states that the group was set up with the expectation that it would
"report back to the Prime Minister in the autumn."
To my knowledge, no such report has appeared. My constituents and the savers in Presbyterian churches not just up and down North Down but throughout Northern Ireland are greatly disappointed with the attitude of the Prime Minister and the Government, who I am sure the hon. Gentleman would agree have a moral obligation to support PMS savers. Will he perhaps enlighten hon. Members as to why no report was forthcoming last autumn?
Dr. McCrea: I thank the hon. Lady for her intervention. We will have to wait for the later part of the debate to find out why the report has not been forthcoming. However, I want to develop that matter a little further and I will touch on it again in my remarks.
Many of the people I have been speaking about put their life savings into the PMS because they were assured that the society was safe and honest. They were also assured that it would help the furtherance of God's work and, of course, that they would get a return on their money. Comforting expressions of concern and sympathy will not suffice in dealing with this crisis; we must actively engage with the Government to reach a solution that will allow pensioners, families and ordinary citizens to have access to their hard-earned money. The crisis is impacting not only on families, but on many Presbyterian Church congregations throughout Northern Ireland, who had money saved to build new church halls and so on. The Presbyterian Church plays a vital role in civic society by organising after-school clubs, old age pensioner groups, youth groups and so on. Many of those groups must now endure financial hardship.
Only yesterday, the administrator of the PMS announced that people who have more than £20,000 in the society will get a payout of 12p for every pound they had in the PMS. That is the first payout since the PMS went into administration in November 2008, and although it will provide a crumb of comfort for those who have more than £20,000 in the society, it will do absolutely nothing to comfort those who have less than £20,000. Many of those people are hurting most.
Mr. Gregory Campbell (East Londonderry) (DUP): I congratulate my hon. Friend on obtaining the debate. He is touching on a critical point. Although all the savers are obviously hurting because of what has happened over the past 17 months, many senior citizens had up to £20,000 in the PMS. They are totally dependent on that money for the remainder of their lives and many were going to use the relatively small sums of money that they had for their funeral costs. We need to try to assist those people as well as the others.
Dr. McCrea:
I wholeheartedly agree and thank my hon. Friend for his intervention. I have major concerns that yesterday's announcement will only put many of
the smaller savers into deeper despair. Unfortunately, in February this year, the High Court in Belfast made a ruling that investors with less than £20,000 could not be considered creditors of the PMS and therefore could not share the £20 million of income that the society has generated since it went into administration. We need Government action to resolve the issue, so that all who placed money in the PMS-both small and large savers-can get their money back.
I am not suggesting that nothing has been happening to take the issue forward. I know that the First and Deputy First Ministers have had meetings with the Prime Minister and Treasury officials on several occasions. In addition, my hon. Friend the Member for East Antrim (Sammy Wilson), the Minister for Finance and Personnel in the devolved Administration, and Mrs. Arlene Foster, the Minister of Enterprise, Trade and Investment, have been actively engaged in these negotiations. I pay special tribute to them for that. However, the bottom line is that my constituents are still without their much needed money-indeed, the point made by my hon. Friend the Member for East Londonderry (Mr. Campbell) showed how much that money is needed and how people are hurting.
Some people have been credited with talking a good talk on the issue, and have gleefully pointed the finger at others while stating that others have all the responsibility to resolve the matter. However, we all carry a responsibility to use our best efforts to bring about a solution. The Moderator-and, indeed, the past Moderator-of the Presbyterian Church in Northern Ireland can confirm that I, as the Chief Whip of the Democratic Unionist party, have hosted with my right hon. and hon. Friends a number of meetings to discuss the in-depth issues that are pressing their congregational members. Indeed, I have made a further request with the Prime Minister's office for a meeting with the moderator.
In June 2009, the Government set up a ministerial working group to deal with the issue. The group comprised the Chief Secretary to the Treasury, the Economic Secretary to the Treasury, the Secretary of State for Northern Ireland, the Northern Ireland Minister for Finance and Personnel, the Northern Ireland Minister of Enterprise, Trade and Investment and the First and Deputy First Ministers of Northern Ireland. Much work has been done and continues to be done behind the scenes to find a satisfactory resolution to the matter for those who have lost money through the PMS. However, it is vital-indeed, imperative-that the Government here in Westminster, together with the local Administration in Northern Ireland, redouble those efforts and work to find a resolution to the problem.
Savers with the PMS have waited too long; they need assistance from the Government on the matter. We have already seen our Government help to protect the interests of those who have money saved in the Icelandic banks. Is it too much to ask for the Government to help savers who have money saved in Northern Ireland? The PMS is not simply a Northern Ireland issue any more than Dunfermline was simply a Scottish issue. Only a UK solution is fair and equitable.
One might well ask what the rationale was for what is believed to be the Treasury view that the Northern Ireland Executive and the Presbyterian Church should contribute to a hardship fund. That is only necessary because the Government have failed to treat PMS members
like other savers in other failed financial institutions. Why were the Scottish Executive not required to contribute to the rescue of the failed institutions within their jurisdiction? I am sure that the Treasury is aware that the only resources available to the Presbyterian Church are those contributed every Sunday by the people in the pews. Is it not wholly unfair that the community that has been directly hit by the failures of the PMS should be required to pay in part for the rescue?
The PMS was a completely autonomous institution over which the Church had no control, and its failure was a local manifestation of a general failure of the UK financial sector. Do the Government realise the huge sense of injustice and unfairness that the handling of the PMS issue has generated? We are talking about thrifty, decent and hard-working people who had every reason to believe that they were ordinary savers. They believe that they have been singled out for discriminatory treatment by the Government, who have shown little regard for the dire consequences of what they have failed to do. My constituents genuinely feel that the Government have not seriously addressed the arguments put forward in support of their case by the PMS lobby group.
The reality of the situation is that for eight months after the PMS collapsed, London displayed a lack of interest. Although I appreciate that the ministerial working group and supporting officials have been working closely with the administrator to seek a commercial resolution to the winding-up of the PMS and are considering other alternatives to assist PMS savers before reporting to the Prime Minister when they conclude their deliberations, the savers are the only ones in the UK who have been denied access to their savings during the most severe period of the recession.
In the Minister's opinion, is the idea of facilitating a commercial solution still a viable and practical option that is being followed seriously? I have been asked whether a commercial solution for the PMS would be facilitated if, as was done in some other cases, the riskiest assets were removed for separate, bad bank-style treatment. Did the Treasury consider such a move and feature it in any discussion with the financial sector? If not, is that not another example of the lack of innovative thinking in tackling the matter, compared with the resourcefulness and urgency shown in the rescue of other failed financial institutions?
It is also fair to say that as recently as 3 March the Secretary of State for Northern Ireland told the Northern Ireland Affairs Committee that a commercial solution was the best solution. What role has the Treasury, which is the lead Department for the financial sector, played in seeking to interest a bank in absorbing the PMS assets and liabilities? How many meetings did the Treasury have with the financial sector on the PMS and what kind of support did it offer? Perhaps the answers to those questions would give concrete evidence of the significant action taken by the Treasury and the Westminster Government.
Perhaps I should also touch on the question of culpability. Reference is sometimes made to the culpability of the PMS for the misfortune of its members, but the same could be said of other failed institutions and the culpability of their boards, managements, advisers and auditors. The crucial point that I want to make in response is that none of the savers in any of those institutions was
allowed to suffer as a result. The Government's declared aim throughout was to protect the innocent victims of the economic and financial crisis. Surely their treatment of the PMS savers must stand out in sharp contrast as the exception. Indeed, the Government go even further and find the PMS savers themselves culpable for not appreciating, as the Government continue to assert, that they were not savers at all, but investors. I resolutely challenge that contention.
I appreciate that many other Members want to speak in this important debate, but before concluding I will ask the Economic Secretary a further question. Does he subscribe to the view expressed by a Treasury official to a visiting delegation that a major reason for the PMS not being treated in the same way as other failed financial institutions was that, unlike them, it posed no systemic risk to the economy? In other words, the others were too big to be allowed to fail, whereas 10,000 savers in Northern Ireland are expendable. Does he not agree that that is a shameful and deeply offensive comment that fully justifies the suspicion that the Government never intended to include PMS savers within their boast that
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