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24 Mar 2010 : Column 81WH—continued
David Simpson:
I have a lot of respect for the hon. Lady, but that is a separate issue. The issue that was dealt with at the Hillsborough talks was policing and justice. The PMS was a totally separate issue, but I
understand the hon. Lady's concern, because her constituency, like mine, is steeped in Presbyterianism. We all want a resolution.
Dr. McCrea: Will my hon. Friend acknowledge that whenever we have had the ear of the Prime Minister, we have used the occasion effectively, and will continue to do so, to try to achieve a resolution? We will never apologise to anyone for that.
David Simpson: I agree with my hon. Friend that we should never apologise for that. Every opportunity should be used to try to achieve a resolution.
We must all play a full part in the search for a resolution, but the ultimate responsibility to help rests with Her Majesty's Government. I cannot state more strongly that the people who invested in the PMS need help, and they need it now.
10.28 am
Mr. Jeffrey M. Donaldson (Lagan Valley) (DUP): I declare an interest as a member of the Presbyterian Church in Ireland and the Banbridge Road Presbyterian church congregation, but I am not a saver in the PMS. Right hon. and hon. Members have shared the problems encountered by their constituents, and their hardships. Recently, the Minister for Social Development in Northern Ireland indicated that PMS savers who do not have access to their savings and apply for social security benefits, including tax and pension credits, would not have their savings taken into account when determining their entitlement to such benefits or tax credits until such time as the PMS matter is resolved.
When the Minister responds, will he be cognisant of the difficulties that some PMS savers face in relation to tax liabilities? I have a constituent who owes tax-capital gains tax I believe-which was to be paid from the savings that they hold with the Presbyterian mutual society. They have not had access to their savings for over a year, and I am aware of other people who owe income tax, capital gains tax and, in some cases, inheritance tax, who were planning to use their savings to pay off those liabilities. I ask the Minister and the Treasury to make Her Majesty's Revenue and Customs aware of the difficulties faced by PMS savers, and to ask for special arrangements to be put in place in circumstances where savers are unable to access their savings. In advance of a solution being found, leniency should be shown and flexibility demonstrated to allow those savers more time to pay their tax liabilities, without facing significant penalties that would only add to their distress and financial difficulties at a difficult time. I ask the Minister to take account of that issue.
Sir Nicholas Winterton (in the Chair): I thank hon. Members from Northern Ireland for being so succinct and helpful in this debate. We will now start the winding-up speeches.
10.31 am
Dr. John Pugh (Southport) (LD):
Thank you, Sir Nicholas. It is always a privilege to serve under your chairmanship, and it is always a pleasure as well. I want to pay tribute to the humanity and kindness that you have shown to many hon. Members, and to your constant good humour. I have never known you to have a bad day or look remotely miserable; perhaps the hon. Member
for Congleton (Ann Winterton) could advise me differently, but I have certainly not experienced it in the House. I also congratulate the hon. Member for South Antrim (Dr. McCrea), who introduced this important debate. Hon. Members have spoken from their personal and local experience, and I do not want to trespass on that, other than to make a few brief and general remarks.
This is a sorry state of affairs. The 10,000 members of the Presbyterian mutual society have become victims of that society. Obviously, one contributing factor to that was poor lending behaviour and unauthorised activities, which was all part of the age of profligacy, and we must acknowledge the poor decision making by executives of the PMS. However, many people who have suffered from such decision making have been bailed out, including bankers themselves. Members of the PMS are particularly unfortunate because the PMS is not a bank. It is not covered by the Financial Services Authority and therefore there has been no bail-out. There is not yet any satisfactory regulatory structure for mutual societies, although an excellent private Member's Bill, which I played some part in, is going through the Commons and will deal with that problem to some extent, although only in a retrospective way.
As with Equitable Life, there is an issue of regulatory failure. As the Treasury Committee stated, no reasonable person, and none of the members of the society, could have supposed that such errant behaviour would have been allowed. There is a feeling, which seems to be manifest in what hon. Members have said, that all the organisations that ought to have worked on behalf of members of the PMS have to some extent let them down or washed their hands of the issue. The FSA does not think that it was its responsibility to have done otherwise, and the Treasury Committee points the finger at the Department of Enterprise, Trade and Investment in Northern Ireland. It does, however, recognise that although that Department might have had the knowledge to act, it had no legal power. Furthermore, even the Department of Enterprise, Trade and Investment could not have anticipated the effect that Government guarantees to other banks would have had on the PMS, and that view has been stated by the directors of the PMS.
To members of the PMS-the sufferers in this case-it can seem that blame is a pass-the-parcel kind of affair. The PMS is faced with £20 million of assets, when the original assets were £300 million, and the organisation is in administration. Members of the PMS seem sadly caught by the semantics of the situation. They are unprotected because they are classified as investors rather than savers, and they stand at the back of the queue because, according to the courts, they are lenders and not creditors. I am sure that that is no comfort to them whatsoever as their situation is pretty grim. There are no interim payments in prospect, and they are not first in the queue for claims. There is no date for when administration must finish, and no clear idea of how it will finish-it could go on for years.
Those people are a sad casualty, but normally that would be mitigated a little by the fact that in all investment there is a hazard and a fair risk. However, the Treasury Committee made clear its view that there was no rational reason why members of the PMS should have suspected that the organisation would get into such a plight, and
there was no obvious in way in which they could have found out about it. There was a general presumption that, since the society was backed by the Presbyterian Church, the most prudential ethics would have applied.
To cut to the quick, the hon. Member for South Antrim talked about this being the time for real positive solutions. There seem to be four possible solutions. One is to rely on existing procedures such as administration and the courts in order to work a way out. However, on objective examination, it seems that the levers are simply not there to resolve the situation in a timely and effective way. Another solution that has been alluded to would be to wait for another company to step in, or for something to turn up-a kind of Mr. Micawber solution. The retrospective solution is obviously to ensure that such things never happen again, and I think that we will do that, although that is retrospective. The fourth solution, which appears to be the burden of the debate, is to call on the Government to be "innovative"-that was the word used by the hon. Gentleman-and to take some ad hoc Executive action to ameliorate the situation of the principal sufferers in these sad events.
10.36 am
Mr. Mark Hoban (Fareham) (Con): I join right hon. and hon. Members in saying what a pleasure it is to serve under your chairmanship in the last debate in Westminster Hall over which you will preside, Sir Nicholas. The hon. Member for Southport (Dr. Pugh) suggested that you have an almost permanently sunny disposition, but I remember an occasion-the final sitting of the Finance Bill 2008 Committee-when that was tested to the extreme-[Laughter.] Your laughter now is a good sign that we did not push you too far on that occasion. It is an honour to take part in the debate today.
I congratulate the hon. Member for South Antrim (Dr. McCrea) on securing the debate. This is an important matter and it is not only hon. Members from Northern Ireland who have received correspondence about it. In my role as part of the Conservative Treasury team I have received a number of letters from people in Northern Ireland who are savers with the Presbyterian mutual society. They have expressed concerns about their financial plight and are looking for a solution.
One of the points that came across strongly in all contributions made this morning is that we cannot forget the personal circumstances of those who have put money into the Presbyterian mutual society and are suffering as a consequence. Although there are legal distinctions between those who put in less than £20,000 and those who put in more, everyone is suffering hardship as a consequence of what has happened. The hon. Member for Foyle (Mark Durkan) gave an example, and the right hon. Member for Belfast, East (Mr. Robinson) made a similar point about people who have locked up significant sums of money for their long-term needs and are suffering as a consequence.
The distinction about whether someone is a shareholder, a saver or a creditor reminds us of the importance of ensuring that people are aware of their rights in the event of a financial problem. We saw that in the financial crisis more generally, and we must ensure that people are aware of the limits and guarantees of the Financial Services Compensation Scheme. When people invest or save with organisations, they should be aware of their
rights. It is the duty of those who run such organisations to ensure that their customers, members and shareholders know what their rights are in the event of a financial crisis and can take decisions about the appropriate amount of exposure to a particular entity.
As the hon. Member for Foyle said, the Treasury Committee has published its report on the Presbyterian mutual society. It raises important issues about the regulatory structure and the need to make progress in resolving the crisis facing members of the Presbyterian mutual society. It is helpful that we have present two members of the ministerial working group: the right hon. Member for Belfast, East and, of course, the Economic Secretary to the Treasury. I had hoped that we might get more of an insight into the workings of that group. The right hon. Gentleman set out four options for resolution. I hope that the Minister will go further and set out more clearly the Government's position.
The right hon. Gentleman was right to stress the urgency of resolving the issue. It is important to resolve it before the general election. People have been waiting quite some time for a proper outcome. I hope that the Minister will make some positive remarks on what the solution might be, because in the absence of that, there will be a hiatus before a new Government are formed and are able to consider the matter. However, I am sure that if the present Government do not resolve it, the Government formed after the election will deal with it as a matter of urgency to bring about some resolution.
Lady Hermon: I am most grateful to the hon. Gentleman for taking an intervention. Picking up on his last comment, let us suppose that, unfortunately, resolution is not achieved this side of the general election. I hope that it is resolved, and the right hon. Member for Belfast, East (Mr. Robinson) has given us some hope this morning that it will be, but in the event that it is not, will the hon. Gentleman explain how often he has discussed the PMS with the Leader of the Opposition and what exactly the Conservative party would do if it was returned after the general election as the Government? What would it give the PMS savers in Northern Ireland? What is its express commitment to them?
Mr. Hoban: Our commitment on the PMS is the same as our commitment on Equitable Life: if the problem is not resolved by the time of the next election, we would want to resolve it quickly. That is our obligation to the people who save with the PMS. I think that we all want to see a quick resolution to the problem. It has been hanging around too long. I hope that people will not have to wait until a new Government are formed.
Dr. McCrea: Will the hon. Gentleman give way?
Mr. Hoban: Very briefly. I want to give the Minister long enough to respond to the debate.
Dr. McCrea: Will the hon. Gentleman go further and give us a clear assurance? The Prime Minister says that there is a moral obligation to find a solution, but can we have a clear expectation that the resolution will guard the rights of those savers with savings of less than £20,000 as well as those with more than £20,000?
Mr. Hoban: The hon. Gentleman makes an important point. I said earlier that I am very conscious that those people with savings of less than £20,000 are suffering hardship as a consequence of the problem. A solution needs to involve very careful thought given to how the rights of the two groups are balanced. The pay-out that has been made already-12p in the pound-benefits those with greater savings but, as the hon. Member for Foyle pointed out, we cannot just think that those with greater savings are fat cats. A balance needs to be struck in any deal.
One concern that people rightly have is the time that it has taken to get to the present point. Last July, the Treasury announced that there would be a working group of Ministers involving the Northern Ireland Executive, the Treasury and the Secretary of State for Northern Ireland. At the time of the statement, on 17 July 2009, the working group was scheduled to report back to the Prime Minister in the autumn, but no report was published. When I checked yesterday whether anything had been published, I found that, still, nothing had been published. Here we are, eight months since the announcement, still waiting for a resolution to the problem.
The Treasury Committee was right to point out that problem. A logjam has been created. The administrator has apparently been waiting for the group to report, but the Minister of Finance and Personnel in the Northern Ireland Executive, the hon. Member for East Antrim (Sammy Wilson), said that while the administrator was
"seeking that resolution with other financial institutions, the report cannot be completed".
There appears to be a logjam, with the administrator waiting for the ministerial working group to report, and the ministerial working group waiting for the administrator to sort out what is happening. That has created a significant delay. We need to make progress.
The Treasury Committee was quite robust in its criticism. Knowing the work of the Committee well, I thought that the language it used was a mark of its unhappiness with the slow progress. In paragraph 62 of its report, it stated:
"We consider it unacceptable and farcical that both the UK Government and the Northern Ireland Executive appear to have suggested some responsibility for solutions but have failed to act."
It pointed out that the people losing from that were the members of the Presbyterian mutual society.
That is the point on which I shall conclude: people are waiting for a response. It is right for the Government to take responsibility for resolving the issue and to doing so before the general election, but let me reiterate what I said earlier. I am sure that, if the present Government do not solve the problem but leave it for their successors to deal with, their successors, whoever they are, will deal with the problem with greater urgency and expedition.
10.45 am
The Economic Secretary to the Treasury (Ian Pearson): It has always been a pleasure to serve under your chairmanship, Sir Nicholas, and it is a particular honour to be present for your valedictory performance as Chair of our proceedings.
I congratulate the hon. Member for South Antrim (Dr. McCrea) on securing this important debate and I am very grateful for the contributions made by right
hon. and hon. Members on both sides of the Chamber. It is clear that we all share a deep concern about the very difficult circumstances in which many members of the Presbyterian mutual society still find themselves. I reiterate that the Government remain greatly sympathetic about the serious financial difficulties faced by many PMS members. Personally, I want to do all that I can in my remaining time in the House of Commons to ensure that we bring matters to an acceptable conclusion.
As many hon. Members have said, it is right that we should not get into the blame game; instead, we should focus on solutions. However, it is worth taking a few moments to remind hon. Members of the factual background to the situation of the PMS, as it sheds light on some of the difficulties encountered by both the Northern Ireland Executive and ourselves in charting a way forward, and it explains some of the delay and frustration that many people who have put money into the PMS have experienced. Again, I assure PMS members that we are doing all we can to work with the Northern Ireland Executive to come up with an agreed way forward.
The PMS is an industrial and provident society, set up in 1982 to operate for the benefit of its members and the Presbyterian Church in Ireland, and registered under the Industrial and Provident Societies (Northern Ireland) Act 1969. The legislative framework for Northern Ireland industrial and provident societies is a devolved matter, falling to the Department of Enterprise, Trade and Investment of the Northern Ireland Executive. The PMS is therefore registered with DETI, although DETI's role does not include or require any regulatory oversight.
The PMS, like other industrial and provident societies in Northern Ireland, is not a deposit-taking institution. IPSs are not normally regulated by the Financial Services Authority or covered by the Financial Services Compensation Scheme. The legal situation is that investments in the PMS were in the form of withdrawable share capital-that is, those investments of up to £20,000, which I recognise are a particular concern of the hon. Member for South Antrim-and interest-bearing loans to the society. That relates to those investments of more than £20,000. The legislation imposes a £20,000 limit on the withdrawable share capital that an IPS may issue to any member, and an IPS with withdrawable share capital may not carry on banking business.
The PMS holds the same status as other IPSs in Northern Ireland and the majority of IPSs in Great Britain-they are not authorised to conduct financial services business. IPSs in Great Britain and Northern Ireland are required to apply to the Financial Services Authority for authorisation should they wish to carry out regulated activity. IPSs issuing withdrawable share capital up to the £20,000 statutory limit are exempt from the authorisation requirement for deposit-taking under the Financial Services and Markets Act 2000. IPSs that engage in mortgage lending, as the PMS did, require FSA authorisation.
As hon. Members will be aware, an FSA investigation into how the society was run concluded that the PMS
"was conducting regulated activities without the necessary authorisation or exemption."
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