Draft Co-operative and Community Benefit Societies and Credit Unions Act 2010 (Consequential Amendments) Regulations 2014
The Committee consisted of the following Members:
Binley, Mr Brian (Northampton South) (Con)
† Bruce, Fiona (Congleton) (Con)
† Cryer, John (Leyton and Wanstead) (Lab)
† Dakin, Nic (Scunthorpe) (Lab)
† Evans, Jonathan (Cardiff North) (Con)
† Hemming, John (Birmingham, Yardley) (LD)
Hendrick, Mark (Preston) (Lab/Co-op)
† Jamieson, Cathy (Kilmarnock and Loudoun) (Lab/Co-op)
† Jones, Mr Marcus (Nuneaton) (Con)
† Leadsom, Andrea (Economic Secretary to the Treasury)
McDonagh, Siobhain (Mitcham and Morden) (Lab)
† McFadden, Mr Pat (Wolverhampton South East) (Lab)
† Murray, Sheryll (South East Cornwall) (Con)
Pearce, Teresa (Erith and Thamesmead) (Lab)
† Percy, Andrew (Brigg and Goole) (Con)
† Rudd, Amber (Hastings and Rye) (Con)
† Russell, Sir Bob (Colchester) (LD)
Wilson, Sammy (East Antrim) (DUP)
John-Paul Flaherty, Committee Clerk
† attended the Committee
Thirteenth Delegated Legislation Committee
Thursday 3 July 2014
[Mr Joe Benton in the Chair]
Draft Co-operative and Community Benefit Societies and Credit Unions Act 2010 (Consequential Amendments) Regulations 2014
11.30 am
The Economic Secretary to the Treasury (Andrea Leadsom): I beg to move,
That the Committee has considered the Draft Co-operative and Community Benefit Societies and Credit Unions Act 2010 (Consequential Amendments) Regulations 2014.
It is a pleasure to serve under your chairmanship, Mr Benton. With your permission, I shall refer to the regulations before the Committee as the consequential amendments regulations; otherwise I shall get very tongue-tied.
This is the first draft statutory instrument that I have moved in Committee, in my new role, and I am pleased to do so. As many hon. Members will know, the Government are in the process of delivering a number of changes to improve legislation for registered societies in Great Britain. Co-operatives, community benefit societies and credit unions are all included within that term.
The statutory instrument relates to an important aspect of the changes, and was requested by the sector, which believes that it is a vital step towards helping them to modernise and engage better with current and future members. It is a further demonstration of the Government’s commitment to supporting mutuality.
There are about 6,000 co-operative societies registered in Great Britain. Member numbers are growing as the sector continues to provide a popular and successful structure for mutually-run businesses. Co-operatives and community benefit societies are a diverse group of businesses found throughout Great Britain, and covering a vast range of activities and industries. Some have many hundreds of members, and are large employers. Others have just a handful of members.
The Government have already made a number of changes to legislation on mutuals, which came into force in April. Those included a package of measures taken forward following a public consultation by the Treasury last year. The measures included increasing the amount of withdrawable share capital that an individual can invest in a society from £20,000 to £100,000, making it much easier and cheaper for societies to raise capital; giving the Financial Conduct Authority additional powers to investigate a society suspected of unlawful or improper behaviour; making insolvency rescue procedures available to societies that previously would have had no alternative to being wound up; and simplifying electronic registration for new societies.
In addition, the Government brought forward the Co-operative and Community Benefit Societies Act 2014, which was announced by the Prime Minister in January 2012 and is due to come into force in August. That Act
is a consolidation, which brings together and modernises the existing legislation on co-operatives, and it was requested by the sector.The objective of the consequential amendments regulations is to make the necessary changes in secondary legislation to enable new industrial and provident societies in Great Britain to register as either co-operative or community benefit societies. That change was requested by the sector to modernise the language that is used to describe societies, and make the terminology more relevant to members and the general public.
The regulations will make amendments to secondary legislation, consequential upon the commencement of section 1 of the Co-operative and Community Benefit Societies and Credit Unions Act 2010, as re-enacted in the 2014 Act. The section lays down new registration requirements for societies in Great Britain other than credit unions. That means that from 1 August in Great Britain new industrial and provident societies other than credit unions will be registered either as co-operative societies or as community benefit societies.
The reason for the change is that the expression “industrial and provident society” is now widely perceived by industry stakeholders as old-fashioned. The new descriptions will mean more to the public and members, and are considered by the sector to be more appropriate and up to date. Existing industrial and provident societies in Great Britain will also be able to choose to change the description under which they are registered. These new registration requirements, together with a number of other industrial and provident society reforms, were subject to a public consultation, “Review of the GB cooperative and credit union legislation”, carried out by the previous Government in 2007. The proposals received the support of the sector.
Jonathan Evans (Cardiff North) (Con): I think from what my hon. Friend is outlining that new organisations will be registered under the new description, as community benefit societies, and will not use the “industrial and provident society” term. The choice will be available to existing companies; in fact, there are 8,053 companies registered with the FCA—slightly more than the 6,000 her officials told her that there were. If they want to keep the term “industrial and provident society”, will they have the choice and not be obliged to move to the new terminology?
Andrea Leadsom: Yes, as I understand it, that is correct. They will have the choice; they will be able to choose to change the description under which they are registered.
We are pleased to bring these changes into effect, as part of the wider package of measures under way during this Parliament to strengthen and support the mutual sector. New societies that register under one of the new terms will not face any additional costs. Existing societies that choose to amend their description may incur minimal costs, for example, to replace stationery or to amend website information. The sector has, however, indicated that any costs incurred as a result of registering under the new name will be offset by having names that mean more to the public and to members.
I hope I have assured the Committee that this statutory instrument further demonstrates the Government’s commitment to the mutual sector. The changes being brought about have already received widespread agreement and I trust that hon. Members will share in that support.
11.37 am
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op): First of all, I want to ensure that I mention my interests at this point, specifically in relation to my history of involvement in the co-operative movement. May I also take the opportunity to welcome the Minister? She pointed out that it is her first outing in one of these Committees. She has made a splendid start and on this occasion we will of course support these measures. Although we may not always have quite such a consensual exchange across some of these Committees, it is important to make it clear that we support these measures.
It is also important to recognise that the measures being put in place are those that the sector—the co-operative movement and Co-operatives UK—have been arguing for for some time. The Minister was also gracious enough to recognise that some of that work dated back to the previous Government, under whom some of the consultation was originally undertaken. As the Minister outlined, some of the changes will ensure that the organisations—co-operatives and community benefit societies—can register and will also clarify the role of the FCA in relation to those organisations. There may well be issues for another day about the FCA’s wider powers in relation to the credit union movement, but they are not for today’s debate—I say that as a marker.
I want to recognise, as the Minister did, the vast number of different organisations that operate as co-operatives. Over the many years that I have been involved in the movement, I have seen everything from agriculture to the retail sector, child care, credit unions, financial organisations, and, importantly, football, through the supporters’ trust movement. It shows, as the Minister recognised, that many things have changed with the 21st-century approach to co-operatives, and many more people are getting involved. It is quite a change from the days when the first co-operatives were set up. Apologies to anyone who believes that that was in Rochdale; it was of course in my own constituency, in the small village of Fenwick in Kilmarnock and Loudoun, that the first co-operative organisation started up. I can bore for Scotland, and indeed for the UK, on that particular subject, but on seeing the beady eye of the Chair, I will not do that now.
I recognise the fact that the Government have on this occasion—O that they would do so on others—taken account of the comments that were made in response to the consultation and changed their position in relation to various issues. I am not sure whether the Minister is entirely responsible for that or whether it was her predecessors, but I want to recognise that. The Government decided to go ahead with the measure on the withdrawal of share capital, which was argued for and very much wanted by the sector. There were also issues around the insolvency rescue procedures for industrial and provident societies, but the Government decided to make some changes and not to go ahead with some of the measures in relation to credit unions. I am sure we will return to that in future.
As I have mentioned, the Government decided to proceed with the FCA, but decided not to proceed with some of the other issues, particularly with regard to the inspection of registered members to prevent what was described as vexatious use of the register by disaffected members. Again, I am sure we will come back to that in due course if other problems are identified. The
Government have decided to proceed with allowing the industrial and provident societies to submit electronic copies of the registration documents to the FCA, which was also welcomed.I want to ask the Minister a couple of questions. She mentioned this, and it was in the explanatory notes, but I was struck by the fact that the Government say they are taking these measures to help promote the mutual sector. Given that the Minister is relatively new in post, has she had any time to think about other measures to support mutuals, particularly in the financial services sector, although not exclusively so? Does she consider there is a need to look at further consolidation around legislation relating to co-operatives and the industrial and provident societies—that wider mutual sector?
Does the Minister have any views on support for the credit union movement and our ideas for a levy on the payday loan sector and the funding to be raised to assist and support that particular part of the mutual sector through the credit union movement? Is she able to respond to that? However, as I said, we are not against the measures being introduced today. They have been argued for by the co-operative movement and others in the sector, and are indeed welcome.
11.43 am
Sir Bob Russell (Colchester) (LD): I will certainly support the proposals before us today. I declare myself as having been a practising co-operator all my adult life. I am a former director, elected by members of the Colchester and East Essex Co-operative Society, now merged with Ipswich and Norwich to form the East of England Co-operative Society. I want to stress that, because the Co-op image has been tarnished by the Co-operative Group and the Co-op Bank. As we have heard, there are thousands of co-operative societies and community benefit societies—mutuals that are not part of the Co-operative Group. It is important to stress that. The Co-operative Group has damaged the whole ethos and concept of co-operation.
I also want to stress that the East of England Co-operative Society is independent of the Co-operative Group. It is successful. Its profits and its sales are going up. It still pays a dividend to its members, and it has actually generated additional jobs. So the ethos of the co-operative movement of the 19th
century is as relevant in the 21st
century as it was in its formative years. Indeed, at a recent advice bureau, a building operative—that is the best way to describe him—came to see me because he and colleagues want to form a co-operative. There is an electrician, a plumber, a plasterer and so on and he feels that the way forward for himself and his colleagues is to form a co-operative society, or mutual or community benefit society. It is important that that is understood. Credit unions are another way for people of modest and not so modest means to come together for mutual benefit. I am a member of the Colchester credit union and we—the Government and Opposition—should do more to promote credit unions. Some of us were promoting them long before the Archbishop of Canterbury was.
I urge the Co-operative Group to embrace people of all political persuasions and none. I will end on that, but the message is there; the co-operative ideal is for everybody, not just the Labour party.
11.46 am
Mr Pat McFadden (Wolverhampton South East) (Lab): I welcome the Minister to her post; I am sure she will do a great job.
I agree with what has just been said. We have talked about regulations that affect either 6,000 or 8,000 organisations, depending on how they are defined. Does the Minister agree that neither politicians nor regulators should judge the co-operative movement, in the widest sense, on the basis of the troubles that have been seen in the Co-op bank over the last year or two? We all know there have been plenty of troubles, but it is important to stress that while they have been very real and very damaging, as we have just heard, they should not define in either the public or the Government’s mind the value of the co-operative movement in the UK as a whole.
11.47 am
Andrea Leadsom: I am grateful for all hon. Members’ contributions and important points have been made. First, I congratulate the hon. Member for Kilmarnock and Loudoun on representing the birthplace of co-operatives in the UK. I was not aware of that and it is most appropriate for today’s discussion. In answer to her question on what more the Government can do to support credit unions, she may be aware that we put out a call for evidence last week and I spoke at the annual general meeting of the all-party group on credit unions. Representatives of the Association of British Credit Unions Ltd and of Lloyds bank were present, congratulating it on its 50th anniversary. On that day we launched a call for evidence on what the sector and the public at large think should be done to support the credit union movement. We will be interested to see what that throws up and I am sure there will be more that we can do. It will be great to hear the hon. Lady welcome further measures to support the credit union movement. I look forward to working with her on that.
The hon. Lady asked what further consolidation might be under consideration. We are in discussion with the Law Commission on what might be realistic and achievable. Again, I will be delighted to talk to her about that in the future.
The hon. Lady also asked what the Government are doing right now to support mutuals. I mentioned in my initial remarks the increase in the cap on withdrawable share capital, allowing troubled societies to enter insolvency rescue proceedings and giving the FCA additional powers. I will add that from 1 April this year the Government increased the cap on the maximum amount of interest that a credit union can charge on loans from 2% to 3% a month. That is to enable credit unions to make more small short-term loans to their members without making a loss on them, which the sector was keen to see. She will know that the Department for Work and Pensions is making a contribution of up to £38 million to credit unions, conditional on their meeting a number of agreed milestones for collaboration, modernisation and expansion. Our specific aim is to support the credit union sector to provide sustainable financial services for up to 1 million additional people. The contract for delivering that project was awarded to ABCUL.
Recently the Government made changes to building society legislation through the Financial Services (Banking Reform) Bill to allow building societies to compete on a more level playing field with banks. I therefore hope that the hon. Member for Kilmarnock and Loudoun will feel that the Government are interested and aware of the need to do everything we can to support a diverse range of financial services and co-operative societies.
Sir Bob Russell: Where does the Government’s localism agenda fit in if there is to be national funding of credit unions? The one in my constituency is independent.
Andrea Leadsom: I am grateful. My hon. Friend has given me the opportunity to say that I visited my own Northamptonshire credit union just last Friday. I asked the people there about how they will access some of the support. It is an independent credit union, as I am sure my hon. Friend’s is. They were clear that they are able to bid for specific bits of money for specific things. In their case, it was to try to improve their website and electronic offering. In other places, it might be to have a shop front, for example. I hope that my hon. Friend feels reassured by that.
In response to my hon. Friend’s point about the damage done by the Co-operative bank’s problems in recent months and what that may have done to the reputation of the industry—the right hon. Member for Wolverhampton South East was also looking for reassurance that our enthusiasm for the co-operative movement would not be harmed by what has happened to the Co-operative bank—I reassure him that the Government are committed to promoting mutuals. The Co-operative bank itself is not a mutual, but a joint stock company. As such, it is not affected by changes in co-operative legislation. Members of the Co-op Group, which is a co-operative, have voted to make changes that aim to strengthen its business and safeguard its future. The Government certainly hope that the group’s plans will be successful.
Cathy Jamieson: I thank the Minister for putting some of the clarification on the record. In response to a point made earlier by the hon. Member for Colchester, will she also put it on the record that Co-operatives UK and the Co-operative Group are non-political organisations and completely separate from the Co-operative party, which is a political party? It is important to recognise the difference.
Andrea Leadsom: Yes. The hon. Lady has made the point for me. That is recognised.
On whether the Co-op bank’s difficulties have harmed the co-operative movement, there are more than 8,000 co-operatives in the UK, the vast majority of which are being run well. My notes say that there are around 6,000 co-operatives, but my hon. Friend the Member for Colchester said that there are more than 8,000. Obviously a little bit of alignment needs to be done, but I will give him the benefit of the doubt; I am sure he is right. The co-operative model continues to provide a popular and successful structure for mutually run businesses.
In conclusion, I thank all right hon. and hon. Members for their contributions today. The Government want to see well functioning and sustainable mutuals, including
co-operatives and community benefit societies that are able to meet the needs of their growing numbers of members, both now and in the future. However, regulation must place manageable burdens on firms, be proportionate, and be tailored to the risks presented in the market. I believe that the statutory instrument before us is a necessary stage in the work under way to deliver the legislative improvements that have been requested by the industry. I therefore ask the Committee to join me in support of the statutory instrument before us.