HC Deb 03 May 1971 vol 816 cc1093-100

Order for Second Reading read.

7.51 p.m.

The Financial Secretary to the Treasury (Mr. Patrick Jenkin)

I beg to move, That the Bill be now read a Second time.

I think the House will agree that this is a Measure which it would be appropriate for me to deal with briefly, but I shall be happy to answer any questions at the end of the debate.

This Bill is much the same as one which fell at the election, when it had already completed its proceedings in another place and had had an unopposed Second Reading in this House. The Bill was reintroduced by the present Administration in another place and the only significant change from that which the previous Government introduced is the addition of Clauses 5, 6 and 7, as they now are, which confer new powers on the Registrar to inspect friendly societies and, if necessary, stop them from taking new business and to give him power to petition a court to wind them up.

The background to the Bill lies in the growing difficulty of many of the smaller societies, due to declining membership and rising management costs. The answer, as in other fields, lies in their merging into larger and more viable units. However, the existing procedures for mergers and amalgamations and for undertaking the liabilities of existing societies are so cumbersome, expensive and time-consuming as to make the process extremely difficult. The primary purpose of the Bill is to provide new, simpler and cheaper procedures both for mergers and amalgamations and for dissolutions. At the same time, new safeguards for members, particularly for minorities, are ensured.

In the case of mergers, instead of having to have the positive assent of at least five-sixth of all the members by value and of everyone, member or not, entitled to benefits from a society's funds, the Bill provides that in future all that will be necessary is that the merger should be approved by three-quarters of the members who actually vote. Of course, everyone concerned must be told what is proposed, and there are rights of appeal to the Chief Registrar if the proper procedure has not been followed. In the case of dissolution, instead of, as at present, five-sixth of all members, the Bill provides that three-quarters of all members must approve.

The new Clauses, Clauses 5, 6 and 7, confer power on the Registrar to inspect societies and to petition the court for their winding up. They also give him power to require the production of documents for this purpose. I must emphasise that these powers are intended as reserve powers only, to be used in those, fortunately rare, cases where friendly societies get into financial or administrative difficulties and where the interests of the members or of the public may call for some action by the Registrar.

The Bill is the result of consultations with the friendly societies movement and has their full support. Indeed, they have been urging this reform on successive Governments for about seven years. The Government are firmly of the view that the friendly societies perform a valuable service in the community. One of my first actions when I went to the Treasury was to set on foot a study to see whether we could lift the limits on certain types of business done by friendly societies so as to give them greater scope to serve the community and encourage savings. This was done last October, and was warmly welcomed by the part of the movement affected. This Bill is another measure to remove obstacles to the societies continuing to operate successfully for the benefit of their members and the whole country, and as such I commend it to the House.

7.56 p.m.

Mr. Robert Sheldon (Ashton-under-Lyne)

I too will deal with this matter shortly, although this is a valuable Measure, which was first introduced by the last Government. I would, more as a jest than anything else, compare my own length of speaking with the speech which the Financial Secretary made in the Second Reading Committee, when he spoke for 26 minutes and perhaps did not cover ground much more relevant than that which he went over tonight.

This is a useful Bill, giving opportunities to those friendly societies which have become rather smaller than they used to be to merge and wind up, and as such we have produced a Measure which will be of benefit and might possibly give them opportunities to enter fields where they are not quite so prominent as they might be.

It is right on Second Reading that something should be said from this side about the useful work of the friendly societies—

Mr. Patrick Jenkin

The hon. Gentleman will perhaps agree that 20 of the 26 minutes I spoke in Second Reading Committee were devoted to the useful work of these societies.

Mr. Sheldon

I was not complaining about the content of the hon. Member's speech. I was only drawing the contrast between his claim to brevity on this occasion and the notable absence of brevity on the last occasion.

The friendly societies have done some useful work and continue to do this work. The purposes of the 1896 Act show some of the ways in which these societies could help the newly industrialised communities in which they were so involved. Those purposes included the relief and maintenance of their members in sickness, paying money on the birth of the child of a member or the death of a member, the relief or maintenance of a member travelling for employment, and the endowment of members' insurances of various kinds. This summary of some of the valuable work of the friendly societies shows how much a part of the local fabric they were, working as they did on behalf of local people.

The reason for the present decline in the position of the societies is that so much of the foundation which they laid so well has been embodied into the subsequent Welfare State.

We see from the report of the Chief Registrar of Friendly Societies the nature of their work and the way in which it has changed. One of the sad things to be noted is the decline in membership. At the end of 1968 we see that for the first time the number of members under the heading of "Orders and Branches" fell below under a million, but the sums involved were very substantial at over £75 million, which works out at an average of £76 a head.

The names mentioned in the Registrar's report, such as the Independent Order of Oddfellows Manchester Unity, the Ancient Order of Foresters, the Independent Order of Rechabites Salford Unity and the Order of Sheffield Unity are great names in the part of the world which I represent. Although they have an aura of the nineteenth century about them, they are still very active in the area which I represent, carrying out valuable work although, perhaps, not enjoying the prominence they once did.

We see that the branches have declined by over 5 per cent. and that membership declined by over 4 per cent. in one year. We realise the difficulties which face these branches when there is such a multiplicity of other organisations, not least the State itself, which have taken over and benefited from work done by the friendly societies themselves.

The great tribute to the friendly societies is that they led the way and showed the need which existed and provided the means of assessing that need in the local democracy under which they work. They were among the first to provide pensions and national insurance, methods of saving and of meeting the difficulties that arose during the formative period of the Industrial Revolution. We see today that they still control very large sums of money since the orders and branches, for example, have over £70 million, the centralised societies have over £250 million and the collecting societies nearly £500 million. These are very large sums indeed. Therefore, we need to concern ourselves very closely with the way in which these organisations, with rather high levels of charges for management expenses and so on, are brought into line with the smaller needs which at present have been shown possible for them.

In assessing the different needs, we see that death benefits have declined by 7 per cent, and that the other changes in regard to annuities and pensions have increased by 7½ per cent., and that accident benefits have increased also by 4½ per cent. The kind of benefits which it is still possible for them to engage in is a matter upon which they should be given every encouragement. Their great strength is that they are strongly rooted in the locality where they operate. Democracy comes in because they are involved with people in and around the area where the work is done and their work is obviously important; only part of that work could be done by the State.

I notice that the societies hold a large number of Government guaranteed securities and local authority stocks. I wonder what they feel about the situation of the Mersey Docks and Harbours Board and the trustee status of this security which was put in doubt. I hope that that was an exception and that their investments will be to the benefit of the country as well as to the benefit of themselves.

I also see that the method by which they were enabled to merge and were able to change their position required five-sixths support in value, and this was thought to put too much of an obligation on the societies in present circumstances. The situation in regard to the various localities is now changed, and the change in regard to three-quarters of those who vote is to be welcomed.

I should like to ask the hon. Gentleman one question in regard to Clause 9, which is the provision relating to fees. The hon. Gentleman put this question during the Second Reading debate in the Labour Government's term of office, and did not receive a very satisfactory answer from an hon. Friend of mine. However, having had a year in which to digest the situation, he is no doubt now fully equipped to deal with the point. I was interested in the reason for the charging of these fees. I know that this is meant, to come into line with similar kinds of fees, but I do not think that this fully gives the position as we would want to understand it.

Do the Government intend to charge the full cost of registry? This was not the case previously, and it would be interesting to know what is the situation. Has the hon. Gentleman any idea whether the scale of fees has been discussed? What are the principles of charging fees and what proportion of the total costs will be covered by the fees? I mention this matter because the present Government are much dedicated to reducing support where it is not shown to be absolutely necessary. Bearing in mind the recent hard-hearted way in which the Government have been hitting "lame ducks", it may well be thought that the friendly societies are not-too-healthy ducks, and they may be suitable for rather less beneficial treatment than we on this side of the House would wish to see.

One final point about the different dates on which the Act comes into operation. In fact, no dates are given. The answer which was given on this matter by my hon. and learned Friend the Member for Lincoln (Mr. Taverne) on the last occasion when this legislation was discussed in the House was not wholly satisfactory. I should like to ask why the dates need to be different and if I can be given any information on this matter.

I commend this valuable Measure to the House.

8.9 p.m.

Mr. Patrick Jenkin

I am grateful for the welcome given to the Bill by the hon. Member for Ashton-under-Lyne (Mr. Sheldon). I very much enjoyed hearing the hon. Gentleman with his own local knowledge of a part of the country where the friendly societies have flourished in the past. I was pleased to hear his assertion of the continuing importance of these societies, which I believe is absolutely right. Although, as he said, the Welfare State has now taken over the liabilities which the friendly societies were orginally formed to provide, the fact is that they still play an extremely important part in the lives of millions of people. The total value of their assets at present is about £800 million and, by any standards, they represent an important facet of our national life.

The hon. Gentleman asked two questions, one about the fees to be charged and the other as to why the different parts of the Bill have to come in at different times. On the matter of fees, it has never been the policy of the Registry to seek to recover the whole of the costs involved in this part of its work. Indeed, the percentage in past years has been about 7 per cent. of the total cost of the registry met by fees. However, as the hon. Gentleman acknowledged, what has happened in the past is not necessarily any clear indication of what ought to happen in future.

The purpose of Clause 9 is to extend the power to charge fees to all friendly societies—a power which hitherto has existed only in respect of the specially authorised societies like the National Deposit Friendly Society, the Hearts of Oak Friendly Society, and so on.

They have always paid fees, but none of the other friendly societies has done so. This is now rather ridiculous, remembering that one category of friendly society, which is perhaps not always recognised as such, is comprised of working men's clubs, with which hon. Members who represent constituencies in the North may be more familiar than those who represent constituencies in the South-East.

Many of these clubs are now immensely profitable and successful undertakings and spend large sums hiring topflight entertainers. It seems ridiculous that they should not be expected to pay reasonable fees for the services which they get from the Registrar by way of registration and so on.

It is the intention of the Registrar to consult the various bodies in the friendly societies movement with a view to determining a level of fees appropriate for that particular kind of society for which fees should be charged. We believe it right that the fees should keep pace not only with the movement of inflation but with, as it were, the market being able to bear a fee which bears a closer relationship with the costs that are actually incurred.

It is certainly not the intention to go anywhere near paying for the whole of the cost of the registry. That would be both unreasonable and impossible. However, that a larger proportion of the costs should be borne by fees from the societies which benefit from the services is something which we can and should pursue, and, as I said, it is the intention of the Registrar to consult with those concerned.

The answer to the hon. Gentleman's second question about the Measure coming into force in part on different dates is that this is designed to give the greatest measure of flexibility and opportunity for consultation with the different interests involved. These interests are quite extraordinarily diverse, as even this short debate has indicated. It is because we want greater opportunity to make sure that the Measure is applied to the different categories of friendly society at a time and in a manner most appropriate for them that it is appropriate for different parts of the Bill to come into force on different dates.

It would, I suppose, be possible to make it all come into force at the same time, but the advice I have received and accepted is that this would not allow for sufficient flexibility. It is clear that the Bill, as it stands, is likely to be more appropriate.

Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).