§ '.—(1) In ascertaining the profit or loss resulting from the operations of a credit union during any year of account all operating expenses in that year shall be taken into account (including payments of interest) and provision shall be made for depreciation of assets, for tax liabilities and for bad and doubtful debts, but no provision shall be made in respect of amounts to be paid by way of dividend.
§ (2) A credit union shall out of its profits from year to year establish and maintain a general reserve as follows—
- (a) if at the end of any year of account the amount standing to general reserve before any transfer under this subsection is less than ten per cent, of total assets, the credit
871 union shall transfer to general reserve not less than twenty per cent, of its profits for that year or such lesser sum as is required to bring the general reserve up to ten per cent, of total assets;
- (b) if at the end of any year of account the amount standing to general reserve before any transfer under this subsection is more than twenty per cent, of total assets, the crdeit union shall transfer to the revenue account and treat as revenue for that year a sum not less than that required to reduce the general reserve to twenty per cent, of total assets;
- (c) subject to paragraphs (a) and (b) above a credit union may at the end of any year of account—
- (i) transfer to general reserve from the profits of that year, or
- (ii) transfer from general reserve to the revenue account and treat as revenue for that year, such sums as the credit union may in general meeting determine, provided that the general reserve is not thereby reduced to less than ten per cent, or increased to more than twenty per cent, of total assets.
§ (3) Not less than ninety per cent, of the amount available for distribution in respect of any year of account that is to say, the profit of that year reduced or increased by any trans fer to or from general reserve in accordance With subsection (2) above, shall be applied in such one or more of the following ways as the credit union shall in general meeting deter mine—
- (a) subject to subsection (4) below, in the payment to members of dividends on the amount of their paid-up shares;
- (b) as a rebate of interest paid by or due from members who have received loans from the credit union, such rebate being propor tional to the interest paid by or due from such members during that year of account; and
- (c) subject to subsection (5) below, for social, cultural or charitable purposes.
§ (4) The dividend payable on any shares of a credit union shall not exceed a rate of six per cent, per annum or such other rate as may from time to time be specified by order made by the chief registrar with the consent of the Treasury.
§ (5) No part of the amount available for dis tribution in respect of any year of account shall be applied by a credit union for the purposes mentioned in subsection (3)(c) above unless a dividend of not less than three per cent, per annum is paid for that year on all paid-up shares of the credit union; and the total sum applied for those purposes out of the amount available for distribution in respect of any year of account shall not exceed ten per cent, of that amount.
§ (6) Where in accordance with subsection (3) above a credit union in general meeting deter mines that an amount shall be applied in any of the ways mentioned in paragraphs (a) to (c) of that subsection, that amount may, unless the determination is that it be distributed or ex pended forthwith, be so applied by being 872 appropriated to a fund to be distributed or expended from time to time or at some future date; and where in accordance with that subsection a credit union in general meeting determines that an amount shall be applied for a purpose falling within paragraph (c) of that subsection, that amount may, unless the determination is that it be expended in some specific manner, be expended for that purpose at the discretion of the committee.
§ (7) Nothing in this section applies to income arising from, or to expenses incurred by a credit union in operating, such a trust fund as is referred to in section 8(3) of this Act.'—[Mr. Denzil Davies.]
§ Brought up, and read the First time.
§ (a), as an amendment to the proposed new clause, in subsection (4) leave out 'six' and insert 'eight'.
§ No. 4, in clause 5, page 5, line 11, leave out "£3,000" and insert "£2,000".
§ No. 5, in page 5, line 15, leave out "£3,000" and insert "£2,000".
§ Government amendment No, 16.
§ No. 17, in page 7, line 20, leave out "six" and insert "eight".
§ Government amendment No. 22.
No. 23, in page 11, line 31 leave out "cultural" and insert
or cultural purpose for which prior consent in writing of the chief registrar has been obtained".
§ No. 24, in page 11, line 32, after "or", insert "any".
§ Mr. Davies
The clause replaces the existing clause 13. There was some discussion in Committee about clause 13, and doubts were expressed about the efficacy of the drafting. We found that there was a good case for amending practically every subsection of the clause to make clarifications or remove ambiguities, so we decided that it would be best to rewrite the whole clause.
The old subsection (1) has been removed since the hon. Member for Brain-tree (Mr. Newton) pointed out that it could be taken to enable a credit union to apply its funds outside its objects as defined in clause 1. Clearly that would not make sense. We have made several changes of terminology in the new clause and have made more explicit some points which 873 were only implicit before. There are no changes of principle. In effect, it means that clause 13 is made subject to clause 1, so that anything done under clause 13 has to conform with the objects as set out in clause 1.
§ Mr. Peter Rees
There were certainly considerable reservations on our side of the Committee about the original clause 13. It was for that reason that I and my hon. Friends put down amendments dealing with the ultimate application of a credit union's surpluses. They did not prove acceptable to the majority of the Committee, but my hon. Friends and I felt it right to come back to this point, which is why we have put down amendment No. 23. It is designed to limit the social or cultural purposes to which a credit union can apply its surpluses. We felt that the terms "social" and "cultural"were so wide that they gave the managing committee of a credit union almost unlimited scope for the application of its funds.
The keen eye of my hon. Friend the Member for Braintree (Mr. Newton) detected that, possibly, under the original clause 13 such applications would be subject to the overriding requirement that they should be within the objects of a credit union as set out in clause 1. But there was an area of ambiguity there, and I am therefore grateful to the Minister for having responded to the doubts expressed from our side of the Committee.
Amendment No. 23 was put down before new clause 4 appeared on the Order Paper. I think that new clause 4 meets our objection. By implication, at any rate, it emphasises that any applications for social or cultural purposes, whatever those very wide terms may mean, must be within the general objects of a credit union. If they are subject to that restriction, the limitation that we propose in the amendment, which is that the application should be subject to approval by the registrar, will not prove necessary.
On amendment (a), we would certainly feel that a greater degree of flexibility should be given to a credit union and that it should be able to make distribution of up to 8 per cent. We thought that 6 per cent, was unduly restrictive, but we believe that the increased figure should be coupled with the limitation that a person should be able to deposit only 874 £2,000 with a credit union. That would balance that relief. That would mean, to use the words of my hon. Friend the Member for Braintree, that depositors could not exploit credit unions by depositing considerable sums on which they would receive tax-free interest.
The Opposition consider that a fair balance would be struck if the amendments were accepted. I hope that the Minister will accede to them. We do not wish to press amendment No. 23 to a Division.
§ Mr. Pavitt
I rise to talk briefly on amendment (a) and amendments Nos. 4 and 5 that were tabled by my hon. Friend the Member for Farnworth (Mr. Roper). I feel that I am a poor substitute for my hon. Friend as he is more or less the progenitor of the Bill. When he first entered the House he began to promote similar Bills.
I am more than grateful to be called to speak after the hon. and learned Member for Dover and Deal (Mr. Rees). I intended to speak briefly on two short amendments, and the hon. and learned Gentleman has said precisely what I want to say about amendments (a) and Nos. 4 and 5.
The hon. and learned Gentleman has explained that as there is a limit on dividend it is essential to attract more and more depositors to join credit unions. They perform a worthy service in offering credit and encouraging thrift. When the Bill reaches the statute book, we hope that there will be a growth of credit unions. Amendments Nos. 4 and 5 seek to facilitate that growth.
I have a constituency interest. One of the first credit unions started in my constituency. For about three years one in nine of immigrants from the Caribbean came to live in Willesden. They brought with them a number of qualities, especially the Shrine Credit Union. It was one of the first credit unions and it will be profoundly affected by the Bill.
In spite of the general pressures of a consumer society and advertising, there is a great need to return to savings, to credit and stability of the family income. Amendment (a) is designed to encourage people to adopt that approach to money management within the family budget. The Shrine Credit Union, which has been operating for a number of years in my 875 constituency, has already made fantastic strides in that direction.
I hope that the House will accept amendment (a). As a counterbalancing factor, I hope that amendments Nos. 4 and 5 will be accepted. I hope, Mr. Deputy Speaker, that you will allow a vote to be taken on the three amendments.
§ Mr. Norman St. John-Stevas (Chelmsford)
On a point of order, Mr. Deputy Speaker. As you will know, Mr. Deputy Speaker, there has been an explosion on the premises and somebody has been injured. We do not know whether it is a Member who has been injured. The work of the House should continue, but should it not be considered whether a Minister should make a statement or whether the sitting, which will shortly be suspended, should be suspended now?
§ Mr. Denzil Davies
I agree with and endorse what the hon. Gentleman has said. Clearly there is a serious situation in the precincts of the House. If you were minded, Mr. Deputy Speaker, I should endorse the suggestion that the sitting be suspended because of the seriousness of the situation.
Mr. Deputy Speaker
The Chair is aware that there has been an accident within the precincts of the Palace of Westminster. The Serjeant at Arms, officials and others are busy investigating it. If it is the wish of the House that the House should suspend temporarily, I am prepared to agree to that course. I suspend the proceedings for 15 minutes.
§ 3.30 p.m.
§ Sitting suspended.876
§ 3.50 p.m.
§ On resuming—