§ Question again proposed, That the clause be read a Second time.
§ 3.53 p.m.
§ Mr. Powell
I take it, Mr. Deputy Speaker, that it is your wish that we should proceed with the debate.
I gather that the hon. Member for Brent, South (Mr. Pavitt) had concluded his remarks upon new clause 4. Perhaps I may say that I hope that the hon. and learned Member for Dover and Deal (Mr. Rees) is right in his assumption that the new clause limits, in the way in which he suggested, the scope of the subscriptions for social, cultural or charitable purposes. Perhaps the right hon. Gentleman the Minister of State could confirm that when he replies to the debate.
I raised two matters with the right hon. Gentleman in Committee, and this is perhaps the appropriate occasion on which to deal with them. Considerable anxiety has been expressed by certain credit unions as to whether the provisions for the accumulation of reserves, in the Bill as it stands and as it will stand with the new clause, are fully adequate in the case of a credit union which might be in very weak financial circumstances and not making appreciable profits. I am obliged to the right hon. Gentleman for a letter which he wrote to me on this subject, and for the renewed consideration that he has given to it. His view, with which I would be inclined to concur, is that it is not really desirable either to elaborate unduly the provision for the formation of a reserve or to give the chief registrar special discretionary powers in relation to the reserves.
However, I think that perhaps the solution may lie, as the right hon. Gentleman suggests, in proper insurance by credit unions against bad debts and other threats to their viability. That is covered by a later amendment. I hope, therefore, that the credit unions which have expressed anxiety in connection with the 878 accumulation of reserves will study what is proposed in the context of compulsory insurance. They may well come to the view that that is the way in which to deal with the risk about which they were concerned.
The other matter relates to assets. The valuation of assets of the credit unions will be necessary in order to comply with the terms of the new clause. Certainly the principal assets, in this sense, of credit unions will be their premises. But that very fact means that from year to year there may be considerable variations, I suspect mostly upwards, in the current valuation of the assets of credit unions. The consequence of revaluation, if substantial, either upwards or downwards, would be to operate automatically upon the provisions for the reserve either to make the reserve inadequate or, what is more likely, to make the reserve excessive and consequently invoke the provisions for the reduction of a reserve to the maximum of 20 per cent., specified in the clause.
This would seem to present difficulties, but the right hon. Gentleman has suggested to me that it would be possible for the excess value of revalued assets to be treated separately in the accounts of credit unions by way of the formation of a revaluation reserve. I am sorry, especially in present circumstances, to be putting the point to the right hon. Gentleman. I understand the difficulties of our keeping full attention. I wonder if the right hon. Gentleman would confirm that it will be within the terms of the Bill, as amended, for a separate revaluation reserve to be maintained by a credit union and thus for the fluctuation upwards and downwards of the reserve requirements, in consequence of the change in the value of assets, to be avoided or at any rate palliated.
§ Mr. Denzil Davies
I think I can give the right hon. Gentleman the assurances he wishes. There will be no objection to have a special revaluation reserve. I take the point that he made in Committee. It is important, but there will be no objection to having that special reserve which would eliminate the fluctuation from year to year of the assets, because the assets are basic to the question of what reserve the credit union should maintain. I accept that entirely.
879 The new clause meets to some extent the Committee point regarding the inter relationship between clause 13 and clause 1. As far as amendments Nos. 4, 5 and 17 are concerned—
§ Mr. Powell
I apologise for interrupting. One has been slightly distracted. I take it that in his reply the right hon. Gentleman will be good enough to refer, in connection with subsection (6) of this clause, to the query I raised earlier regarding the purpose of the admissible funding instead of direct payment of sums by way of share interest. It was a point which was raised on a previous new clause. If he could refer to subsection (6) it would be helpful.
§ Mr. Davies
Yes, I will deal with subsection (6) in a moment. I take the right hon. Gentleman's point. The clause itself is an attempt to resolve the difficulty between the original clause 13 and clause 1. Subsection (6) makes it clear that a credit union can, if it wishes, carry forward some of its profits from one year to spend in another—for example, to smooth the flow of dividends from year to year. It also makes it clear that the annual general meeting can, if it wishes, set aside a certain amount for social, cultural and charitable purposes, without specifying to the last penny how this amount is to be spent.
These are simply enabling provisions to allow credit unions to do ordinary and sensible things if they wish. We have tabled them only because the rules about distribution in the present clause 13 (3) and the new subsection (3) could otherwise be taken to mean that everything which is to be distributed must be distributed at once and that the AGM must decide every last detail of that.
I do not know whether that meets the point of the right hon. Member for Down, South (Mr. Powell), but if it does not I shall certainly look at the matter to try to clarify it further.
§ It being Four o'clock, the debate stood adjourned.