§ 'Where a building society has more than fifty employees, one of the directors shall be an employee nominated as a respresentative of employees ("employees" representative) in accordance with the society's rules and to which Section 54 does not apply. The rules of the society may impose conditions for the re-election of the employees representative, reasons for disqualification and requisite nomination procedures. The Commission may make such transitional provisions as it considers expedient.'.—[Mr. Weetch.]
§ Brought up, and read the First time.
§ Mr. Weetch
I beg to move, That the clause be read a Second time.
The text and scope of this clause make its aims and intentions clear and straightfoward. I hope that the broad aims of the clause will be supported by the House.
The clause makes provision for at least one director on the board of directors to be elected by the employees of a building society, provided that society has more than 50 employees. We are talking about the principle of employee directors.
961 Once that principle is grasped, the rest is administrative apparatus. Thus the new clause makes separate provision for this to be done outside clause 34 which lays down the main framework for elections to boards of directors.
I should like to come to the brass tacks of the case. On many occasions hon. Members have paid tribute to the success of building societies in the cause of owner occupation and in terms of service to the public. I am certain that the Opposition will be supported by hon. Members in all parts of the House. A great deal of the success of building societies is due to the dedicated, efficient and conscientious service that their employees give to the public. Such service is to be found from the counter staff to the most senior levels of management.
The skills and enormous experience of the people who work for the building societies would be invaluable in making the societies' services more available to the public. These are the people who do the day-to-day work and take the day-to-day decisions. They come face to face with the public every day, and they have a feeling for the local communities that they serve. It would be quite in character for building societies to be warmly receptive to the basic idea of this new clause.
Building societies grew up as part of the self-help movement in Britain, and they still adhere to that principle. They are still described as mutual institutions. There was a great deal of reassurance in Committee that the building society movement, although there are changes taking place, still remains firmly part of the mutal framework of Britain. There could be no better demonstration of mutuality than the acceptance of the principle that employees should be elected to and serve the boards of directors of building societies.
It has been said that building societies are entering a rougher and more competitive world. That is certainly true. But one thing is even more certain: that when the changes come the employees of building societies will be the first to take the flak. The new clause will enable employees to face those changes with a great deal more confidence. If takeovers occur and if opposed mergers are successful, there will be redundancies and unemployment, and those things will take place in the name of rationalisation. There will be difficulties, but if employees are directly represented on boards of directors they will be more confident in being able to face those problems and protect themselves. The best way to do that is to ensure that they have a say in strategic and policy decisions at director level.
I move the new clause with some optimism but rather doubtful experience, because when I moved a similar clause on the Trustee Savings Bank Bill some years ago I lost. I hope for better luck this time. The case for the clause is strong. As I have said, building societies are mutual institutions, and I am seeking to establish a democratic and mutual principle. I have read briefs advancing the argument that there is no demand for employee participation at director level. The argument is that, because there is no demand, we ought not to do anything about it. If everything had to be created by demand, few political speeches would ever be made. The argument about demand is not one that politicians can accept.
The idea of employee directors is good in principle, and I hope that the Government will accept it. The Opposition 962 will certainly go into the Lobby in support of the clause because changes of this kind are long overdue, especially in mutual institutions. The staff of building societies have a fundamental interest in the future of their societies, and that should be recognised in the legislation. New clause 1 goes a substantial part of the way towards bringing that about. It is said that if building society employees are elected to boards of directors they will inevitably take a sectional view of the business of building societies. My answer to that is that building society employees, with their record of service to the public, are just as capable as anyone else of taking a broad rather than a sectional view.
There is great strength in this clause. I hope that the House will accept it.
§ Mr. Stephen Ross (Isle of Wight)
I support what has been so ably said by the hon. Member for Ipswich (Mr. Weetch). I am glad that the Government are paying much more attention to worker participation, profit sharing and employee share ownership. Surely the natural response to the new clause should be to accept it and agree that in future building societies should make provision for an employee director where the society directly employs more than 50 people. The arguments for that have already been advanced. We discussed it briefly in Committee, although we did not make much progress. I hope that today this proposal will be accepted, and that some thought has been given to it in the interim.
A great change is coming to all building society operations, especially housing financing. Professions, of one of which I am proud to be a member, will have to take a rather different role. Much more commerce will be involved in professions such as chartered surveying and the law. There will be greater competition. Banks and building societies will vie with one another. Building societies can now set up commercial institutions and businesses.
I entirely agree with the hon. Member for Ipswich that the employees of building societies, which may get very big—we shall have much bigger ones yet and probably very few of them—should have a firm stake in their company, with a director on the board. I hope that we shall have a positive response to the new clause. The time for such a move has long since passed.
§ 7 pm
§ Mr. Austin Mitchell
The arguments have been extremely well and ably made by my hon. Friend the Member for Ipswich (Mr. Weetch), who has taken a close and active interest in the Bill and in the principle of worker representation on the board. I remember the discussions on the Trustee Savings Banks Bill, which he mentioned.
It is important to put the principle into legislation. It is good to see the Government coming round to accepting some of the principles that we have argued for consistently, such as the ombudsman, which they have now accepted. I hope that this is another. It is right that there should be representation. Employees should have a channel of influence and the feeling of involvement that comes from it. They should be able to influence the organisation their way and advance their views. A legacy such as this has been conferred on much of West German industry, and it has worked extremely well. The form is peculiarly appropriate to building societies.
As my hon. Friend the Member for Ipswich said, the new clause would extend the principle of mutuality. There 963 has been a dramatic change in the nature of building societies from the small, intimate, almost paternalistic locally-based organisations at the beginning of the 1960s. There has been an enormous increase in the number of branches, but a rapid shrinkage in the number of building societies. Societies are now much bigger and employ far more people. There are problems of impersonality, remoteness and lack of contact which simply did not exist a couple of decades ago. In view of that change, we should provide the principle of employee representation in legislation. I should like it to be done voluntarily, but that has not happened.
As building societies are becoming much larger financial institutions, employing large numbers of people, we should provide, through legislation, a channel which will ultimately be accepted enthusiastically. I hope that the Government will accommodate themselves to the arguments. It would be rather a shame if the Minister merely played a straight bat, which the smile lingering around his face shows he might be intending to play. I hope that he will accept the force of the arguments— building society employees do.
§ Sir George Young
I have quickly removed the smile from my face, as I must advise the House not to accept the new clause. It is not that we have anything against the principle of employee involvement. We favour it and have taken several steps to encourage it, but I see no logic in applying the obligation just to building societies and not to companies and other organisations, and I am not convinced that the best way in which to promote employee involvement is to impose statutory obligations such as are suggested.
The hon. Member for Ipswich (Mr. Weetch) rightly said that one of the strengths of the building society movement is its staff. They have strong roots in the local community and are popular. They have achieved that status without the benefit of the new clause. I did not follow the hon. Gentleman's logic which led him to believe that we must now impose a statutory obligation on building societies if that high reputation and commitment are to be maintained.
We have heard no explanation of why such a requirement should be put on building societies but not on companies generally. If we make such provision, it should apply equally across the corporate sector. It is illogical to single out the building societies.
§ Mr. Austin Mitchell
The Minister has accepted exactly this principle in regard to the ombudsman. We did not make that clause extend to every other organisation. Why cannot the logic of that principle be applied here?
§ Sir George Young
There are ombudsman arrangements for other services. One of the reasons why we introduced an ombudsman service in the Bill was the feeling on both sides of the Committee that there should be a statutory ombudsman service. Such provision is unnecessary in other sectors, as there is already a voluntary service. If other parts of the private sector want to implement the ombudsman principle, the Government would be delighted and would not stand in the way of that being done. We do not accept, however, that the nature of building societies is so different from the rest of the corporate sector that we must single them out and impose on them a statutory obligation of an employee director.
§ Mr. Michael Latham (Rutland and Melton)
My hon. Friend knows that I am a vice-president of the Building Societies Association. Can he confirm that there is another matter that ought to be considered? Not everybody accepts that the best way for the interests of employees to be considered is for one of them to be on the hoard of directors. The idea is not accepted unanimously by the trades union movement, for example.
§ Sir George Young
Indeed. As I said earlier, there are two objections. The first is the somewhat narrow one that there is no reason to single out the building societies, and the second, more general one is whether, if one believes in employee involvement—which the Government do— this is the right way in which to proceed. Provisions consolidated in schedule 7 to the Companies Act 1985 require companies with more than 250 employees to report annually on the development of their arrangements for providing regular information to employees, for consulting them and for involving them in the company's affairs. Parallel provisions for building societies could be introduced by the commission's regulation-making powers. I am aware that the present chief registrar, as first commissioner, intends to recommend to the commission that similar provision should be made. Parity of treatment in that way seems entirely desirable.
The Government do not believe that imposing statutory obligations on organisations to have employee representatives is the right way forward. As my hon. Friend the Member for Rutland and Melton (Mr. Latham) said, some trade union representatives do not believe that that is the best way in which to proceed. Employees and employers should work out between them arrangements which suit them best. We want to encourage that type of co-operation rather than impose a rigid statutory obligation which may not be appropriate.
Building society employees can always put themselves up for election to the board. A retired employee of the Abbey National got himself elected to the society's board at its annual general meeting earlier this year. That is a perfectly legitimate avenue, which is open to building society employees, to secure representation on the board. The policy of encouragement will be applied as much to societies as to companies—the reporting requirement is evidence of that. For the reasons that I have given, the Government cannot support the case for the new clause.
§ Mr. Weetch
I am completely unconvinced by the Minister's reply. Although I am saddened by his answer, I am not especially surprised by it. We are meeting the same stone wall on the Floor of the House as we met in Committee.
The Opposition are not singling out building societies in this respect. By adopting this approach we did not intend to saddle all other corporate organisations with the same obligations. When I put this case, I tried to argue that building societies purport to be mutual institutions and that one of the definitions of a mutual institution is that the affairs of the society are under the control of its members at all times. We believe that new clause 1 is the most effective way to bring that to pass.
We hope that the principle of industrial democracy, which we recommend in the clause, will become more widespread as the years pass. We believe that the building societies are a good place in which to make a start to achieve that industrial democracy.
§ Question put, That the clause be read a Second time:—967
§ Question accordingly negatived.