HC Deb 19 April 2002 vol 383 cc844-52

Amendment made: No. 5, in line 5, leave out from "company;" to "and" in line 7.—[Mr. Gareth R. Thomas.]

Order for Third Reading read.

11.56 am
Mr. Gareth R. Thomas

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

The Bill emerges from Report significantly improved and achieves two things: first, it places co-operatives registered under the industrial and provident societies legislation in the same position as building societies by ensuring that on that most crucial decision whether or not to convert to a company, there is substantial democratic participation. Members can still change the structure of their organisation, but only on a 50 per cent. turnout and the 75 per cent. vote in favour which was already provided for in law, mirroring the existing provision in building society law.

Secondly, the Bill permits the use of statutory instruments when company law is changed in future to assimilate industrial and provident society law with company law, to deal with the discrepancies on, for example, insolvency procedures, capacity rules, accounts and audit and other aspects of corporate governance which meant that industrial and provident society legal form lagged considerably behind that of the company model and the friendly society and the building society model.

Although that can happen only when changes to company law are enacted, following our deliberations in Committee and in the Chamber today, it is possible for any part of the industrial and provident societies legislation from 1965 to 1978 to be changed, except those parts that are central to the nature of industrial and provident societies or to facilitating the processes that they carry out.

It is important that the co-operative and social enterprise sector is allowed to develop freely and that artificial obstacles such as the lack of a modern legal form are not put in its way. The uneven playing field with companies in the areas that I mentioned and the difference from building societies and other mutuals on demutualisation were serious problems, which have exercised members of the co-operative movement for a considerable time.

The Bill, although modest, allows both issues to be resolved, and should play a small but important role in encouraging the use of industrial and provident societies, so facilitating the development of co-operatives and of businesses with community benefit aims. That can only benefit our economy and the development of communities that are both enterprising and caring.

I pay particular tribute to the sponsoring bodies that I consulted and with which I worked to bring the Bill to its present stage: WI Country Markets, the Committee of Registered Clubs, the Village Retail Services Association, the Rugby Football Union, the Welsh Rugby Union, the United Kingdom Co-operative Council and the Co-operative Union. They have all been extremely helpful and positive about the Bill and I welcome that.

During the Bill's passage, a number of issues have been raised that still need to be resolved, of which asset lock-in, which we were discussing only a short time ago, is a key one, as is the issue of fees for registration, which I hope will be sorted out shortly.

On the eve of the private Member's ballot in July last year, a former Minister said to me in passing that hon. Members who were lucky enough to secure a private Member's Bill opportunity tended to become obsessive about the process. Hon. Members will recognise that I am the exception to that rule, but nevertheless I have at times come close to being obsessed and I am grateful for the considerable support that I have had in avoiding falling into that trap from parliamentary colleagues, particularly members of the co-op group.

I am grateful for the support that the Bill has had at all stages from Treasury Ministers, and the helpful advice that we have received from their officials. When I heard that the hon. Member for Christchurch (Mr. Chope) was to lead for the Opposition, being aware of his two-hour speech on the High Hedges Bill, I did not immediately feel delight, but I am grateful to him for the way in which he has engaged with me and with the issues, and we have a better Bill as a result of those cross-party discussions. I am also grateful for the contributions of the hon. Member for Twickenham (Dr. Cable) who leads for the Liberal Democrats for approaching the Bill in the same spirit.

I am grateful, too, for the support from the co-operative movement. The Bill puts in place a number of provisions for which that movement has long campaigned to have included in legislation. In particular, I am lucky enough to chair the Co-op party and I pay tribute to its members who have been assiduous in lobbying Members of Parliament on the Bill. I also pay tribute to its staff who have been extremely helpful during the Bill's passage.

I pay tribute to three people in particular who have worked closely with me on the Bill. Mr. Ian Snaith, the guru of co-operative law, passed me a great tome on industrial and provident society legislation to read on the beach during the summer. I am extremely grateful to him for his support and advice, but he will understand when I say that I will be delighted never to have to look at that particular tome again.

I also pay tribute to Mr. Cliff Mills from Cobbetts, the lawyer who has worked closely with me on the Bill. He has almost convinced me of the worth of the lawyers as a profession, but not quite. He has been extremely kind, generous and supportive and without his advice the Bill would not have reached this stage.

Finally, I pay tribute to my friend the general secretary of the Co-op party, Peter Hunt, who has been an extremely loyal supporter during the Bill's passage. However, in saying those words, just in case lightning should strike twice when the private Member's Bill ballot is drawn next year, I warn him that I will not be in a position to meet him.

I am grateful for the support of hon. Members in making the time to be here on Friday. I know how difficult that can be on occasion. I hope that the House agrees that the Bill has been significantly improved and is worthy of a Third Reading so that it can be passed to the other place for consideration.

12.4 pm

Mr. Greg Knight

I am disappointed that what could have been a great Bill is only a fair Bill following the defeat of new clause 3. The Paymaster General needs to appreciate the great debt of gratitude that she owes to her Whips Office, because during discussions inside and outside the Chamber on the Bill several Labour Members have told me that they supported new clause 3 but had been advised not to vote for it. Therefore, I warn her that if the issue is not satisfactorily resolved, it will return.

I congratulate the hon. Member for Harrow, West (Mr. Thomas) on steering the Bill this far. A private Member's Bill is a fragile vessel indeed and he has done well to reach Third Reading. I wish him the best of luck in his forthcoming meeting with the FSA. I hope that he will relate the growing concern in all parts of the House on the issue of fees and that his meeting will ultimately help to resolve that outstanding matter.

Mr. Thomas

I invite the right hon. Gentleman to speak to me after today's proceedings and to take part in that meeting.

Mr. Knight

I respond in the spirit in which the hon. Gentleman made the offer. I shall speak to him when our proceedings have concluded. I wish the Bill well.

12.6 pm

Mr. Love

I warmly welcome the Bill and I congratulate my hon. Friend the Member for Harrow, West (Mr. Thomas), not least on maintaining a sense of humour throughout the proceedings up to Third Reading.

It is well to remind the House that the industrial and provident society sector consists of something approaching 9,000 different societies with total assets of around £61 billion. It is a substantial sector of the economy. Perhaps even more important than that are the sector's unique structures, which can be summed up as an attempt, through constitutional means, to combine the efficiency necessary to survive in a competitive environment with the need for community involvement and, in many cases, democratic accountability. That is no mean feat.

We have an enormous diversity of organisation. We all know the tremendous work done by the housing associations, not only in building houses, which is their primary function, but, if one considers how they have evolved during the past five years, in becoming increasingly involved in community issues with regard to poverty and deprivation. That is a step that I welcome. We also have the old retail shops, agricultural co-operatives and, as many hon. Members have said, there are the different clubs, ranging from Conservative clubs through to trades and labour clubs. That is perhaps the only way in which the two sides come together, which attests to the diversity and warm fellowship within the movement.

I want to comment briefly on two important issues.

Linda Gilroy (Plymouth, Sutton)

Does my hon. Friend agree that, having listed the existing mutual models that will be grateful for the Bill, new generations of social entrepreneurs will also be grateful as they develop new and lasting models based on the Bill?

Mr. Love

I wholeheartedly agree with my hon. Friend, not least because, in the mutual movement, we tend to look back, and it is most important that we look forward. I hope that the Bill is a contribution to that. This is the first legislation on industrial and provident societies for 30-odd years. There have been numerous Companies Acts during that period, so a Bill that provides for updating industrial and provident society legislation without the need for primary legislation, is a welcome measure. Industrial and provident societies face hurdles. They do not have a level playing field with their company competitors, but the Bill will help to create one.

In the past 15 years, demutualisation of societies has been seen as the honest and correct thing to do, as there have been windfall benefits for everyone and no down side. The Bill recognises that that is not the case. More importantly, it exposes what has happened as a result of demutualisation. The original clause 1—it may be clause 2 under the revised numbering—recognises that we must create a level playing field for industrial and provident societies, otherwise they, like other mutuals in the financial services sector such as building societies and mutual insurers, will be overtaken by events, as has happened in years past. The debate about whether organisations should demutualise was overtaken by the question of how much money individual members would receive, regardless or whether such a move was to the benefit of the society.

Almost all the arguments used by the managements of the organisations that demutualised are now either bankrupt or do not apply. There is concern that some of those organisations, having demutualised, will now be gobbled up by other financial services companies or banks, and will no longer be able to offer the services that they provided when they were mutuals.

We must try to create a more level playing field for industrial and provident societies. The court case involving the Co-operative Wholesale Society shows the need to do that. Two of its most senior executives have been found guilty and will be sentenced in the near future. That is an object lesson for us all, and shows what can happen inside large organisations with significant assets that many people would like to get their hands on.

I strongly welcome the Bill, because it moves towards a level playing field for industrial and provident societies. We need to take further steps, and my hon. Friend the Member for Harrow, West listed some of them. This is a most welcome measure, and I commend it to the House.

12.13 pm
Mr. Butterfill

I endorse the warm welcome that the hon. Member for Edmonton (Mr. Love) has just given to this excellent Bill. I share the regret of my right hon. Friend the Member for East Yorkshire (Mr. Knight) that we have not adequately tackled the issue of charging by the Financial Services Authority. I hope that the proposed meetings will bear fruit, because the will of both sides of the House has been clearly expressed.

I also understand why the Paymaster General felt unable to accept amendment No. 7, which was tabled by the hon. Member for Edmonton. That was a little disappointing, but there is clearly a need to consult further. I hope that that consultation will lead to a successful conclusion on the important issues that were raised in that amendment.

Having said that, I think that this is a worthwhile Bill. It has been clear from the debate that much of the important fabric of our society is represented by industrial and provident societies. Without their activities, our communities would be deeply impoverished. The strengthening of those societies through this legislation was long overdue. I join in the congratulations given to the hon. Member for Harrow, West (Mr. Thomas) on bringing this measure before the House.

12.15 pm
Mr. Edward Davey

I apologise on behalf of my hon. Friend the Member for Twickenham (Dr. Cable), who has been forced to leave me in charge of the Third Reading speech for the Liberal Democrats. He has given me some speaking notes, and I am delighted to echo his support and that of my party for this welcome measure. I pass on his congratulations to the hon. Member for Harrow, West (Mr. Thomas) on bringing it forward and on steering it through the House so well. I had a visit from his hon. Friend the Member for Harrow, East (Mr. McNulty) and, given the number of other Bills on the Order Paper, I assure the House that I shall keep my remarks brief.

I also believe that mutuals play a strong and important role for many of our constituents. They play an active role in making our communities that much richer, so it is important to bring the legislation that applies to them up to date.

Many people in the House and outside believe that this sector can play a much larger role in future. The many social entrepreneurs that are around and many people working in the public service and the private sector want this model adopted by their organisations—either existing or new ones. The Bill is welcome because it brings the law up to date and provides a mechanism for the legislation to be updated more frequently and more easily.

My hon. Friend the Member for Twickenham believes that the limitation that the Bill puts on carpetbaggers by ensuring that a democratic process applies to industrial and provident societies is an important step forward. I agree with him and with the hon. Member for Edmonton (Mr. Love) that more work needs to be done on entrenching the assets in these organisations. I was pleased to hear from the Paymaster General that the performance and innovation unit is actively considering that issue, and that consultation will take place in due course.

I am pleased that the fairly new social enterprise unit in the Department of Trade and Industry is contributing to that work, and is examining not only new ways of reforming industrial and provident society legislation, but new artificial identities that could be developed in the framework of industrial and provident society or company law.

We could go back to that creative stage in the Victorian era when new artificial identities were established to ensure that the economic and social objectives of society could be met by legal entities. We commend the Government on that work, and encourage them to go further.

I end by again congratulating the hon. Member for Harrow, West on his Bill.

12.18 pm
Mr. Dennis Turner

My remarks will be brief as time is limited. Our thanks to my hon. Friend the Member for Harrow, West (Mr. Thomas) have already been put on record, but it would be remiss of us not to mention that his conduct and approach to the Bill since its inception have been admirable. On behalf of Co-operative MPs—I declare an interest as a member of that group—I express our appreciation of the way that my hon. Friend has approached the Bill. He thanked legions of people in his contribution, so it is appropriate for us to thank him for giving his private Member's slot to this extremely important Bill.

For several years, the co-operative movement wanted to introduce such a measure, but we always found that parliamentary and Government time were taken up with so many pressing issues for our country that there was no opportunity to initiate modernising legislation for our co-operative enterprises and societies. An opportunity has been presented through the good offices of my hon. Friend in giving us this private Member's Bill. The measure is moving towards the statute book and hon. Members have told us of the benefits that it will bring.

I want to comment briefly on the remarks of the right hon. Member for East Yorkshire (Mr. Knight) and the hon. Member for Bournemouth, West (Mr. Butterfill) about the difficulties for clubs in respect of fees. The comments of the Paymaster General show that there is an anomaly that must be addressed and resolved, but it would have been unfair for that to impact on the Bill. We know that there must be serious discussion of the problem of the FSA and fees, and I am grateful to the Paymaster General for telling us that she is prepared to listen further to our arguments and to resolve the problem.

The matter must be resolved. The present situation is unjust for co-operative societies, as well as for working men's clubs, Labour clubs, Liberal clubs and Conservative clubs—thousands of clubs throughout the country with thousands and thousands of members. They feel disadvantaged and badly treated by a decision that was not originally theirs. They did not choose to move away from the Registrar of Friendly Societies; it was the result of legislation passed in this place. As a consequence, the societies were harshly treated as regards the fees that they have to pay. The FSA has said that it will do its best to reduce the fees, but the anomaly will remain. I urge colleagues vigorously to pursue the matter with Ministers so that we can find a solution.

I remind the hon. Member for Christchurch (Mr. Chope) that I described the Second Reading as a happy parliamentary occasion; there was unanimity as to the desirability of the benefits that would flow to many thousands of people. We have also seen that today.

Before the introduction of the Bill, we shared the views of that wonderful philosopher Omar Khayyam. He said:

  • "Ah love! could thou and I with Fate conspire
  • To grasp this sorry Scheme of Things entire,
  • Would not we shatter it to bits…and then
  • Re-mould it nearer to the Heart's Desire!"
That is what we have done today. We have remoulded the Bill nearer to our heart's desire and that of many thousands of people. We should give thanks for having been able to do that.

12.23 pm
Mr. Chope

The final part of the contribution of the hon. Member for Wolverhampton, South-East (Mr. Turner) must have been the result of his drinking from one of those bottles of special real ale with which he was presented by the Campaign for Real Ale—

Mr. Turner

Not this morning.

Mr. Chope

The hon. Gentleman referred to the fact that the promoter of the Bill, the hon. Member for Harrow, West (Mr. Thomas), had dealt with it admirably. I would like to add that the hon. Gentleman has done so in an exemplary fashion. Indeed, if other Members who introduce private Member's Bills use his experience and follow his example, they will do extremely well. He realised that in order to get a private Member's Bill on to the statute book, one must be clear about one's objectives; one must be prepared to listen to points of view from both sides of the House; and one must conduct oneself with good humour and keep in touch with people who have expressed an interest in the subject. He has done all those things. From the moment at Second Reading when I first expressed misgivings about clauses 2 and 3, he went out of his way to try to accommodate my concerns.

I am only sorry that now, at Third Reading, the Bill completely lacks the content of the original clause 2, because although I had reservations about it—as did the Government—the clause could probably have been amended to make it acceptable if work had been done on it earlier. I share the frustration that the hon. Gentleman must feel that although, having managed to secure his place in the ballot, he chose and identified his piece of legislation very early, Treasury officials did not get to grips with the detail of the Bill until the eleventh hour. If more thought had been put into it earlier, we might have been able to progress clause 2. The hon. Gentleman also understood the concerns that were expressed about clause 3; as a result, the latest version is a great improvement on the original.

I hope that the hon. Member for Wolverhampton, South-East and others will not rue the day that they chose not to support my right hon. Friend the Member for East Yorkshire (Mr. Knight) in his new clause 3, which would have produced a better Bill. Their decision is understandable if—as might be the case—they were threatened that if the Bill was amended in that way it would not receive Government support at Third Reading, but let us hope that Labour Back Benchers' faith in their Government will be fulfilled and that there will be a significant reduction in the fees that clubs and industrial and provident societies are charged. I have my doubts about that, but time will tell whether I and my right hon. Friend the Member for East Yorkshire are right or whether Labour Members were right to put their trust in the Government.

I congratulate the hon. Member for Harrow, West on the Bill. I and my party support its Third Reading and hope that it passes through the other place without significant—or perhaps any—amendment, because if it is amended, it may encounter difficulties in terms of time in the House and fail to reach the statute book.

12.27 pm
Dawn Primarolo

I echo the comments made by the hon. Member for Christchurch (Mr. Chope) congratulating my hon. Friend the Member for Harrow, West (Mr. Thomas) on th,2 excellent and dedicated way in which he has guided the Bill through the House.

The quality of debate on Second Reading, in Committee and in the Chamber today has been high. That shows that at last, after a very long time—stretching back beyond even the stewardship of the Labour Government—we are on the verge of fulfilling the desire of the industrial and provident societies to reform themselves and update their legislation. The House has recognised the significant part that industrial and provident societies play in the wider mutual sector and how much positive will there is among Members of Parliament to ensure that we maximise the benefits that those societies can offer to their members.

There are currently just under 10,000 industrial and provident societies in the United Kingdom, with assets totalling over £60 billion They, with other classes of mutuals in the United Kingdom—building societies, friendly societies and credit unions—form a distinct and important part of the economy, and the Government believe that mutuals of all kinds should have an opportunity to develop and play an important role in offering consumers choice and innovative services. The mutual advantage—not having external shareholders to satisfy, so that organisations can concentrate on providing goods and services for their members and for the wider community—makes mutuality a distinct and potentially very useful alternative model for business, as hon. Members have said. We believe that mutuality has a great deal to contribute, now and in the future, offering particular benefits to individual members and to the communities in which they are based. It is because we recognise the value and potential of mutual societies that we have recently been involved in several initiatives to help them maximise the benefits that they can offer to their members.

I realise that some people are disappointed that changes made during the Bill's passage through the House make it less ambitious than they would have preferred, but it is important that there should be time to consult and to consider its detail. Despite that disappointment, and in addition to recognising the hard work of my hon. Friend the Member for Harrow, West, those who supported and advised him, and the Treasury officials who have stood ready at all times to give the advice that they are required and able to give—private Member's Bills are dealt with in a different way from other Bills—we should not underestimate what the Bill will achieve in its current form.

A more robust demutualisation procedure should bring more confidence in, and strength to, the society form. The ability to update industrial and provident society legislation through secondary legislation will ensure that the legal framework for societies need never fall further behind the framework applying to companies. Over time, the Bill's provisions will have a much more profound effect. They will allow industrial and provident legislation to catch up in areas deemed appropriate, thereby helping to create a genuinely level playing field with companies and across the mutual sector.

During the Bill's passage, we considered several other provisions that are not current features of it. Although, for differing reasons, it has not been possible to accept them, the debates and the analysis undertaken have served a useful purpose. For example, we have been able to explore areas in which the movement might benefit from an updating of its legislation. We have also examined the issues surrounding asset "lock-in" and why it may be advantageous to certain parts of the movement, and what issues need further consideration. We have discussed at length fees, the relationship of all societies to the Financial Services Authority, and particular problems with fee levels that have been identified in certain areas.

The performance and innovation unit has undertaken its own analysis of the legal framework of the social enterprise sector, and it hopes to report later this year. Whatever its conclusions, I believe that the discussions and the work that we have undertaken during consideration of the Bill have given us a much better idea of how to help the movement grow, and of how we might take forward any recommendations that the performance and innovation unit makes. The Government believe that, where appropriate, it is essential to help industrial and provident societies to operate on a level playing field with companies and other mutuals. The Bill provides an important stepping stone towards achieving that aim.

Once again, on behalf of the House I congratulate my hon. Friend the Member for Harrow, West on introducing this very useful Bill. I am delighted to hear that his reading matter will now move on from the Industrial and Provident Societies Acts. Perhaps he will read the Red Book and the Budget papers, before finally alighting on something a little lighter. I recommend the Harry Potter novels, for example, which provide amazing relaxation. My congratulations are sincere. In terms of the procedures of the House, the difficulties associated with private Member's Bills are enormous. He has done an excellent job and this is an excellent Bill. The Government certainly want to see it on the statute book.

Question put and agreed to.

Bill accordingly read the Third time, and passed.