§ Mr. Andrew Love (Edmonton)
I beg to move amendment No. 9, in page 12, line 4, leave out `Industrial and Provident' and insert 'Cooperatives and Community Benefit'.
The amendment would give the Bill a new short title, but the important thing is that the change would apply to all Acts of Parliament from the 1965 consolidating measure that brought together all previous industrial 1185 and provident societies Acts, right through to the excellent Bill promoted by my hon. Friend the Member for Harrow, West (Mr. Thomas) and carried by the House last year. The amendment's net effect would be to change "industrial and provident" to "co-operatives and community benefit" in all parts of the law. While that change is deceptively simple—people might say that in many ways it is modest—it is fundamental to the modernisation of industrial and provident society law.
The amendment is probing, because, like my hon. Friend, I am not going to the barricades yet. However, an important principle is involved, which I raised on Second Reading, as did my hon. Friend the Member for South Derbyshire (Mr. Todd) and the hon. Member for Eddisbury (Mr. O'Brien), and it has been touched on again today. I am rather disappointed that it was not taken up in Committee, because we could have had a useful discussion.
Interestingly, the Bill is called the Co-operatives and Community Benefit Societies Bill. The reason for that could be that, last year, my hon. Friend the Member for Harrow, West introduced his Industrial and Provident Societies Bill, so that title was not available, although I think that a more important principle is involved. That is, of course, the modernisation agenda as it relates to industrial and provident societies, which is reflected in the strategy unit report "Private Action, Public Benefit".
In that report, the modernisation agenda was endorsed by the Prime Minister himself, who said in his foreword:This report sets out a package of measures which will modernise the law and enable a wide range of organisations to be more effective and innovative, whilst maintaining the high levels of public trust and confidence which are vital to the continued success of the sector.I strongly believe that the name change would contribute to a number of things, such as organisational effectiveness and achieving the public trust and confidence that we want to see in this sector of the economy, both of which are referred to in the foreword.
The strategy unit report was published in September 2002 and the consultation concluded at the end of December. Other Members will comment, I suspect extensively, on that report. It is important to review what that report said about the name change. It is easy to understand why we need a name change.
Yesterday, when I was thinking about this debate, I realised that I had better look up what "industrial" and "provident" mean. I cannot relive the debates in the House in 1852, but I looked up the word "industrial" and the dictionary definition is "of the nature of industry or productive labour". I tried to associate that with the consumer co-operative movement, with agricultural and worker co-operatives, and even with community benefit societies such as football trusts and housing associations. It is difficult to associate any of those activities with the dictionary definition of "industrial".
Similarly, the dictionary definition of the word "provident" is "careful in providing for the future". We could argue about that in respect of the provision of pensions, and I suspect that the Government strongly want to get across to people the message that they 1186 should look after themselves when they reach senior citizen status, but the term does not have any contemporary relevance to the organisations that are concerned with the law as it stands. It is redolent of a 19th century, Dickensian, Victorian vision. There were visionaries at that time, but these terms are not relevant to the 21st century.
§ Claire Ward
For many young people, their main connection with a community benefit society is probably through the new football supporters trusts. For them, that is clearly a community benefit, yet it would have no connection with the concepts of "provident" or "industrial". Would not it be helpful in our approach to the next generation to use terms that they understand and appreciate?
§ Mr. Love
I agree entirely with my hon. Friend. It is an immediate turn-off for organisations that are thinking about establishing new bodies and are considering the different structures available to suggest that they form an industrial and provident society. There is no way that young people, or I suspect people of any age, will be attracted by that terminology. We need to move on and find a modern language to reflect what can be achieved by these societies.
§ Mr. Levitt
Is my hon. Friend arguing that the sector needs to increase public trust and confidence, because it lacks that? Does he believe that merely changing the name will produce the extra public trust and confidence that I am sure we all seek?
§ Mr. Love
The organisations that are formed under industrial and provident society law critically depend on public trust and confidence, so the need to ensure that they have that trust and confidence is a strong priority for them. The reason that I suggested a change in title was more fundamental. I think that it will improve trust and confidence, because it will improve people's understanding of such organisations.
If we are to modernise the structures, as this Bill does, as the Bill introduced by my hon. Friend the Member for Harrow, West did and as I hope will be the outcome of the strategy unit report, we must also modernise the language that is associated with these organisations. Although there was a 1965 consolidating Act, these structures date back to laws that were passed in 1852 and 1862. We still use those structures as a basis, and we still use the language of that time.
That language may have meant something at the time, and may have given Victorians and people who lived in the 19th century a vision of what industrial and provident societies were trying to achieve. I do not think that that applies at the present time. I shall take the example of a football trust, which was mentioned earlier. I was involved in the formation of a football trust in Enfield. The old Enfield Town football club has gone through considerable difficulties in the past few years. In an effort to mobilise its support, it decided to set up a football trust. It is an admirable organisation, and is working successfully. I attended meetings, and I put them in touch with the national organisation set up by the Government. When we got down to the nitty gritty of discussing how the trust would be formed, someone said, "Lads, it has to be an industrial and 1187 provident society". Hon. Members can imagine that the response was, "What the **** is an industrial and provident society?". It had no relevance or meaning to them. That is the problem that we face.
The strategy unit report referred to modernisation of industrial and provident society law. A number of issues were emphasised in the report that are relevant to the debate on this amendment. I was involved in the retail co-operative movement, and I remember with dismay that everyone who tried to explain what it was would always start with its glorious 19th century heritage and would not talk about its 21st century relevance. That is an important consideration in this debate about the language.
That terminology is off-putting. It is not possible to attract people using the language that is current in the laws that cover industrial and provident societies. They have a poor brand image. How do we get people who are trying to form an organisation to consider industrial and provident societies when there is such low public esteem for those bodies? The term is out of date and needs a fundamental overhaul.
This is a critical issue for important sectors of the economy. It is not just new organisations that are being formed. In significant parts of the economy industrial and provident societies are already of relevance and constitute a majority in that activity. I could talk about the housing or agricultural co-operative movements and credit co-operatives, but I shall use the example of the retail co-operative movement, because it is the one best known to me and, I suspect, to other hon. Members. It has 115,000 staff members, most of whom do not have a clue what an industrial and provident society is. Frankly, if one tried to raise the issue with them, they would be put off by the idea. It has 9 million members, and although they are aware of the caring, sharing difference of co-operatives, as the old brand image used to call it, they do not understand what it is. We must do something about the problem of language.
The strategy unit report recommended that we set down a definition for co-operatives. As well as using the terms "co-operatives" and "community benefit societies", we should define them.
When it comes to community benefit societies, we could have the same argument about football trusts. The organisations that I know best are the registered social landlords: the housing associations. They are a big sector of the housing market. In recent years, half a million properties and tenancies have passed from the council sector to the housing association sector. It is rapidly becoming the largest social housing landlord in the country, yet it still uses this completely outdated terminology of industrial and provident society. Let us suppose that someone is trying to persuade a tenant that a transfer from council to housing association accommodation would benefit him or her. That cannot be done in the language of the 19th century.
The importance of comprehensibility is stressed in the strategy unit's report. There is little recognition of the advantages of industrial and provident societies. If they were known as co-operatives and community benefit societies, people would have a much better understanding of what they were. There is also little 1188 recognition of the difference between industrial and provident societies and companies. Most people have a vague idea of how a company operates, with shareholders and shareholder value and profits and dividends; but they have no real understanding of the nature of an industrial and provident society. We must also do something about the weak branding and the negative image. A critical factor in that is modernisation of the language.
Industrial and provident societies face other problems in the marketplace: the lack of protection for their assets, for instance, and the threat of demutualisation, which is always there. They also have difficulties in raising money. I used to be a member of a revolving loan fund for co-operatives. Co-operative after co-operative used to tell us of the impossibility of raising money from bank managers or any other financial organisations, because no one understood what co-operatives were all about.
A good deal of complexity is involved in industrial and provident societies. My hon. Friend the Member for Harrow, West has concerned himself in recent years with the problems of registration—the cost, and all the time and effort that must be put in.
§ Mr. Lepper
My hon. Friend mentioned the brand image and the use of the word "co-operative". Is not a prime instance of that word's attractiveness the success of the Co-operative bank over the past few years? It has assets of £5.5 billion and more than 4,000 staff, and has gone from strength to strength. Many people have moved their accounts to it because of the appeal of the name, and the sense of community benefit and ethical trading that they gain from it.
§ Mr. Love
The Co-operative bank is indeed a brand leader in its financial services sector. It established free banking some time ago, and it continues to set standards for the rest of the industry. I also pay tribute to the Cooperative Insurance Society, which works closely with the bank. It has done much, in a variety of ways, to establish a more ethical stance for financial services organisations—and the word "co-operative" is central to its activities. That underlines my point that if we are to improve the image we must change the language. The current image engenders a lack of trust and confidence because of the outdated language.
Costs arise because of the way in which industrial and provident societies are composed, and because not enough people choose them rather than companies. As I have said several times today, a level playing field must be created between all the different organisations in the economy: that is crucial to the future of industrial and provident societies. It is easy to see why so many new companies are formed each year and so few industrial and provident societies. In fact that would probably happen anyway, but I think many people who are not opting for industrial and provident societies now would do so if we only modernised the language.
The company law review has been mentioned. There have been a number of Companies Acts in recent years, but since 1965 there has been only one piece of industrial and provident society legislation, initiated by my hon. Friend the Member for Harrow, West. Let us hope that this will be the second. Both, however, have been 1189 instigated by private Members, and have been given very little time in comparison with measures relating to company law and law reform, and indeed the review with which we shall be presented in the near future.
I pay tribute to both my hon. Friends for their Bills. I am particularly impressed by this Bill. The proposals relating to assets in clause I are at the cutting edge of modernisation of industrial and provident society law. If the legislation is to succeed, however, we must also be at the cutting edge of linguistic change. Not only will my amendment take the language of industrial and provident societies into the 21st century. but; "Co-operatives and Community Benefit" will give people a more accurate picture of what is entailed in the establishment of such societies, what they are and what they do. The sector will also become much more relevant to the economy, and, hopefully, will be given an impetus to involve itself in different parts of the economy.
I believe that my proposed new title is both user-friendly and public-friendly.
§ Mr. Stephen O'Brien
It comes as no surprise to me, as a fellow member of the Institute of Chartered Secretaries and Administrators, to hear such a fine speech—entirely in order, or you would have pulled him up, Mr. Deputy Speaker—from the hon. Member for Edmonton (Mr. Love). He spoke for even longer than the Bill's promoter.
The hon. Gentleman said that this issue was mentioned on Second Reading. As he will recall, it was very much mentioned in Committee, and as he knows, I support him. I too have been ably supported by the Co-operative Group. I thank Peter Hunt, of that organisation, for his briefing—and, not least, I thank my constituent Mr. Martin Beaumont, the chief executive, for his.
Without wishing to go down the highways and byways of the great historical treatise that we have been just treated to, it would be highly desirable to change the name to the Co-operatives and Community Benefit Societies Bill. In fairness, it was touched on in Committee. Despite the extraordinary thoroughness of the presentation by the hon. Member for Edmonton, it is, as he said, only a probing amendment. That said, it was, to say the least, an exceptionally good exploration of the subject.
It would be wrong not to record that the Minister said in Committee that the Government were not opposed in principle to the idea but that there were genuine technical issues about changing the name of legislation that belonged to a family of legislation with a long history. With the best will and intent, and the unquestioned skills not only of parliamentary draftsmen but of all the advisers with a view on these matters who work in Government Departments, it is possible, given all the cross-references, notwithstanding the technology available these days through electronic reading, to miss something and have difficulty in achieving the consistency required.
It is certainly a worthwhile project. It could be used as a model of how to try to update the titular effect of Bills, equivalent to the tax law rewrite. It might be useful to review what is on the statute book and where titles can 1190 be changed, not least because we would realise how much law could be repealed. It would be desirable to make the statute book less long.
In looking at the new name for the Bill, I could not help but feel that there was a certain equivalence when news was brought to me on the Front Bench this morning that the right hon. Member for Hamilton, North and Bellshill (Dr. Reid) has been appointed Leader of the House. He had a great record—I pay tribute to him—for being a man of communities benefit when he was Secretary of State for Northern Ireland. I like to think that we can all benefit from the community of interest that he will seek to introduce, in one of his new roles, in safeguarding the interests of all hon. Members. Both I and my party offer our congratulations on his transfer.
When I looked at the other aspect of the recommended name, the co-operative side, I was reminded of the announcement of the new Labour party chairman, who has a particular—
§ Mr. O'Brien
I might possibly have to crave your indulgence, Mr. Deputy Speaker, because I feel that I have left Labour Members on tenterhooks as to who the new chairman of their party is—
§ Mr. Deputy Speaker
Order. I am sure that hon. Members and the House as a whole are more intent on seeing the successful completion of this debate than on any other consideration.
§ Mr. O'Brien
I will do nothing more than allude to the fact that the right hon. Member for Makerfield (Mr. McCartney), a man of the most co-operative style, is the new chairman of the Labour party.
I am happy to say that I and indeed my party, as part of the consensual approach that has been adopted throughout the Bill's proceedings, favour the idea of the change of name, if it can be achieved in a technical and thorough manner. It is, therefore, appropriate that the hon. Member for Edmonton has suggested that the amendment is a probing one. It would be difficult today to give a conclusive view for the Government; the Minister mentioned the difficulty when we looked at the matter in Committee. With a flag that we would like the proposal to move forward and hope that there will be a thorough exercise, at this stage of the Bill we are keen that the hon. Member for Edmonton should seek to withdraw the amendment once we have had an opportunity to explore the issues.
Mr. Gareth Thomas
I hesitate to gatecrash the love-in between the two members of the Institute of Chartered Secretaries and Administrators. I congratulate my hon. Friend the Member for Edmonton (Mr. Love) on the way in which he has introduced the amendment and the hon. Member for Eddisbury (Mr. O'Brien) on initiating a discussion on the issue in Committee. I, too, accept that this may have to be a probing amendment; some miserable lawyer somewhere may find reason to object to what is an entirely sensible provision, which, as my 1191 hon. Friend said, is recommended in the Government's strategy unit report into the charitable and not-for-profit sectors.
Hon. Members who have had the opportunity to introduce a private Member's Bill will recognise that many members of their constituency party often take a profound interest in the subject that they seek to take forward. Last year I approached a number of my party members and explained that I was introducing a Bill to amend the Industrial and Provident Societies Act. I was disappointed somewhat by the blank look on the faces before me. Having had representations from those party members to ban fox hunting or to amend various other legislation, there was some disappointment that I was seeking to do something to legislation that they had not even heard of. That gives some indication of the problems that the amendment seeks to deal with.
Once I had got over that disappointment and was researching the types of organisations that would be affected by the legislation, I discovered that a series of organisations such as rugby clubs and women's institute country markets were industrial and provident societies. When I got in touch with my local women's institute country market and my local rugby club and asked "Are you a company or an industrial and provident society?", they had no idea what an industrial and provident society was. I only discovered that they were registered under that legal form in discussion with their parent bodies. That shows some of the difficulties that a failure to modernise the terminology to describe this form of community organisation causes that sector. It is long overdue that we bring into the 21st century the terminology that we use to describe community businesses.
The Government's intention to legislate to create a community interest company is an entirely sensible, albeit separate approach, to other forms of community businesses. I hope that we will hear from my hon. Friend the Minister a similar commitment to modernise the legislation in this way.
My hon. Friend the Member for Edmonton has done the House a service by seeking in his amendment to restate the case for sensible legislative change. I hope that, if we cannot reform the legislation in this way now, we will have an early commitment from the Minister to initiate the change that we want to see.
§ Ruth Kelly
I congratulate my hon. Friend the Member for Edmonton (Mr. Love) on the way in which he introduced his amendment. As he has said, he has shown a consistent interest in this matter. I am aware of his concern about the use of the term "industrial and provident society", particularly the points that he made about whether the term is outdated and well understood, whether it should be replaced by what some regard as more modern, more descriptive terminology such as co-operative and community benefit society. The strategy unit report looked at the issue and concluded that the name "co-operatives and community benefit societies" should be retained and that the umbrella term, industrial and provident society, should no longer be used.
As I said in Committee, we examined the responses to the public consultation on that report. I hope to make our response to those recommendations soon. Nothing 1192 in the legislation requires societies to call themselves industrial and provident societies, but it does require that the title of every society must end in the word "limited". The term "industrial and provident society" is used in the title of the relevant Acts and in some of the substantive provisions of the Friendly and Industrial and Provident Societies Act 1968 and the Industrial and Provident Societies Act 2002. The proposed amendment would not change the names of the previous Acts or the substantive provisions in which the term "industrial and provident society" occurs. Societies would continue to be registered under the Industrial and Provident Societies Act 1965.
I recognise that part of the issue is presentation and branding, and how the movement and individual societies wish to present themselves. My hon. Friend the Member for Edmonton made a powerful case about the members of football clubs and whether they see themselves as members of industrial and provident societies. Given the case that he and others have made, we considered whether we could introduce an enabling provision to facilitate a change in the names of industrial and provident society Acts and to amend all other legislation that contains references to those Acts. Unfortunately, we decided that such provision was outside the scope of this Bill. Moreover, changing the names of those Acts would probably be unhelpful at this stage. It would apply a collective title to Acts that individually bear different titles and that would make the legislation less transparent and more difficult for societies to navigate. For those reasons, I urge my hon. Friend to consider withdrawing his amendment.
§ Mr. Todd
Unfortunately, it has fallen to the Minister to give the boring and disappointing answer to this interesting debate, but her response was not unexpected. She has done her duty. It is worth reflecting for a moment—I still fancy myself as a historian—on the reasons for choosing the term "industrial and provident society" to describe that sector of activity.
I have mixed feelings about the amendment. It is logical, in the modern day, to describe the movement in a way that is much more recognisable to ordinary individuals, especially—as my hon. Friend the Member for Watford (Claire Ward) said—to young people, who would not necessarily be aware of the background of those organisations. However, I am always struck by the extraordinary endeavours of those who founded, in Victorian times, the movement that we are discussing today and—as my hon. Friend the Member for Edmonton (Mr. Love) mentioned—the respect that we owe to people who struggled to set up organisations that provided a wide range of benefits for working people at a time when the state did not so provide and they relied entirely on their own endeavours through voluntary groups.
The original legislation in 1852, which started the process, was moved by the then hon. Member for Shrewsbury. I cited that Bill's preamble on Second Reading, but not everybody was here then. It states:Associations of Working Men have been formed for the mutual Relief, Maintenance, Education and Endowment of the Members, their Husbands, Wives, Children, or Kindred, and for procuring to them Food, Lodging, Clothing, and other Necessaries, by exercising or carrying on in common their respective Trades or Handicrafts.1193 That is a good description of industrial and provident societies as they operated at that time. For example, hon. Members should note the reference to "working men". Sexism was automatic at the time and we cannot criticise people for using in 1852 language that we would not accept now. The legislation was designed specifically to benefit working people, who did not have such services available through any other means and who had sought to come together, often in the face of considerable obstacles, to create those institutions. The reference to industry—also contained in the reference to "Trades and Handicrafts"—makes it clear why the word "industrial" was chosen at the time.
The word "provident" is not commonly used today, but the word "prudent", which is commonplace in the Treasury, has had a welcome revival, and the same might happen to "provident". It has the clear meaning of making sensible provision for future needs, which is clear in the original purpose of the legislation.
The movement moved on and did not remain confined to working people. Any person from any background, as confirmed by the examples given by my hon. Friend the Member for Harrow, West (Mr. Thomas) and others, can now become involved in such societies and seek to further a variety of goals that the Victorians never conceived of. I defend the use of the language at the time, because it was appropriate and clearly defined the organisations that existed in those days. I also salute those people who wisely provided the legislative framework to permit such institutions to carry on their business safely in law at that time, but I accept the arguments advanced by my hon. Friend the Member for Edmonton. He pointed out that whatever the benefits and merits of the description then, it does not apply in present circumstances.
I note the Minister's words with regret, albeit tinctured with some relief that we shall preserve in the legislative framework references to farsighted behaviour by hardworking individuals. The profound implications of the judgments that they made show that we owe them great credit. I hope that my hon. Friend will withdraw his amendment, but I respect his reasons for moving it.
§ Mr. Love
I have always thought of the Chancellor as a modern-day Rochdale pioneer, although I raise that point with some trepidation in case the hon. Member for Eddisbury (Mr. O'Brien) jumps up to tell us that we have someone new in that post. I wish to correct an earlier mistake and pay tribute to the founders of the co-operative movement and the community benefit movement, including the Rochdale pioneers of 1844 and J. T. W. Mitchell—a person of very humble origins —who was the chief executive of the Co-operative Wholesale Society in 1895 and took part in an investigation by a Committee of the House of Commons into retailing. His comments and his vision for the future are due great respect, even today.
§ Mr. Lepper
In my hon. Friend's catalogue of pioneers of the co-operative movement whom he congratulates, I am sure that he would want to include Dr. William King and those others who in the early 1820s, some 20 years before the Rochdale pioneers, set 1194 up a co-operative retailing shop and a working men's institute based on co-operative principles in West street in my constituency.
§ Mr. Love
I do of course pay tribute to Dr. William King. I also pay tribute to George Mudie—not the Member of this House—who set up the London Co-operative Society. Some in Scotland—looking round the Chamber, I can see that there are no Members from Ayrshire here—lay great claim to the Fenwick weavers having been the originators of the co-operative principle. Whoever it was, I pay great tribute to the endeavours of all the people who created the movement that we have today.
I freely admit that my amendment has some shortcomings, as the Minister said, but it allows me to refresh the House on the importance of changing the language in this respect. I take note, as we did in Committee and on Second Reading, of the fact that the Treasury is looking carefully at the strategy unit report and will bring forward recommendations resulting from that in the near future. I also take note of the positive way in which the Minister responded to my amendment. I can feel some sympathy for its terms, although I recognise that it does indeed lie outside the scope of the Bill. I hope that the Minister and Treasury officials will give serious consideration to the strategy unit report and to its recommendations in general, but in particular to the recommendation that we should change co-operatives and community benefit societies. I hope that they will take note of the sentiment of this House, which has been strongly expressed on several occasions, not only by me, but by Back-Bench Members of all parties. Given those considerations, I hope that the Minister will make proposals that reflect them.
On the basis of the assurances that she has given, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Order for Third Reading read.
§ Mr. Todd
I beg to move, That the Bill be now read the Third time.
It is pleasure to introduce the Third Reading of the Bill, which has occupied a significant amount of the time of the House and of hon. Members who served on the Committee.
Let me briefly refresh hon. Members' memories as to the key purposes of the Bill and its implications. The first purpose is to remove arcane obligations on societies on the execution of agreements of various kinds. For example, clause 5 relates to the use of society seals, the way in which they are kept and operated, their function and indeed the necessity of having them at all. That has already been commended by many as a means by which a number of societies will be able to make significant savings in terms of money and administrative time in the course of their activities. It is a modest change, but one that has beneficial implications.
The second purpose is the protection of business partners of societies should they inadvertently or—as we discussed earlier—deliberately breach the objects of their constitutions. We all accept that it is important 1195 that those who have business dealings with societies should have equivalent protection to those who deal with a company and should not be caught out by someone being able to point out that the society has traded outside its objects. In that case, the contract struck is ultra vires, which places that entirely innocent partner in the position of potentially losing significant sums of money. Those provisions are covered in clauses 3 and 4. Particularly as a result of additions to those clauses, the Bill has been dramatically extended from the Bill that received Second Reading. I had imagined that if the House continued to have faith in it and it passed through another place I would have a relatively modest Little package of paper to present to people and say, "This private Member's Bill has been passed partly through my endeavours." It will now be a slightly larger package of paper because the amendments, particularly on this matter, have lengthened it considerably. To be fair, they set out the protections in much more detail and therefore perhaps with greater legal protection for those who are covered.
The third protection, which is a new element that was introduced in Committee, but is certainly valuable, is to ensure that societies that are also charities make clear that status to those with whom they form contracts. That is because those contracts will not be protected in same way as those that are made by societies that are not charities. The key element here is the balance of protection involved. It is right that the membership of a society who intend further to extend their own benefits should be treated in the same way as a company in terms of the protection of third-party contracts. However, that is not so in the case of a charity that seeks to serve the interests of third parties. It is clear in law that the assets and objects of that charity should be protected with greater rigour than is obliged in the case of companies or—after the passing of the Bill, if that is willed—co-operatives and community benefit societies. It is vital that the fact that a society is a charity is made crystal clear to anyone who seeks to make a contract with it. That effectively challenges the individual or body making that contract to look carefully at the objects of the charity to ensure for themselves that they are engaging in a contract that lies within the scope of the charity's objects, because they will not enjoy the equivalent protection that they would if they had been dealing with a community benefit society or a co-operative that was not a charity. Clause 2 covers that at some length. It is an important point for a small sector of activity.
The final element of protection is the framework to give community benefit societies new rights to bind their assets and the proceeds of any assets that are disposed of to the purposes of the society, albeit that such purposes may be carried out through another vehicle. It is recognised that it may be appropriate to change the framework through which the object is delivered, provided that the same obligation applies to that new vehicle: in essence, that the assets may not be disposed of to those who happen to be members of the society at that time, but must be used for the purpose involved. On Second Reading, in Committee and on Report, reference was made to the importance of that provision; for example, to community benefit societies that are football trusts. Although the precise purpose may have become redundant, it is important that the society's 1196 original aim should continue to live in its assets and should be transferred to another society with similar aims. That is the purpose of the Bill.
The implications of the Bill are that it would bring the relevant legislation broadly into line with equivalent company law. It would make it easier for societies to carry out the normal business of making agreements, contracts and conveyances with other bodies, without an additional bureaucratic burden or unintended risk. It could make societies slightly more competitive than they are currently; it would save them some time and money and would make it possible for them to pursue their interests more effectively and speedily.
The asset lock clause lays the foundation to allow the implementation of one of the recommendations of the strategy unit's report, "Private Action, Public Benefit", which has been mentioned several times this morning. Incidentally, that report has received as wide a range of accolades for the quality of its thinking and the comprehensiveness of its recommendations as any report from a public institution for some years. It is pleasing that part of the Bill would implement an aspect of its recommendations.
Lack of an asset lock provision could prevent the safe use of a community benefit society model in some circumstances; for example, in public service provision. I have long argued that some services are better delivered through a voluntary sector model, or at least one that engages with the customers or residents who use that particular service. For example, a particular village may have a direct personal interest in the way that its services are run, but there should be public support for such services, perhaps through the transfer of an asset and certainly through the provision of public money. If one were to follow that path, it is critical that there is a way of locking those assets into that particular purpose. It would be wrong if those who happened to be residents or qualifying members of a particular society were able to say, "Thank you very much, we'll take the proceeds and use them for whatever we have in mind or for our own purposes", through using the escape clauses—turning into a limited company by guarantee—that were discussed on Second Reading. The Bill thus affords a valuable opportunity to use community benefit societies as a means of delivering public services with the benefit of public assets and public money.
I shall refer briefly to my personal history. I served on Cambridge city council for 12 years, three of them as leader, and always held the view that one should try to find ways of engaging with our citizens. Often, in Cambridge, they were willing to be engaged; they did not need much prompting. My hon. Friend the Member for Cambridge (Mrs. Campbell) is not in the Chamber today, but I am sure that she would agree.
As a member of the council, I wanted to provide ways for citizens to exercise more direct control. Cambridge is a city with a profusion of voluntary sector, charity and industrial and provident society activity. It would have been marvellous to have found ways safely to transfer some services to some local residents through the means proposed in the Bill. However, one could not do that then; the Bill would provide the basis for such judgments.
1197 I willingly thank the Treasury team for its help with the Bill and in preparing substantial additions to strengthen it. Through their help in preparing the definitions in clause 1, the Government have set out the means by which the asset lock protection would work after appropriate detailed consultation. They rightly provided that there should be an obligation to consult and set out the type of issues on which consultation would be required. The Bill would allow the implementation of the asset lock through regulation after consultation. It is not the perfect model; I should have preferred to include rather more such definition. However, clause 1 is sufficiently constrained to reassure those who feel that the measure would be an open door for a variety of procedures. It is quite restrictive and obliges the Government to draft the regulations so that they clearly define how an asset lock would work and its implications for the community benefit society that would use it. The simple model would be where new community societies chose to adopt an asset lock at the start of their activities, while the more complex model would be where an existing community benefit society chose to adopt the asset lock and persuaded its existing membership of the need to follow that approach.
Those who have followed the Bill with interest will want to monitor the Government's progress in drawing up the necessary regulations. Obviously, the timing will be dependent on the officials and Ministers who guide the process; nevertheless, I am encouraged by the enthusiasm and commitment shown by the Treasury so far. It indicates a firm intent to proceed at a reasonable pace.
In conclusion, this is a modest Bill. As the person who was first in the ballot for private Member's Bills, I had a large number of Bills suggested to me—some of which could certainly not be described as modest. However, one of the several provisos that I made in deciding which Bill to promote was that I wanted a Bill that would not restrict freedoms. In some circumstances, restricting freedoms is understandable—and a number of Bills on the list this year do so—but I wanted not to restrict but to extend freedoms, and this Bill does that. It provides greater protection for existing organisations to carry out their business more effectively and it provides a framework for a flowering and extension of the community benefit societies movement. It will have wider implications beyond our conceptions.
One of the main reasons that I am fond of this Bill—and the reason that I quoted the preamble to the 1852 Bill—is that, sometimes, from tiny little acorns greater oaks may grow. It may well be that making it easier for community benefit societies to operate may have implications for their future kind, range and scale that are wider than we can conceive of now. With those thoughts, I commend the Bill to the House. I very much hope that it will be supported.
§ Mr. Bailey
I congratulate my hon. Friend the Member for South Derbyshire (Mr. Todd) on promoting this Bill and on surmounting the twin hurdles of convincing the Treasury and sufficient Members of Parliament to attend for its consideration to allow it to get as far as it has. I hope, of course, that it will reach a successful conclusion.
1198 The hon. Gentleman was being a little too modest when he said that this was "a modest Bill". I wonder whether the pioneers of the co-operative movement in the 1840s realised the full significance of the structure that they had devised with their particular co-operative society and whether they realised the impact that it would have not just on the economy and retail structure of the country, but on its social provision as well. This ostensibly modest proposal could have the most profound consequences. I will deal with those in a moment.
My own long-standing association with the co-operative movement is fairly well known; I mentioned it at Second Reading. The issues that the hon. Gentleman has raised, and that the Treasury has said that it will try to deal with, have been of enormous concern to the movement for a long time. I welcome the amendments, which have been debated at some length today. They strengthen the Bill. I also welcome the Minister's commitment to consider creating a level playing field between company law and industrial and provident society law. From experience of talking to practitioners in the co-operative sector, I know that that is a huge issue for them.
It is gratifying that at last this House is beginning to debate the significance and relevance of co-operative legislation —of which there is now a greater public perception. For too long, debate on our economy and public service provision was carried out in terms of the private sector or the public sector as defined by state or local government provisions. The co-operative and mutual sectors are a huge part of our economy, but that was largely unacknowledged. The hon. Member for Edmonton (Mr. Love) said that, when he contacted local organisations, they did not actually know whether they were an industrial or provident society or company. That reflects the lack of public profile that this form of organisation used to have. However, the situation is changing, partly as a result of private Members' Bills.
Back in the 1980s and early 1990s, demutualisation procedures had a devastating short-term effect on some sections of the mutual movement. However, what happened demonstrated publicly the scale of the assets that those organisations and co-operative societies had. It also forced them to publicise the benefits of this particular form of ownership.
At the same time as people were becoming more aware of the benefits of this form of ownership, the incentive to create new societies was much diminished by the absence of protection for the assets of societies and organisations such as building societies and so on. Possible providers and backers of such societies were deterred by the absence of any long-term protection of those assets. The Bill will provide a mechanism by which that obstacle to future development can be removed, and it has enormous potential.
I wish to look very briefly at some of the areas where the Bill has potential. It offers potential for some charities perhaps to adopt a different form of legal structure to fulfil their objectives more adequately. Water utilities have been discussed in the past, as has the health and social services sector, but I will not stray into the debate on foundation hospitals now.
In particular, sports clubs and football clubs often have huge and deep community interests, but they are wrapped up in clubs that operate in a legal framework 1199 that makes them accountable only to relatively small numbers of shareholders, so there is potential for conflict. In some cases, that has led to individuals taking over football clubs and, basically, asset stripping them regardless of the impact on local communities and the long-standing loyalties that huge numbers of people in those communities have to their clubs.
This model of provision offers enormous potential. My hon. Friend the Member for Watford (Claire Ward), who is not in her place at the moment, mentioned football trusts, but the formation of football trusts and the Bill can work together to give added protection to such organisations. That is very much in line with the concerns of people in their local communities and will do a lot to promote the concept of co-operatives and community societies in a way that enhances their attractiveness to a huge section of the community.
I am conscious of the fact that other hon. Members wish to speak, so I will draw my remarks to a conclusion by saying that this so-called modest addition to the range of options available to organise societies and companies may have a profound effect in the future, and we should be extremely grateful to my hon. Friend the Member for South Derbyshire for piloting the Bill through the House of Commons.
Mr. Gareth Thomas
I am grateful to the House for the opportunity to congratulate my hon. Friend the Member for South Derbyshire (Mr. Todd) on the way in which he has piloted the Bill through its various stages in the House thus far. He has demonstrated an excellent grasp of the subject matter, which has its origins in the 19th century, as we said earlier. He has effectively consulted the organisations that use the industrial and provident society legal form and, perhaps most importantly, he has negotiated the Bill's passage through the House of Commons with great skill. Given the many obstacles that can trip up private Members' Bills, he deserves particular credit for that success.
I welcome the Bill. I particularly welcome clause I as a further guarantee against demutualisation. Unlike my hon. Friend the Member for West Bromwich, West (Mr. Bailey), I think that foundation hospitals are an interesting example to touch on briefly in the context of clause 1. By the time that the Bill is passed by the House of Commons and the other place —I hope that that will happen—the House will still be considering the foundation hospitals legislation, which I warmly support. Whether foundation hospitals could use the industrial and provident societies legal form is worthy of debate, perhaps not now, but certainly in considering the legislation that my right hon. Friend the Secretary of State for Health may introduce in due course.
I pay tribute to the way in which Ministers have co-operated with my hon. Friend the Member for South Derbyshire, but I should like to flag up some unfinished business in the reformation and modernisation of the legislation that governs this sector. In Committee, we touched on audit and accounting requirements for industrial and provident societies. The most pressing problem is that societies wishing to publish interim accounts must undertake a full audit, with all the associated costs that accountants charge. Companies, 1200 by contrast, can simply publish interim accounts and declare that they are unaudited, which is a major anomaly. The Co-operative Group, perhaps the largest industrial and provident society, estimates that producing half-yearly interim accounts costs it about£0.25 million. The Midlands Co-operative Society, a smaller industrial and provident society, estimates that it costs £60,000 per annum to produce interim accounts, and the Colchester and East Essex Co-operative Society estimates that it costs about £30,000 a year.
It is clearly unreasonable to place more onerous requirements on community businesses that compete with companies that are not under the same requirements. The issue is becoming increasingly urgent, and Ministers need to address it. My hon. Friend the Financial Secretary acknowledged its importance in Committee and in response to my earlier intervention, so I hope that people who work for her will redouble their efforts to provide her with a solution to the problem. Another problem is the exemption from audit requirements for societies with a small turnover. Companies with a turnover of less than £90,000 are exempt from audit, but those with a turnover between £90,000 and £350,000 need an accountant's report. By comparison, since 2000, any companies with a turnover of less than £1 million can gain exemption from the cost of any audit or accountant's report. Again, there is a major anomaly in the audit requirements for smaller societies compared with similar sized companies, which needs to be addressed.
My hon. Friend the Member for Edmonton (Mr. Love) has flagged up the fact that the Companies Directors Disqualification Act 1986 does not apply to industrial and co-operative societies. If we are modernising legislation, we must recognise that industrial and provident societies, just as much as companies, can have rogue directors, and we need to address that issue. Limits on investments were touched on briefly—they, too, need to be addressed as a matter of urgency. Industrial and provident societies are permitted to take some investments from their members, to allow much-needed capital injections into those societies. At present, there is a limit in the legislation of £20,000 maximum per member. That was a sensible limit when it was introduced, and was designed to ensure that no individual shareholder member of a society had undue influence over it, thus reinforcing societies' democratic nature. However, community businesses sometimes have difficulty raising the capital that they need for their investment programmes. Indeed, that was recognised as recently as last week, when the Treasury, the Department of Trade and Industry and the Home Office jointly announced a consultation on the community interest company, another model for community businesses in future, which will be able to attract investment so that it can operate for the benefit of the community, with no £20,000 limit on its investments. Ministers accept the need for a level playing field so that industrial and provident societies are on an equal footing with companies and other mutual organisations, but that limit is another issue that needs to be sorted out as a matter of urgency.
Lastly, I take Ministers back to the issue of the powers of the regulator. Again, the regulator is an important check and safeguard for society members and for those 1201 seeking to engage with industrial and provident societies. As we heard on Second Reading and briefly touched on in Committee, the regulator's powers in relation to industrial and provident societies are not as wide as they are for companies. That is an important area where modernisation is needed.
My hon. Friend the Member for South Derbyshire has done the industrial and provident society movement a great service by promoting the Bill, ending for many the scourge of demutualisation and modernising the way in which ultra vires matters and matters relating to the SIB are dealt with. I congratulate him again on the way in which he has piloted his Bill through the House and I wish it a fair wind through the other place.
§ 12.5 pm
§ Mr. Levitt
I was inspired to seek to catch Mr. Deputy Speaker's eye in the debate because of some words that I read in Hansard, which defined mutualism asa desire for more control of our lives; recognition that membership and involvement can add quality to service; and acceptance that services for a community can be best managed by that community."—[Official Report, 31 January 2003; Vol. 398, c. 1114.]Sagacious words from the speech of my hon. Friend the Member for South Derbyshire (Mr. Todd) on Second Reading. Wise words always come from Members of Parliament representing Derbyshire, as we know.
It is an opportune time to consider these issues in relation to the voluntary sector, first, because the Home Secretary has proposed a charities Bill; secondly, it is time to review the compact of understanding that exists between Government and local government on the one hand and the voluntary sector on the other, as regards the delivery of services; and thirdly, because of the strategy unit report, "Private Action, Public Benefit", which has been mentioned by other speakers. The Bill allows for charitable purposes to be achieved by means that would normally be in the province of business. The 10-point definition of charitable purposes suggested in the strategy unit report is a sensible analysis and clarification of the legal position.
At present services are provided by three different sectors. We can visualise them as a triangle. At one corner is business, which uses the market, has a profit orientation and is traditionally owned by the few. At another corner is Government, operating by means of legislation and public spending, and constrained by democratic accountability at local and national level. At the third corner is the voluntary sector, including the co-operatives and mutuals, with a huge variety of types of provision. There are about 600,000 organisations, including 180,000 registered charities, in the voluntary sector, but for reasons of brevity, I shall not list them. In the past those three sectors viewed each other with suspicion.
Now let us consider another triangle, with each of its points between two points of the first triangle, giving us a six-pointed star. We have arm's-length companies in the space between business and Government. An example is the one being used in the housing sector. We have "compact" partnerships between Government and voluntary service, and we have the new concept of charitable companies operating in the section of the model between business and the voluntary sector.
1202 The compact isa memorandum of understanding between national and local government and the voluntary sector, defining co-working practices in a way that neither demeans nor exploits the voluntary sector, which has much to offer to the delivery of public service.I quote from my article in The House Magazine charities supplement last week. I commend the whole article, of course, as well as the article by the Charities Commission, which welcomes the strategy unit report.
The model of the six-pointed star allows charitable companies to have a social purpose, to operate on a not-for-profit basis, to involve people and to have devolved and wider ownership, but at the same time to have business attitudes to delivery, planning, trading, efficiency and financial stability. That is extremely important. On trading in particular, it is necessary to clarify the law and allow voluntary sector organisations and charities to get the benefits as well as the protection that they need in order to trade effectively and to promote their cause in that regard.
The strategy unit report anticipates the development of community interest companies and charitable incorporated organisations, both of which are very much in line with the Bill. By creating the idea of the charitable company and ensuring that there is a continuum, we can ensure that three different sectors no longer compete against each other and vie with each other generally in the provision of services. Instead, there will be a continuum in which one merges into another. By breaking down the isolation between business, government and the voluntary sector, we can only gain from the achievements of such organisations and develop charitable purposes still further.
I believe that those provisions, along with those in my hon. Friend's most excellent Bill, will benefit the whole community for the future.
§ Mr. Lepper
I am glad to have this brief opportunity to add my congratulations to my hon. Friend the Member for South Derbyshire (Mr. Todd). The fact that he chose to introduce a Bill relating to co-operatives after having drawn the No. 1 spot in the ballot for private Members' Bills this year is a sign of the strength of the revival of interest in the co-operative and mutuals sector. I pay tribute to him for that and for the way in which he has guided the Bill through a process that can often be strewn with obstacles for a Back-Bench Member of Parliament.
In the co-operative and mutual movement, we often spend a lot of time talking about our history. Indeed, we have talked a bit about that history today, and I shall do so a bit more, if I may. I have already referred to Dr. King and his pioneering efforts back in the 1820s, but it was also in Brighton that Peter Kropotkin was inspired towards the end of the 19th century to write "Mutual Aid", partly as a repost to the popularised Darwinian theories of individualism that were so dominant at the end of the Victorian era. It is perhaps no coincidence that when a group of 30 or so organisations operating on co-operative and mutual principles got together five or six years ago to act more cohesively in the Sussex area, they decided to adopt the name "Mutual Aid" for their organisation, which took the form of an industrial and provident society. I am glad to say that they were supported by the co-operative retail group in their activities.
1203 In the past few years, as my hon. Friend the Member for West Bromwich, West (Mr. Bailey) has said, partly because of attempts to demutualise building societies and attacks by carpetbaggers on the Co-operative Wholesale Society, we have seen the co-operative and mutual movement reviving and galvanising itself. It has done so not only because of the need to protect, but because of the need to look to the future. In the past year, two Bills on such issues have been introduced—those of my hon. Friend the Member for Harrow, West (Mr. Thomas), to whom I pay tribute as president-elect of the Co-operative Congress for the next year, and my hon. Friend the Member for Edinburgh, North and Leith (Mr. Lazarowicz). Both those Bills dealt with aspects of co-operative and mutual organisation.
I am proud of the record of this Labour Government in supporting co-operatives. Mention has already been made of Supporters Direct, which was established with funding from the Department for Culture, Media and Sport, and it was my right hon. Friend the Prime Minister who set up the Co-operative Commission a couple of years ago to consider the future of the co-operative movement. In public service provision and well-known examples such as those in Bristol and Greenwich, we can see how co-operative forms of organisation are making services more responsive to the needs of those who are using them. My hon. Friend the Member for Harrow, West rightly suggested that the principles of community benefit societies might well have a part to play in the organisation of foundation hospitals.
I congratulate my hon. Friend the Member for South Derbyshire on his Bill and I hope that it completes its remaining stages. It is part of the welcome revival of interest in co-operative and mutual principles that I am sure will now go only from strength to strength.
§ Mr. Stephen O'Brien
May I draw attention to my entry in the Register of Members' Interests? I am a member and fellow of, and a parliamentary advisor to, the Institute of Chartered Secretaries and Administrators. My spouse and I are honorary life members of the Winsford Constitutional and Conservative club, which is encompassed by the Bill's provisions.
I reiterate my congratulations to the hon. Member for South Derbyshire (Mr. Todd) on not only coming first in the private Member's Bill ballot, but on promoting a wholly worthy Bill, which will be effective due to our considerable deliberations during its passage. It will be greatly welcomed by co-operatives and community benefit societies. They play an important role in the voluntary sector, which is supported by hon. Members from all parties as being integral to the way in which we in this country live our lives and as part of the essential culture of a civilised society as defined in a democracy under the rule of law. I have taken pleasure in the way in which we gave the Bill's provisions a good airing on Second Reading on 31 January and in Committee on 18 March, and it would be inappropriate to summarise all those arguments now, not least because there are other Bills to be considered today and we should allow them that chance.
The official Opposition take great pleasure in being fully supportive of the Bill's intent. I was interested to note that the Liberal Democrats indicated their support 1204 on Second Reading, although we have heard little from them in this debate. Plaid Cymru also supports the Bill, so it is true to say that it has all-party support. The original Bill as drafted by the hon. Member for South Derbyshire had the great merit of brevity.
§ Sir Robert Smith (West Aberdeenshire and Kincardine)
The hon. Gentleman might not have heard much from me because, as he said, there are other interesting Bills to consider. Given that Liberal Democrat Members supported the Bill on Second Reading and participated in improving the Bill in Committee and on Report, there can be no doubt that they support the Bill. I should note that we are spending more time on Third Reading of the measure than we do on many Government Bills.
§ Mr. O'Brien
I am grateful to the hon. Gentleman for confirming that the Bill has all-party support. We shall see how much time I shall take on Third Reading to decide whether his assertion is correct.
The initiative of the hon. Member for South Derbyshire has allowed the Government to focus their energy on addressing the matter seriously with the professional resources at their disposal. That is why the Bill's measures and detail are correct and why we should speed its passage to join other Acts on the statute book. It is a permissive Bill and will consequently be enabling legislation. Producing such legislation rather than measures that curtail and restrict freedom is the proper role of the House and an essential element of our democracy. I could not say the same of other Bills before the House.
Clauses 1 to 3 of the original Bill were replaced by new clause 1, and new clauses 2 to 5 were added. The original clause 4 is now clause 6 and the original clause 5 is now clause 7. The Bill also now has new clause 8 and clause 9, and so it was important to keep track of it. I can honestly claim to be half-Lancashire and therefore part of the genuine heritage of the co-operative movement, a pride in which I share with many others, and I am glad that this important sector has been recognised, not least because, at the end of 2000, the 8,382 industrial and provident societies on the register held assets of £61 billion in this country. It is an incredibly important sector.
For the purposes of that analysis, the register is divided between retail societies, including the small co-operative stores—one of which is in Bunbury in my constituency, in which I shop every week and get my ample supply of newspapers; one might call it a media store—and the wholesale and productive societies. The register also includes the agricultural societies that are so important to our rural economy, given the challenge that it faces, the fishing societies that provide the ability to supply fishing equipment to members and marketing facilities to each other, clubs—of one of which I am proud to be an honorary member—general service societies and housing societies. Given the great importance of those organisations to what is taking place in so many of our communities, the strategy unit report correctly put its finger on this important area for review, as has been mentioned earlier.
We did not have the opportunity on Report to refer to some of the questions raised in Committee. The Minister very helpfully agreed to write to me about 1205 them, and I would like to place on record that she did so on 25 March. Her letter sought to deal with two particular points, and I urge all Members with an interest in the Bill to read it, as it has been placed in the Library. It had attached to it the draft regulatory impact assessment, and I am most grateful to all those who have spent time giving that assessment proper and due consideration.
I am pleased to place on record that it is a very satisfactory and helpful document which summarises why this measure is justified and—if I may rather immodestly suggest this—vindicates the request for such an assessment. It merits reading, and the point that flows from it—to which the Minister might allude later—is that it seeks to clarify why it is fair to say that this provision does not anticipate all the measures that might come out of the strategy unit report on charity law reform. At the same time, however, it heralds some of the thinking that is probably going on as a result of the extensive consultation that is taking place because of that very worthy and welcome report.
In regard to the regulatory impact assessment's finding on the power to restrict the use of assets—the so-called asset lock—in clause 1, the Minister's letter suggests that, without an asset locking regime in place, there would be "a serious deterrent to funders". It is important to recognise that that was not clear from the outset, and that it has become clear during our deliberations. That is part of the merit that has been derived from our having had this extensive debate on the Bill. That was important not only because we have looked at a number of the processes by which these entities are able to commit themselves and to be bound to the outside world as well as ensuring that they have modern procedures, but because, in the modern competitive world, they must have the opportunity to gain the confidence of those who would seek to fund them so that they can be competitive while maintaining the mutuality of interest of their members. Those requirements have been served by the measures that we are introducing. As with normal companies, the provisions allow for the possibility of a reduction in transaction costs and the facilitating of business transactions, which I welcome as potentially deregulatory.
I would like to raise a practical point, which is that, in relation to the sealing of documents, there is an added benefit that is not highlighted in the Minister's letter of 25 March. These days, commercial deals are often done quickly to capture the opportunity, and co-operative or community benefit societies equally need to try to ensure that they do not lose out by being unable to act swiftly when it is in their interests and the interests of their members to do so.
The seal is no longer needed, although it has to be considered in jurisdictions other than England and Wales. It is appropriate that we have that benefit, which is also necessary given that, these days, company executives, as well as those of co-operatives and community benefit societies, have to travel extensively, despite the fact that they are focused within their community. They are often not in the right place to be able to sign against the seal. The point is very practical, but all those who have been involved in commerce 1206 realise that such factors can often be a serious deterrent to getting deals done quickly and giving confidence to the counter-party.
We discussed on Report the ramifications of ostensible authority and vires, but it would be best if we received clarification from the Minister, either today or as soon as possible, that the Financial Services Authority is to be considered. The review is coming up at the end of the year and the FSA's remit is set by Parliament, so the Government will have to come back with a recommendation, but it would be helpful to know what they have in mind or whether there is any barrier to working positively on those issues. As a registry function is provided for the sector, it would be useful to have that clarification. The Minister's letter was helpful as far as it went, and I pay tribute to that.
Moving on from the letter, which I recommend that all those with an interest in the Bill read, my only other reservation about the process is that, as a result of the Government amendments, much will be left to secondary legislation. That will obviously depend heavily on a consultation process. That indeed helps, and as part of the asset lock-in and dedicated assets discussion we had not only consultation, but the liberal use of the word "sensitivity". I am glad to think that the question of dedicated assets and asset lock-ins can be dealt with in a sensitive way. I think that that is intended as an attempt to take cognisance of the particular conditions at any given time and the particular transactions that people may have in mind as to each society. That is sensible, so long as the overriding principles, at all times, are purpose and the community of benefit. If we always keep those uppermost in our minds, we will be fine.
The Bill is highly worthy, likely to be effective and desirable. The point on the question of the name has been considered, but it would be helpful if the Government reiterated their assurance that the legislation is intended not as a blank cheque, but as a process by which secondary legislation is clearly itemised and dealt with under the affirmative resolution procedure, although that has already been confirmed.
It is interesting to note that the hon. Member for Harrow, West (Mr. Thomas), who has kindly sent me a note of apology to say that he cannot be here for the winding-up speeches as he has to go to his constituency surgery, none the less thinks that we are setting a good precedent for foundation hospitals. It will be most interesting to see how that develops, if he believes that the proposals on foundation hospitals relate to co-operatives, which is not how I read them.
My only other point is technical: it would be helpful if the Minister made some reference to when the Government intend to consider the separate legislation that will apply to Northern Ireland and bring it into line. Quite rightly, Northern Ireland has been excluded from the Bill. It has different arrangements, so it would be sensible to consider whether they can be dealt with as effectively as those we have debated today.
It is appropriate to pay tribute not only to the hon. Member for South Derbyshire, as the Bill's promoter, but to the Minister, who has handled proceedings with dedication and a seriousness of intent, and to my constituents who have helped me as they are somewhat involved in the Co-op group, not least the chief 1207 executive. The Opposition also pay tribute to all that the co-operatives and community benefit societies do. This is a well-deserved measure that will assist them in going forward in the 21st century. We hope that it builds on the legacy of past generations, which made available assets as well as their time, skills, endeavour and good will. We hope to acknowledge them by doing the same and adding to their good work.
§ Ruth Kelly
I thank my hon. Friend the Member for South Derbyshire (Mr. Todd) for introducing this important Bill on co-operatives and community benefit societies. He has worked hard to secure the Bill's passage through the House. I applaud his constructive approach to bringing that about. The Bill has been improved through scrutiny, which is due in no small part to the illuminating and constructive debate involving hon. Members on both sides of the House. I am sure that that will produce a legislative outcome that will greatly benefit the industrial and provident society sector. I thank the House and my hon. Friend for that. I am also grateful for the support that the Opposition parties have lent to the Bill, and for the favourable remarks made by the hon. Member for Eddisbury (Mr. O'Brien).
Industrial and provident societies, with their ethos of member engagement, independence and help for the community, have for many years made an important contribution to the United Kingdom's economy and society. They form a significant section of the economy. The hon. Member for Eddisbury described the diversity of the sector and the contribution that it makes. Societies also perform an important social function. The Government welcome the benefits that they produce for their members and for the wider community. A range of enterprises across all sectors of the economy can use that flexible corporate form, which, strengthened by the proposals in the Bill, should continue to prosper. We are keen to help the sector to maximise the benefits that it provides to its members, which is why we have made it clear from the outset that we support the principles behind the Bill.
Clause 1 on asset lock-in was rightly given a great deal of attention in Committee. It will enable the Treasury to introduce in secondary legislation provisions under which community benefit societies could prevent any use of, or dealing with, their assets except for the benefit of the community. That will provide societies with the option of ensuring that their assets can be used only for purposes that are beneficial to the community.
As the hon. Member for Eddisbury said, the proposal emerged as one of the key recommendations of the strategy unit's report into the voluntary and not-for-profit sector. The report highlighted the benefits of the proposal, stating that the current situation with no asset lock-in provision was a "serious deterrent to funders". That is an important point. The new provision could be of great benefit to industrial and provident societies.
The report also noted that care would need to be taken forrobust mechanisms … to be put in place to ensure that takeovers, mergers and dissolutions are conducted in a fair and transparent way".Similarly, it will be important to ensure that societies with the lock can continue to evolve and change their purposes and activities accordingly.
1208 An asset lock-in regime is a complicated area of policy, and it is important that we get it right. My hon. Friend the Member for South Derbyshire and I took the view that it would not be possible, within the time scale envisaged in Parliament, to establish in detail exactly what the regime should look like. We need to produce a regime that will maximise the benefits to societies and the wider economy, which is why the Bill provides for a clause that enables regulations to be made at a later date giving community benefit societies the ability to lock in their assets. As the hon. Member for Eddisbury said, we will consult thoroughly with the movement and with other interested parties to ensure that we get the regulations right. They will be passed by affirmative resolution in due course.
The question of who the regulator will be is one of the details that we have not had time to consider properly during our scrutiny of the Bill. That is why we are introducing enabling legislation, which will allow us to consult more fully with the movement, and with the Financial Services Authority on whether it would be prepared to take on that role. At present, we have no set view on the outcome of that consultation, but I can assure the House that if the Bill is enacted, officials will start work straight away to establish an asset lock-in regime, and will consult on the details of the regime as soon as it is sensible to do so. I can, however, confirm our full support for the principle and the clause.
The hon. Gentleman asked about the current legislation being considered by Northern Ireland Ministers and officials. We are liaising closely with Northern Ireland officials to ensure consistency of approach, but, while consistency is highly desirable and will certainly be taken into account, this is ultimately a matter for Northern Ireland.
I shall not repeat all the arguments advanced in Committee, but I will say a little about the Bill. Clauses 2 and 3 update industrial and provident society legislation in line with company law to make it easier for societies to enter into business transactions. They protect those dealing with societies and society committees from adverse consequences if societies or committees are found to have acted outside societies' rules. That will remove the current risk that apparently legitimate business transactions may prove invalid if a society is found to have acted outside its own rules. It will also remove the onus on those doing business with societies to investigate their rules before entering into contracts.
The clauses were amended in Committee to make their effects more transparent. By setting out all the new provisions as amendments to the 1965 Act, they reduce the amount of reference to other Acts that would otherwise be necessary, and make clear the intended effects on societies. The proposals accord with the Government's agenda for modernisation of the industrial and provident society form, and with our aim to create, where appropriate, a level playing field between societies and the company corporate form.
The aim of clauses 4 and 5 is to make it easier for societies to enter into contracts and execute documents. It seeks to do that by, again, bringing industrial and provident society legislation up to date with existing provisions of company law. The hon. Member for Eddisbury raised some important points about that. Societies will be more able to execute documents 1209 without having to overcome the potentially cumbersome burdens associated with having to use a common seal on all occasions, and will thus enjoy much more flexibility.
The Bill takes an important step towards the modernisation of industrial and provident society legislation. In doing so, it will benefit societies and their members, and I am pleased to say that it has the Government's full support. Mutual societies have an important part to play in providing consumers with choice and innovative services in retail and financial markets, and in facilitating social enterprise. I believe that the Bill has the potential to add significantly to the contribution already made by industrial and provident societies.
I congratulate my hon. Friend the Member for South Derbyshire on his work, and on the constructive way in which he has engaged with the Department and with me throughout the Bill's passage. I also thank all who have spoken today, and who spoke during the Bill's earlier stages. The Bill makes an important contribution to the industrial and provident society movement, and will benefit that movement considerably. It will modernise the sector, and I wish it every success in the other place.
§ Mr. Todd
With the leave of the House, Mr. Deputy Speaker.
I thank all who have spoken today and, indeed, those who spoke during the Bill's earlier stages. Some have done both. I also thank the co-operative movement in general, particularly Peter Hunt and Matt Ball, who have worked tirelessly in providing information and support. I thank, in particular, the hon. Member for Eddisbury (Mr. O'Brien) for his consistently informed and constructive contributions, and for the time he has devoted to the Bill. I also thank the Treasury team, which has worked extremely well with me and my advisers, particularly the Minister, who has responded with great grace and care. I extend my best wishes to her in her future career both as a Minister and as a mother.
§ Question put and agreed to.
§ Bill accordingly read the Third time, and passed.