SECOND READING. (Hansard, 16 August 1894)

§ THE LORD CHANCELLOR (Lord HERSCHELL)
My Lords, this Bill which I ask your Lordships to read a second time has been very carefully considered in the other House. Your Lordships will be aware that attention has recently been called to the very disastrous effects which has been produced owing to the failure of certain Building Societies, resulting in the loss by many of the working classes of this country of the product of many years of thrift. Although the measure has no doubt attracted public attention owing to the recent failures, and although I think it certain that those failures have facilitated the passage of the Bill through the other House by exciting a natural interest in the subject and a desire to see an amendment of the law, yet it does not represent anything that could be called panic legislation, inasmuch as the expediency of legislation in this direction has long been in view, and the provisions which are substantially embodied in this Bill have been long under consideration. The Bill does not propose to interfere with the management of their affairs by the Societies themselves. To attempt this would no doubt be a fatal policy; but it deals with what will probably prevent some of the disasters which we have recently seen. Hitherto, although accounts have been presented to the members and Registrar from time to time, yet on matters most material they have conveyed little or no information. Large sums have often been advanced on mortgage, and owing to the non-payment of interest the Society has entered into the possession of many of those mortgaged properties without any information on the subject being conveyed to the members, and without their knowing anything of what was going on. The 1154 extent to which this practice has prevailed will be apparent when I tell your Lordships what is shown by a Return which has been moved for of the value of the properties which have come into the possession of Societies owing to the non-fulfilment of obligations by mortgagors. The Societies are not under any statutory compulsion to make a Return. Two hundred and twenty Societies having £13,000,000 out on mortgage do not make any Return, but 716 Societies which have £28,000,000 on mortgage made Returns showing that they were in possession of properties themselves which had been mortgaged for no less than £7,315,000. No doubt those Societies which made Returns had in their possession mortgages in similar proportion, and this would mean that nearly 1,000 Societies have probably about £5,000,000 of mortgaged property which they have had to take into their own possession owing to the non-fulfilment of obligations. The Bill proposes to require that the Societies should show in their annual accounts what amounts are out on mortgage, not, of course, specifying the particular properties or the names of the mortgagees, but indicating what amounts have been advanced on individual properties, and on how many properties those advances have been made. The original object of these Building Societies was to encourage thrift by enabling advances to be made by means of which working men should become the owners of their own dwellings. But, unfortunately, many of these Societies have departed from the original purpose of their foundation, and they have become lending Societies in connection sometimes with speculating builders on extremely insufficient security. That is the first and probably the most vital provision of the Bill. In addition to this, power is given to 10 members of a Society to call upon the Registrar of Building Societies for the appointment of a person to examine the accounts and report upon them, and one-tenth of the members of a Society may at any time require the appointment of an Inspector, who may examine into the management and proceedings of the Society and the manner in which the Society is carried on. There are also provisions for auditing the accounts of the Society. I do not think I need trouble your Lordships 1155 in more detail with the measure. I am sure your Lordships will sympathise with its object. It will not fetter the conduct by the Societies of their own business, while on the other hand it will afford to their members such information as will be likely to induce an amount of care and caution in the management of Societies which has not hitherto always been shown, audit will protect their Members from such losses as those from which unfortunately in the past they have suffered.

§ LORD ASHBOURNE
My Lords, I entirely concur with the noble and learned Lord on the Woolsack upon the propriety of reading this Bill a second time, and of giving it every assistance to enable it to be passed into law without delay. It deals with important matters which have attracted much public attention, and is likely to prevent the repetition of grave abuses. I have been written to in reference to this Bill by a firm of solicitors in whose judgment I place confidence and for whose respectability I can vouch, suggesting some Amendments; but I am bound to say as at present advised, having read the clauses in this Bill, I do not see the exact relevance of the suggestions made, and I have asked for further information. I do not, however, suggest that the noble and learned Lord should change the day he has fixed for the Committee stage on that account, and unless my mind goes with the Amendments I will not trouble your Lordships with them.

LORD BALFOUR OF BURLEIGH
said, he also had received communications from Scotland in regard to this Bill, one being from a gentleman whom he could trust in reference to one of the clauses as interfering with members of these Societies obtaining small amounts free of Stamp Duty. That privilege was reserved by some Societies, but would not, owing to the peculiar form of the drafting, he given to others. He would be glad to know from the noble and learned Lord whether he would accept; an Amendment which would meet the difficulty?

§ THE LORD CHANCELLOR (Lord HERSCHELL)
The noble Lord has been good enough to communicate with me on this matter. Two points are mentioned: 1156 one that the Society referred to would be unable in future to make temporary advances to non-advanced members in respect of subscriptions standing to their credit. This Bill will make no difference, and whatever power existed before will remain after the Bill is passed. The other point is one of some substance. The Society referred to is at present registered under the Act of 1836, and the Stamp Duty for transactions under £500 is small. No doubt that exception is of some value. If the Society were allowed to register as proposed by the Bill under the Act of 1874, it would undoubtedly lose that exception. On the other hand, it would gain the advantage that, whereas the liability is unlimited under the Act of 1836, it would become limited under the Act of 1874, so that if they lost in one direction they would obtain the benefit in the other. If the Society desires to obtain the advantage of that exception, I do not think it is unreasonable that their wish should be complied with, inasmuch as that has been done in the case of certain Societies registered before 1855. I understand that the Society to which the noble Lord refers was registered in the following year, and if he desires to amend the Bill by substituting for the date 1855, that of 1856 or 1857, to meet the case, I should not feel inclined to resist the Amendment in that form.