HL Deb 05 March 1970 vol 308 cc510-9

4.50 p.m.


My Lords, I beg to move that this Bill be now read a second time. The main purpose of the Bill is to simplify the procedure for the merger of registered societies (which may be either by amalgamation or by a transfer of engagements of one society to another) and for their dissolution. The Bill also makes a number of other amendments to the Friendly Societies Act 1896, which is the principal Act regulating friendly societies.

There are five classes of societies registered under the 1896 Act of which friendly societies are the most important. The principal business of that group is the insurance of their members on a mutual basis for sickness, death and endowment benefits. They include nation-wide bodies such as the National Deposit Friendly Society and the Hearts of Oak Benefit Society, as well as small local societies which have changed little in character from the sick and burial clubs of the last century. At the end of 1968 there were 765 centralised societies (exclusive of the collecting societies) and 34 societies and branches having between them 6,986 branches. Their combined membership was then about one million, and funds totalled some £75 million.

In addition there were 74 functioning collecting societies. These are friendly societies which do industrial assurance business; that is, life assurance on which the premiums are collected at short intervals at the members' homes. These societies are subject to the Industrial Assurance Acts 1923 to 1968 as well as to the Friendly Societies Acts. At the end of 1968 they had more than 20 million paying policies in force and funds totalling £451 million. Other classes of societies registered under the 1896 Act are workingmen's clubs (some 2,500, with over 1½ million members); specially authorised societies—that is, societies for any purpose authorised by the Treasury as suitable to the provisions of the 1896 Act (223 societies in all)—benevolent societies (110); and cattle insurance societies (6).

A falling-off in the number of members coupled with increasing management costs has led to the situation that many smaller societies are no longer economic-ally viable units. As a result, some societies have found it difficult to continue operating, and it is expected that this tendency will increase. The rational solution, as in other fields of activity to-day, is for societies to amalgamate to form larger units.

Under the present procedure, which is contained in the 1896 Act but which dates from at least 1850, amalgamation and transfer of engagements involve a cumber-some process and it involves a society (which may already be in a financially precarious position) in disproportionate expense. The main obstacle with which a society is faced under the present pro-visions is the necessity to obtain a positive expression of support for the merger proposals from at least five-sixths "in value" of all its members and from everyone, whether a member or not, who is receiving or is entitled to receive any benefit from the society's funds. The term "value" is defined in the 1896 Act and in effect gives to each member a number of votes depending on the length of his membership. This adds an additional complication to an already difficult procedure. The difficulties have greatly in-creased with the spread of membership of societies, which in earlier days were usually confined to a fairly small geo-graphical area, or formed part of the life of closely knit communities. But the requirements of the 1896 Act are obligatory, and a society wishing to merge must go through the motions of endeavouring to secure the necessary number of con-sents—even though it can be predicted with some certainty that these will not be obtained. The society will usually fail to get the required consents, not because of active opposition to the proposals but because of the indifference of what need only be a small proportion of the total membership who will not trouble to respond or to express a view.

Having gone through this process and failed to get the required number of consents the society may then apply to the Registrar of Friendly Societies to dispense with consents, which he may do with Treasury consent. But this will be only after a time-consuming, expensive and cumbersome procedure which to-day cannot really be justified. It must be remembered that many friendly societies rely to a large extent on the voluntary labours of their officers to whom this procedure seems, not unnaturally, an un-necessary burden. Similar difficulties, for similar reasons, existed in the case of trade unions until in 1964 Parliament enacted the Trade Unions (Amalgamations etc.) Act 1964 which simplified the merger procedure for trade unions. The proposed legislation for friendly societies is in many respects analogous, and follows similar lines.

The present Bill substitutes a procedure which is much simpler and speedier in its operation, and less costly. Its main feature is that it requires that the merger proposals shall receive the support of three-quarters of the members who vote upon the proposals. The Bill has provisisons to ensure that every member has an opportunity to know what the proposals are and to express his view upon them, and it safeguards the rights of any minority groups within a society. In addition, the procedure followed in every case will be controlled by the Registrar, and there are express rights of appeal to him.

The procedure for the dissolution of a society under the 1896 Act is similar to that for mergers and is equally cumber-some and onerous. This procedure also is made somewhat more easy by the pro-visions of the present Bill, which in the case of friendly societies substitute a three-fourths majority of members for the five-sixths at present required. In this case, however, it is still to be three-fourths of the total membership who must consent. This distinction is justified on the ground that in the case of an amalgamation of societies or transfer of engagements the obligation to the member, with regard to his benefits, and so on, carries on after the amalgamation or transfer, whereas in the case of dissolution the contract between the member and his society is in effect being broken, and this is considered to be something which should have a clear positive expression of support from a substantial majority of members.

As to the background of this Bill, for a number of years the representative bodies of the friendly societies movement have been pressing for amendments to the law to bring it up to date and to facilitate the operations of societies in present-day conditions. In 1964, the Friendly Societies Liaison Committee, which represents the four principal associations of friendly societies, submitted a memorandum to the Treasury setting out a number of proposed amendments. Since then several of these suggestions have been implemented, either in whole or in part. The societies' powers of insurance were extended by the Finance Act 1966, and provisions for keeping and auditing their accounts were modernised by the Friendly and Industrial and Provident Societies Act 1968.

At its annual meeting in September, 1969, the National Conference of Friendly Societies passed a resolution calling on the Government to implement the re-mainder of the proposals contained in the 1964 memorandum. The proposals in the Bill dealing with mergers and dissolution and with group insurance arise out of the memorandum. They have been discussed in detail by a Working Party made up of representatives of the movement and of the Registrar. In addition, a number of minor amendments are proposed to deal with practical difficulties which have been brought to notice by representatives of the movement. It is also hoped that in the near future a consolidating measure may be introduced to consolidate the Friendly Societies Acts from 1896 onwards. There are in this present Bill a number of amendments designed to tidy up some of the imperfections in the wording of those Acts and to remove some dead wood. This will enable a slightly more useful Consolidation Bill to be prepared when the time comes.

My Lords, of the other new provisions contained in this Bill the following are probably of most general interest. Clause 7 provides that a society's rules need not contain tables relating to benefits payable in respect of group insurance business. At present, tables in respect of all benefits (other than those no longer open to members) must be in the rules. This relaxation will make it much easier for societies to undertake benefit schemes which will suit the employees of a particular employer. The societies are keen to have the opportunity to do more of this business.

By Schedule 2, Part 1, paragraph 3, a society's power to provide benefits for children during their minority is extended to include step-children and orphan children above minority age who are in receipt of full-time education. In Schedule 2, Part 1, paragraph 4, the Registrar is to be given power to veto a choice of name by a society which is undesirable and, therefore, might cause embarrassment or offence. Then, under Schedule 2, Part 1, paragraph 5, societies are to be permitted to pay sums on death of a member upon production of a grant of representation: at present they are bound to require a death certificate as well, even if probate or letters of administration are produced. Finally. would mention paragraphs 10 and 11 of Schedule 2, Part 1. Property of a society vested in trustees devolves automatically without conveyance to succeeding trustees, with the exception of stocks in the public funds of Great Britain and Ireland. This exception is to be removed.

My Lords, I beg to move that the Bill be now read a second time.

Moved, That the Bill be now read 2a. —(Lord Bowles?)

5.2 p.m.


My Lords, I should like to thank the noble Lord for his full explanation of this Bill. The contents were made very clear. The Bill affects a very large number of people in this country. I was not absolutely clear just how many people it does affect. I was under the impression, after reading the Bill, that we were dealing only with those covered in Part I of the Report of the Chief Registrar of Friendly Societies, which deals with friendly societies with branches, and those without branches, rather than the other forms of friendly society that he listed, such as Catholic societies and so on. It seems to me that possibly the scope of the people covered was more in the nature of 7½ million than the much larger figure of 20 million that he gave. What-ever the figure, certainly a very large number of people are affected.

One can approve of the purpose of this Bill, not only because after very many years it paves the way towards consolidation, but also because it effects a good many improvements in the law. With regard to the slow rundown in the membership of societies, I notice that it was reckoned that only one new member was being recruited for every two who gave up membership. That is the present rate of decline.

Where those circumstances arise, obviously there must be branches which are unable to look after themselves; and indeed there may be some of the 750-odd other societies where the run-down is already so great in their own locality— and they are very largely based on locali-ties—that they are unable to maintain an efficient administration. In those circum-stances, it is highly desirable that that society or branch should amalgamate cither with the branch of another society or with another society. As I understand it, that is what the Bill provides for and it also makes that much easier to achieve. I noted what the noble Lord had to say about the three-quarters of member-ship needed to validate such an amalgamation, and the difference between members present or those voting by proxy when it was a question of amalgamation; and the case of dissolution where three-quarters of the total membership was required. I do not know whether the noble Lord could indicate to us how easy it will be to get together three-quarters of the total numbers required to validate dissolution. The problem here seems to be that of getting general agreement while providing adequate safeguards for the individual member, without at the same time opening the door too wide to small minorities, or even individuals, who may try to delay or block what the majority believe to be the reasonable action to take. We can consider in Committee whether this is right. I do not know whether the noble Lord is able to give instances of what has happened in the past, what difficulties have been encountered, and how far the Bill will overcome those difficulties.

I should like to ask the noble Lord about Clause 6, which gives the Treasury power to prescribe fees for registration of a society, or of an amendment to its rules. I understand that up to now such fees have not been required, and we shall naturally want to know why they should now be thought necessary, and how much they are likely to be. It may be difficult to fix scales which are not thoroughly regressive and burdensome to the smaller and struggling societies. There is a formidable list of amendments to the principal Act in Schedule 2, but this is obviously going to pave the way to consolidation, and that is all to the good.

We have been accustomed to consolidation before reform in many cases, and it is therefore legitimate to ask whether further reform is contemplated in this case. It might be fanciful to suppose that the Bill is intended to pave the way to a reform, to an acceleration of amalgamations, as it were, to allow the Chief Registrar to do in the field of friendly societies what the I.R.C. is doing in the field of industry. I do not know whether the purpose of the Bill is to encourage amalgamations, or merely to facilitate them. Perhaps the noble Lord could elucidate that a little further.

There is one particular point that I should like to mention—and I apologise to the noble Lord for this, but it came to my attention only this morning. I understand that some amendments agreed between the Chief Registrar and the Secretary of the Friendly Societies Liaison Committee are likely to be brought forward for the Committee stage. None of them, I am told, is of a substantive nature, but there is one concerning group insurance business. That point is still being discussed. It seems to be of a highly technical nature. In view of the national superannuation legislation now before Parliament, it is just as well to get the provisions in regard to group insurance right, as they will become ancillary to those superannuation provisions and will be regarded, in many cases, as additional fringe benefits. I hope that enough time will be allowed between Second Reading and Committee stage to straighten this out.

Briefly, the point seems to be this. Group insurance is defined, for the first time I understand, in Clause 7, and the definition would cover group life business; but financial limits are laid down in Section 41 of the principal Act, that of 1896, as amended by Part II of Schedule 8 to the Finance Act 1966. Each employee to be covered by the group insurance policy or contract would have to be asked whether he had already covered himself with another friendly society in order to ensure that in his case the financial limit would not be exceeded. Although the clause confers wide powers of approval on the Chief Registrar, he presumably would not be empowered to approve a policy of insurance for an amount which exceeded in any particular case the limit when taken together with any other policy. The position is complicated by the fact that there are separate limits laid down in the 1966 Finance Act for non-taxable and taxable life and endowments business.

I do not expect the noble Lord to comment on this point to-day, especially as I have not been able to give him notice of it. But, as I say, I hope that sufficient time will be allowed for the point to be discussed before the next stage of the Bill, so that any Amendments that are going to be introduced can be introduced before the House parts with the Bill. I do not of course know whether agreement will be reached even between the Chief Registrar, on the one hand, and the Secretary of the Friendly Societies' Liaison Committee, on the other. But clearly this is a point we shall have to consider at a later stage, and that is why I raise it at the present time. My Lords, that is all I have to say on the Bill, and from these Benches we give it an unqualified welcome.

5.10 p.m.


My Lords, I am most grateful to the noble Lord for his speech and for his welcome to the Bill. I received a note from Mr. Fisher (the gentleman to whom no doubt the noble Lord was referring: I think he is secretary of the Liaison Committee) just before lunch to-day. But the position, as I understand it, is that the proposals that are now made will need very careful examination and involve consultation with other Departments, possibly other bodies, which may be interested. The point is being considered, but I can give no undertaking at present on what the position will be. I will have a word with my noble friend the Chief Government Whip on the question of the timetable, because the Committee stage is scheduled for next Thursday. It may not be possible to obtain agreement before that. I understand that some Amendments of a drafting nature may be submitted, and it may be that the interval before the Report stage will be long enough for the consultation with the various bodies concerned to take place. But this is a matter on which even the Registrar himself had a note only this morning. So it is difficult for me to say any more this afternoon than that I cannot give an undertaking.

With regard to the noble Lord's question about fees, regulations will provide what societies are to pay. Before the regulations are made an opportunity will be given to the representative bodies to indicate any views they may have.


My Lords, could the noble Lord indicate what is the purpose of the fees? Is it to cover expenses of the Registrar in toto, or partly; or what is the purpose?


My Lords, I do not know their purpose. It may be a form of taxation; I do not know. Perhaps it is about time the Registrar's office obtained a little more money. I understand that fees are charged in the case of all societies except those at present exempted by Section 96(2) of the 1896 Act.

The noble Lord asked about getting together three-quarters of the members to approve a dissolution. We are making it easier than it is at present. For dissolution the consent of three-quarters of members can be obtained by the circulating of a voting paper to each member; it is not necessary to obtain consents at a meeting attended by three-quarters of the members. And, of course, as I am sure the noble Lord knows from his experience, the Registrar will order advertisements to be placed in various newspapers, local, or even national, to draw attention to what proposals are being made by the society in question. I think that that is about all I can say at present. In these circumstances, I hope that the noble Lord is satisfied and that the House will now give this Bill a Second Reading.

On Question, Bill read 2a, and committed to a Committee of the Whole House.