INDUSTRIAL AND PROVIDENT SOCIETIES BILL [H.L.] (Hansard, 13 March 1975)

§ Lord JACQUES

My Lords, I beg to move that this Bill be now read a second time. It is a very modest amendment to the Industrial and Provident Societies Act 1965. An amendment of this kind was in fact promised by the last Government as far back as 1972, and had it not been for lack of Parliamentary time I suspect it would have been on the Statute Book long ago. The Industrial and Provident Societies Act 1965 is the Act under which cooperative societies and voluntary associations are registered, and that Act also governs their operation; it sets the frame-work. The Act covers a wide range of societies and voluntary associations. It includes the retail co-operative societies which we see in the High Street and with which I have been associated all my life. Ft also includes the agricultural societies and the housing societies and associations, and quite a substantial number of clubs are registered under this Act. It is a matter of interest that nowadays the most numerous of the registrations is housing associations, partly due to the increase in the number of housing associations and partly due to some amalgamations among the other kinds of societies.

The members of such a society or voluntary association have always been limited in their maximum shareholding. There are exceptions to this. Another registered society can have an unlimited amount in a registered society, and certain local authorities can hold an unlimited amount in a registered society, but 475 the individual member has always been limited. In 1893 the limit was £200; in 1952 it was raised to £500, and in 1961 to £1,000. We now propose a limit of £5,000. The limit has never been intended to inhibit the development of the society. The purpose of the limit has been to avoid domination of the society by one or two individuals, although in practice the basis in most societies is one member, one vote, regardless of the amount of shareholding. Nevertheless, there could be a dominating influence if one or two members had very substantial amounts in the society. They could threaten withdrawal if they did not get their own way, so in one way or another there would be a possibility of domination if there was not some limit upon the maximum amount of the holding.

The Government are proposing a limit of £5,000, which is not wholly due to inflation. If we were to rest our case wholly upon inflation, the increase would be a little less than £2,500. We are proposing £5,000, because we feel that it is desirable to increase the limit to a sum which will enable societies to increase their member-owned capital, and we believe that up to a limit of £5,000 this can be done without endangering their essential co-operative character. The agricultural societies usually have a very small membership—sometimes less than 100. This limit of £1,000 weighs very heavily upon them. For example, if their limit is £1,000 per member and they have only 100 members, in law the maximum share capital which they could possibly have is £100,000. This limit of £1,000 has been a very important restraining influence upon their ability to expand their activities.

The Central Council for Agricultural and Horticultural Co-operation which acts for the Government under the Agriculture Act 1967, has been requesting this increase in the maximum shareholding since 1970. It is supported by other agricultural interests, and it would be a valuable, practical and psychological encouragement to agricultural societies. On the other hand, the retail societies are not greatly interested in this increase in share capital. They are not interested, because usually they have a very large number of members, in contrast to the 476 agricultural societies which usually have a very small number. Members of retail societies tend to invest relatively small amounts, but, of course, there are a few who invest up to the maximum amount. Furthermore, the retail societies very often raise some of their capital as creditor capital. We think that it would be wise if all co-operative societies were encouraged to raise member-owned capital, as distinct from credit-owned capital. We hope all sides of the House will believe it to be a wise decision.

I will now deal with the clauses in the Bill. The first clause raises the limit of shareholding to £5,000 and allows the committee of the society to increase the maximum holding until the next occasion when the rules are to be amended. This is a very convenient device on which societies and their committees are already well informed, because it is a device which has been used on two previous occasions when the maximum shareholding has been increased.

The second clause enables future alterations to be made by Statutory Instrument. The Chief Registrar would make the Instrument with the consent of the Treasury. The Instrument would be subject to annulment by Resolution of either House. This would save Parliamentary time and would avoid the kind of delay that we have had on this occasion.

The third clause is consequential and formal. I beg to move.

§ Lord BELSTEAD

My Lords, the House is grateful to the noble Lord, Lord Jacques, for explaining the reasons for the introduction of this short Bill. In reply, may I pick out one of the reasons which the noble Lord gave for the Bill— the particular need of agricultural marketing co-operatives to increase their existing capital. It was in December 1974 that the report of the Working Party on Investment Capital in Agricultural Co-operatives concluded that an increase is necessary if societies are to meet their long-term investment opportunities. Indeed, the noble Lord has reminded the House that pressure for this increase has been going on since 1970.

477 As the noble Lord has pointed out, this Bill will enable such cooperatives to increase their share capital, along with all the other registered societies, although I agree with the noble Lord that in these more straitened times shareholders are not necessarily poised, ready to increase their shareholding. The Working Party made the point that agriculture, which is such a highly capital-intensive industry, always makes investment on the farms the first call on farmers' resources. My point is that although this Bill is designed to assist all societies and especially to assist agricultural marketing cooperatives, the effect will not be absolutely immediate. None the less, I accept the desirability for the Bill in the interests of all registered societies.

I listened carefully to the noble Lord when he pointed to the dangers of allowing too large holdings. I am one of those who hope that the Registrar will not, by order, feel the necessity to use the ordermaking power for increasing shareholdings yet again in the foreseeable future. I hope that it can stay at a £5,000 ceiling for the reasonable future. Also, I think that the administrative provisions in the Bill for societies to give effect to the provisions of the Bill immediately are prudent and that they also should be supported. My Lords, from these Benches I support both the intentions and the provisions of this Bill.