Building Societies: Members' Participation (Hansard, 27 May 1982)

§ Baroness Trumpington
My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

§ Lord Lyell
My Lords, Her Majesty's Government are satisfied that in general the relevant provisions of the Building Societies Act 1962 are sufficient to enable members to participate fully in the affairs of their societies. But, as my right honourable friend the Chancellor of the Exchequer said in a recent speech, when there is next building society legislation it will be necessary to consider again the whole question of the constitution of building societies.

§ Baroness Trumpington
My Lords, while I thank my noble friend the Minister for that Answer, may I ask him whether the Government will consider setting 1257 up an independent inquiry into the content of future legislation, so that a completely fresh look is taken of the whole legislative framework in which societies operate?

§ Lord Lyell
My Lords, the Government would be very pleased to receive any views, from whatever part of the public spectrum they come, on the content of any future legislation so far as building societies are concerned, and especially on the relationships between the societies and their members.

§ Lord Strabolgi
My Lords, may I ask the noble Lord whether the Government are aware that building societies are finding it very difficult to carry on their traditional role due to increasing competition from the banks over mortgage business, due to the high bank rate, and from National Savings over investment business? Will they look into this and try to do something about it?

§ Lord Lyell
My Lords, I am sure that the noble Lord and the House will be aware that the building societies are still one of the greatest success stories in the United Kingdom in the commercial and financial spectrum of the last century. We are quite sure that the building societies themselves are aware of their tremendous reputation and that the building societies and other sources of finance in this market are able to regulate their affairs and the level of competition.

§ Lord Houghton of Sowerby
My Lords, is the noble Lord aware that competition from the banks has nothing to do with the behaviour of some building societies towards candidates who want to get a foothold in the self-perpetuating oligarchies which rule the building societies at the present time? I do not know whether the noble Lord, before giving his Answer, saw the "Watchdog programme 10 days ago. Did the noble Lord see the letter from his honourable friend the Member of Parliament for Hornchurch in The Times yesterday, and is he aware that this movement towards a greater share in the control of building societies will spread and that even a sympathetic vice-president of the Building Societies Association like me finds some of the antics of the building societies at the present time deplorable? Will he ask the Building Societies Association to study this matter and produce a code of conduct which is satisfactory to Parliament and to the members of the building societies so that they may know what their rights are when they want to offer themsevles properly and democratically as candidates for election to the board of a building society?

§ Lord Lyell
My Lords, my right honourable friend the Chancellor in the course of the speech to which I referred in my original Answer mentioned the problem of accountability of the societies to their members. He stressed to the societies that this was very important. Certainly, with regard to any individual problem or breach of what might be called the rules of the society and the treatment of members and the society itself, that is a matter for the society. But I would stress to the noble Lord and to the House that what the noble Lord liked to call a code of conduct is laid out in the rules of each individual society.

§ Lord Wells-Pestell
My Lords, may I ask the Minister, having regard to what has been said, whether this is not an appropriate time for the Government to have an inquiry into the scope and functions of building societies? The point was raised by the noble Baroness but I do not think that she was given an answer. There is an enormous number of building societies in this country and there are four or five branches of building societies in every high street, I should think, throughout the country, spending enormous amounts of money on expensive offices with each building society having an expensive tie.

§ Lord Sandys
My Lords, if the noble Lord, Lord Wells-Pestell, could curtail the length of his supplementary Question, it would be most helpful.

§ Lord Wells-Pestell
My Lords, I think that the Minister is being a little unreasonable. I think that I owe it to the House when I ask a supplementary question to give the reasons why I ask it. What I am saying is that there is an enormous amount of money spent in maintaining offices locally and nationally, and should not the Government set up an inquiry before they anticipate legislation in this matter?

§ Lord Lyell
My Lords, if there are abuses or if the noble Lord or any member of the public or any member of the building societies believes that there are any abuses, the Government view is that they believe the remedy lies in the hands of those members. I have already stressed that the Government are willing to receive any views from any member of the public, any section of society, as to the content of any future legislation which may regulate the conduct of building societies and their members.

§ Lord Hankey
My Lords, are the Government aware that the building societies run with an extraordinary level of efficiency and at a profit level of anything between 17p and 25p per £100 of assets? I do not think that many commercial companies or banks can match that. Are the Government aware that all investors and mortgagors have a vote in the affairs of their building society and that societies are run in a very democratic manner? Are they aware that a good deal of the present agitation comes from certain people who want to force policies on certain building societies which might not be very desirable, seeing how carefully the building societies are run? Have not our experiences in the past few years with the Grays Building Society and so on shown how necessary it is to show caution in this matter? Finally, I must declare an interest. I am a director of one of the larger building societies. May we take it that when the Government set up the inquiry or study that they have mentioned, they will be in touch with the Building Societies Association before it is concluded?

§ Lord Lyell
My Lords, I hope that the noble Lord and the House have not misinterpreted what I have said. The Government are not necessarily going to set up an inquiry or a study. I hope that I said that the Government would be pleased to receive any comments from the Building Societies Association or from any members of the public. So far as the first supplementary question asked by the noble Lord is 1259 concerned, he makes far more forcefully than I the point that I raised earlier, which is the success story of the building societies. I would reiterate what he has said. So far as accountability and democracy within the building societies are concerned and so far as the relationship between members and the society and the board of directors is concerned, that is a matter for the building societies according to the rules.

Lord Oram
My Lords, if there is to be an inquiry, is not the likely outcome that the democratic facilities are there enshrined in the Act but that members do not make use of those facilities? Is not the problem one of apathy and one that is difficult to overcome?

§ Lord Lyell
My Lords, the noble Lord has made the point absolutely. This is a major and important part of the speech made by my right honourable friend the Chancellor to the Building Societies Association.

§ Lord Houghton of Sowerby
My Lords, can the noble Lord show me a rule in any building society which authorises the society to approach the employer of a candidate for election to ask whether sufficient time will be available for the candidate to perform the duties of his office? What right have they to do that? Is that in the code of conduct in the rules of the society?—yet this was done by a building society within the last month.

§ Lord Lyell
My Lords, I am sure that the noble Lord and the House would not expect me to comment on any one particular rule of any one particular building society as far as one or perhaps a small number of persons is concerned. The noble Lord mentioned the rules. I am sure that the majority of building societies and their members are capable of understanding the rules and abiding by them. I stress that the Government will not be setting up an inquiry. I hope the noble Lord will accept that.