§ 6A Lord Banks rose to move, That this House do insist on their Amendment 5 to which the Commons have disagreed for the Reason numbered 6.
§ The noble Lord said: My Lords, I beg to move that this House do insist on their Amendment No. 5 to which the Commons have disagreed for the Reason numbered 6. As the House is well aware, the Trustee 1277 Savings Banks have been built up over the years by the savings of their depositors. It has been widely understood—and how correct that understanding was has been the subject of discussion already this evening—that they belonged to the depositors, for whom the trustees acted.
§ The future position of the Trustees Savings Banks was considered in the early 1970s by the Page Committee on National Savings. They found that the Trustee Savings Banks, as they were then, provided an outlet for small savings, supported by a Government guarantee and subject to tight Government control, affording a limited amount of tax relief and offering limited banking facilities. In those days there were no overdrafts or personal loans available; the majority of the depositors, the committee found, were in the lower income groups, and the banks were on the fringe of commercial banking.
§ The Page Committee decided to recommend that the Trustee Savings Banks should become mutual banks freed from much Government restriction and offering full banking facilities for personal accounts only. The Government of the day accepted that, and the Bill which came before Parliament in 1975–76 facilitated development on these lines, and overdrafts, personal loans, credit cards and mortgages soon followed.
The Page Committee said this:
A set of mutual Banks similar in organisational form to Building Societies seems to us an excellent way of promoting a competitive service for the financial needs of the small saver and depositor".
There were in fact to be three types of bank. There were to be commercial banks; the state bank, the GIRO; and this new set of mutual banks developed from the Trustee Savings Banks.
The Page Committee went on to say:
The suggestion has been made to us that the Trustee Savings Banks should be hived off to the private sector as commercial concerns. If by this is meant that they should have shareholders and operate from the point of view of ownership like commercial banks, we see such a solution as neither practicable nor desirable in principle.
Yet that is exactly what is now proposed.
§ The concept of mutuality has been abandoned. Shares in the Trustee Savings Banks, now reduced to four, and the Central Board are to be sold to the public. The new shareholders will thus acquire the existing assets of the banks and their own purchase price. The assets built up by generations of depositors are virtually to be given away.
§ It is argued that the Trustee Savings Bank Board are anxious to encourage depositors and staff to buy shares. I am quite sure that they are, and I acknowledge the efforts which they are making in order to bring that about. But if I understand the position aright, they expect that only some 10 per cent. of depositors will feel able to do so. While they could possibly constitute 50 per cent. of the shareholders, they would constitute a very much smaller proportion of the shareholding. In any case, 90 per cent. of the depositors, if that figure is correct, would be left out.
§ As we have already heard this evening, in Scotland, where the Trustee Savings Banks began and where they are strong, a depositors' association opposed to the flotation has been established. They have requisi- 1278 tioned a meeting of depositors of the Trustee Savings Bank (Scotland), and that is to take place on 28th August in Glasgow. The depositors, of course, were not consulted about what is now proposed.
§ It has been argued this evening by the Government that the ownership is obscure, or that there is no ownership at all at the present time. But we have also heard that there is strong support in legal circles in Scotland and elsewhere for the view that the banks in fact belong to their depositors. We have heard a good deal about the opinion expressed by Mr. John Murray, QC, for the TSB in 1979, when he came to the conclusion that the banks were a voluntary, unincorporated association owned by their depositors.
Other Scottish lawyers have written to me insisting that this is the case. Some have urged that the trustees are in fact in breach of trust. In answer to the question:
In the event of a solvent dissolution of a Trustee Savings Bank what are the rights of the depositors?",
Mr. Murray wrote in his opinion of 1979—and I have seen the opinion—
The depositors will take the whole remaining assets. Each depositor is, in my opinion, entitled to the return not only of the sum deposited by him but all his pro rata share of the produce [the reserves] earned by the deposits accumulated in so far as not withdrawn by him".
§ It is clear, whatever is the legal merit, whatever is in fact the final judgment on that, that not only many ordinary men and women but also experienced legal opinion have been under the impression in the past that the depositors owned the shares. It was with this in mind, and to retain some measure of mutuality, that an amendment was put forward at the Committee stage here proposing that 49 per cent. of the shares should be held in trust for the depositors and the staff.
§ That amendment was moved by my noble friend Lord Taylor of Gryfe, and it was defeated. We therefore tabled an amendment at Report, which I moved, ensuring tht 25 per cent. of the shares should be held in trust for depositors and the staff. This amendment was approved by the House and was contained in the Bill when it returned to the other place.
At the instigation of the Government that amendment was struck out in the other place, and it is that amendment on which I am asking your Lordships to insist. The amendment provides:
From the vesting day 25 per cent. of the shares in the TSB Group shall be held in trust for holders of deposits in the TSB Group and employees of the TSB Group, the trustees being elected annually in equal numbers by appropriate Associations of both groups
The 25 per cent. share would not be owned individually. It would be held in trust collectively for the whole body of depositors and staff.
§ In another place Mr. Ian Stewart, the Economic Secretary to the Treasury, described that as a hybrid arrangement. He said that we must either have an arrangement which is a 100 per cent. mutual, or an arrangement which is on the Companies Act basis as proposed in the Bill originally. He maintained that a hybrid arrangement would not work. But hybrid arrangements have worked and have been successful. If you look at the case of Kalamazoo Ltd. in Birmingham you will find that in 1947 30 per cent. of the shares, as a result of a gift or several gifts, were put in trust for the staff there. That arrangement still persists today, all these years later, and has worked 1279 successfully in the meantime. In fact the trustees have used some of the proceeds from shares, some of the dividends on shares, to purchase further shares. So it is possible to have a successful hybrid organisation.
§ It is argued also by the Government that with 5 per cent. of the shares held in trust for charity a block of 30 per cent. would dominate. There is no reason why those representing the 5 per cent. and those representing the 25 per cent. should necessarily agree with each other rather than with those representing the remainder of the shareholders. Even if they did, 30 per cent. would scarcely dominate 70 per cent.
§ It is argued that to have this arrangement would cut across the intention of the TSB to obtain a large number of the depositors as shareholders and other small shareholders. I see no reason why that should be the case. I am sure that that can still be done for the 70 per cent.
§ In conclusion, here we have a set of banks built up by their depositors. The trustees, as their name implies, are the trustees for the depositors. The depositors were thought to be the legal owners, and it may be that they are. No one knows for certain. We know only what various opinions about that are. At least let us ensure that all the depositors and not just a minority who can afford to buy shares will have a stake in the future control and prosperity of the Trustee Savings Bank along with the staff. We wish the Trustee Savings Bank well. We want to see it prosper, but we want to ensure that its depositors, who provide and have provided the sinews, are not elbowed out of the way and entirely deprived of the assets built up on their behalf and which may well be theirs. I beg to move.
§ Moved, That this House do insist on their Amendment 5 to which the Commons have disagreed for the Reason numbered 6.—(Lord Banks.)
§ 8 p.m.
§ Lord Grimond
My Lords, I rise to support my noble friend Lord Banks. I hope to do so extremely briefly. I do not intend to repeat what he has said so well nor indeed to repeat what I have said so well on previous occasions! I find that the Commons Reason is wholly unconvincing. To begin with, as my noble friend Lord Banks has said, trusts for this kind of purpose are quite common and work very well. Secondly, I do not see that the setting up of such a trust would interfere with the wide distribution of direct shareholding as suggested by the Commons. I believe that the depositors should have some special recognition in this Bill. Above all I am interested in the employees, and however good the terms offered to them, this would give them a definite and long-term stake in the bank. Therefore I think that the Commons objections are unconvincing and that we should insist upon our amendment.
§ Lord Mackie of Benshie
My Lords, I also should like to support my noble friend. The arguments which we heard earlier make it all the more necessary for the House carefully to consider insisting on this amendment. We have heard as I understand it—and if I am wrong perhaps the Lord Advocate can correct me—that the opinion on who owns the bank which the Government obtained after 1981 was founded on the 1280 Bill which reassessed the position of the TSB banks in 1981. I noticed that he did not try to contradict the opinion of 1979 and that he founded his assertion that good advice was taken on the fact that the 1981 Bill had altered the whole basis.
If that is the case, it appears to me that the assets of the depositors in Scotland have been taken away from them by stealth. If there is anything in Mr. Murray's opinion that was altered by 1981 it does not appear to me to be a satisfactory situation. I need not enumerate again the arguments so cogently put forward by my noble friend. All I can say is that the whole thing does not look right.
The Government could have brought forward a Bill in which they said that there was an enormous sum, £700 million or whatever it was, in the bank which would belong to the depositors. They would have shares to that, the Government would raise the additional money from the market, the depositors would have the £700 million and the investors another £700 million. That might have been a fair basis. But it must be wrong to allow the majority of the shares—and by far the majority, as I understand the opinion, is something like 90 per cent.—to pass into the hands of the new investors along with the original assets. This will only partially correct that position, but I think the House should support my noble friend's amendment.
§ Lord Houghton of Sowerby
My Lords, this is very late in the day to stage a major disagreement with another place. I have no doubt that earlier when this amendment was before your Lordships' House I supported it. I supported it because at that time not only this amendment but others of importance were being put as an expression of the opinion of your Lordships' House on matters that needed more thought and attention. I was under the impression that, after having passed several amendments, and the board and the Government having had an opportunity to consider the matter further, a lot of water has gone under the bridge. I was under the impression that some kind of tolerable understanding had been reached between those who were sponsoring this and other amendments and representatives of the Treasury and the bank. I was not involved in any of those discussions.
I hate to say that I am nearly always right, but I raised this major issue of who owned this bank right at the beginning. I made no bones about it. I said that the ownership rested where the money was and the money belonged to the depositors, therefore the ownership could not belong to anybody else. But what support did I have? I am a lone voice far too often in your Lordships' House. I did not have the support then that I thought that principle required.
I see that as a major issue which might have had to go elsewhere so as to determine where the ownership should lie, but this has became far too complex for me to be able to suggest a way out. Now we have what I thought was the best that could be done in the circumstances. I am afraid that I shall not be able to support the Motion before your Lordships' House at the moment. I feel that all concerned, including the Trustee Savings Bank Holding Company and the chairman, have heard all the arguments and they 1281 know the sentiment that is widely held on this transaction. For my part, apart from the undertakings which have been given, which up to a point have satisfied certain of the earlier amendments, I am prepared to leave it to the bank now to decide what they can reasonably do, if anything at all, to meet the sentiment behind the case that the depositors have a claim to special consideration.
At least we can be certain that this bank does not belong to a large number of people who will subscribe to the floating of the shares. They will come into it because they want to be on a good thing and they undoubtedly will, because the bank is sitting on bags of gold. When there are bags of gold around all sorts of people want to put their hands on them.
The depositors are those who in the main have enabled the bank to reach its present position. I do not say that the depositors have actively contributed to the success of the bank. The success of the bank has been in the management of the affairs of the bank and in having a great deal of money at very competitive rates of interest. I am sorry to say that I cannot support the insistence of the Alliance on the earlier amendment, much as I had sympathy with it at the time. But now is the last hour on this Bill and we cannot keep it hanging about any longer. Otherwise, I think, it will seriously damage the prospects of the bank in making a successful launch and that, in turn, will probably depreciate the value of the investment that the depositors among others will surely wish to make.
I hope that we can rely on the bank, and Sir John Read as chairman, to do the best that they can having regard to the fact that they want to make a successful launch in the interests of the bank and its future—and therein lies the interests of the depositors as well as others—and see what can be done to give preferential treatment to the depositors to enable them to feel that they have a fairer deal. What a pity it is that the Scottish depositors woke up too late and the English depositors never woke up at all!
Those of us who have tried to wake them up and put their case here received little or no support. I do not think I had a single letter from any depositor supporting the stand that I took on their behalf. There are limits to how far you can go on fighting a case when you do not get the support of those who are directly concerned. There it is, I have done my bit and I have no more to say.
§ Lord Stoddart of Swindon
My Lords, I have left my contribution until rather late to hear what other people had to say, particularly my noble friend Lord Houghton of Sowerby. I am somewhat surprised that he is taking the line that he is. If he will recall, when he correctly stated that the bank belonged to its depositors, he received a great deal of support. He had support from me—that is certain—and from other quarters of the House as well, certainly on this side. To say that because he has not had representation from the depositors and perhaps the staff of the Trustee Savings Bank does not necessarily mean that they are not particularly interested in what happens to them.
We are here, I should have thought, to safeguard the interests of people whose interests we think might be being undermined, irrespective of whether the people 1282 come to us or understand exactly what is being done in this place in Parliament on their behalf. It is our duty to try to see that they are safeguarded. On Second Reading, and since, I have argued that the correct way forward was mutualisation. That was still possible and would have been the best safeguard for the depositors and the staff of the Trustee Savings Bank. That is still my view.
If we had proceeded in that direction, which is supported by the noble Lord, Lord Banks, and other noble Lords, then we would not be having actions before the Scottish courts. There would be no problem at all because it would have been established that the depositors were the owners in law and that the bank would be run for their benefit.
The amendment, I would remind your Lordships, was passed in this House without Division. It was accepted by the Government; or, at least, if they did not accept it, they did not vote against it.
§ Lord Stoddart of Swindon
My Lords, they did not seek to oppose it. It may well have been that they thought they would lose; but that is another matter. The fact is that there was not a Division. The amendment sought—I think quite rightly—to give depositors and staff an interest, a real interest, in the new organisation. I believe that was correct, and indeed I have a particular interest in this amendment because, as a result of its passing, I did not move my Amendment No. 8 at Report stage, which would have sought to have given representation to the workers on the central board and on each individual board of the Trustee Savings Bank.
As the result of the passing of this amendment, I withdrew it because I thought it was unnecessary. I thought that if the workers and the depositors had 25 per cent. they had enough interest without needing to elect additional workers to the board. Therefore, I feel affronted by the Commons decision to remove this amendment because I have now lost the opportunity of moving my amendment to put workers on the boards. Naturally, I shall certainly support the amendment of the noble Lord, Lord Banks, tonight. I hope that my noble friend Lord Houghton will reconsider his position, and I ask my other noble friends to follow me into the Lobby to support the amendment.
§ 8.15 p.m.
The Earl of Gowrie
My Lords, I, for one, am not surprised that the noble Lord, Lord Houghton of Sowerby, has taken the line that we have all had a good go at the issues raised by this Motion to insist on the Lords Amendment No. 5 to the Bill. No less than three Liberal Front Bench speakers have made the case of insisting; but it is the same case that the noble Lord, Lord Banks, and some of his noble friends put forward in your Lordships' House on no less than three occasions during the passage of the Bill. I am therefore simply going to summarise very briefly the arguments that we feel there are against the case, and then we shall have to come to a view upon it.
I think we are all agreed that the TSBs cannot sensibly continue on their present, very strange 1283 constitutonal basis. There are two options: to convert the TSBs into mutual organisations or to convert them into a Companies Act structure with direct shareholding. There are two key reasons why the TSBs themselves and the Government have adopted the Companies Act approach. The first is that in today's conditions it really is essential that a bank with general banking powers—and I would remind your Lordships that TSBs enjoy general banking powers at present—should have access to the capital markets if it is to prosper and if it is to survive and thrive alongside its competitors. The second is that the Companies Act solution provides for effective accountability to the bank's owners. A mutual solution, as is sought, satisfies neither of these tests.
I accept that there are successful mutual financial institutions. It is one thing for long-established mutuals to continue in business and quite another to launch a new type of mutual organisation. Also, I think the successful mutual institutions to which some critics of the Bill refer—for example, building societies and mutual insurance companies—are much more specialised and much more closely regulated than banks. I would remind the House in this context that when the Page Committee recommended that TSBs should become mutual banks it envisaged that they would engage in a rather narrower range of business than they do now.
The amendment on which the noble Lord, Lord Banks, wishes to insist seeks a middle course between the Companies Act approach to the Bill and the mutual bank approach, which he would prefer to see, by providing that 25 per cent. of shares should be held in trust for depositors and staff. While I appreciate that others may take a different view on the balance of advantage between mutual banks and Companies Act banks, I would ask your Lordships to accept that company status or mutual status are alternatives. It is not practical to blend the two. The amendment falls between two stools. It deprives the TSBs of most of the advantages of the Companies Act solution but bestows few, if any, of the compensating advantages of the other solution.
As the noble Lord, Lord Houghton said—no lone voice, as so often, where I am concerned—we have had a good run over this case. The noble Lord, Lord Banks, has made his position very clear, but I hope that at this stage of the Bill, after the other place has made its views known on this amendment, the noble Lord really will reconsider his intention, which appears to be to divide the House.
§ Lord Banks
My Lords, I should like first to thank those noble Lords who have expressed their support for this Motion: my noble friends and also the noble Lord, Lord Stoddart. I much appreciate their support. The noble Lord, Lord Houghton, said that it was rather a late stage at which to have a disagreement with another place and that we must not keep the Bill hanging about; but I would have thought that the new information about the possible legal position which we have had this evening, and about which we had much discussion in our earlier debates, is in itself sufficient ground for keeping things hanging about for a little longer, so that we may make sure that this legislation is not confiscatory—because that is really the issue.
1284 There has been no understanding on this amendment. The noble Lord, Lord Houghton, referred to discussions which had taken place. Discussions certainly did take place and I am most grateful to the noble Earl, Lord Gowrie, and to the Economic Secretary to the Treasury for the fact that they were prepared to discuss the matter with me. But we did not agree at any point and I have pressed this amendment throughout, so that I certainly do not feel like abandoning it at this stage.
On the question of whether or not it is right for this House to return an amendment to the other place, of course we know that within the Standing Orders of the House it is certainly quite correct procedure. Whether we ought to do it at this particular juncture must be judged by the circumstances, and I think the circumstances are such that we are right, on this particular matter and in view of all that is now being said about the ownership of the deposits and the position of the depositors, to ask the other place to think again.
The noble Earl, Lord Gowrie, said that the Trustee Savings Banks must have access to the capital market. But of course they would still have access to the capital market. They would be raising this 70 per cent. in that way. He gave arguments which were against mutuality at first but which do not necessarily apply to what he described as "the middle course". He asserted, though I do not really think he had any grounds for so doing, that one had to have one or the other: mutuality or a company structure. He said that one could not have a combination of the two. Yet, as I said myself earlier, and as my noble friend Lord Grimond also said earlier, there are hybrid examples. There are examples of a certain number of the shares being held in trust and the others being held in the ordinary way by shareholders working perfectly satisfactorily in industry. There cannot be any reason why it should not apply in the case of the Trustee Savings Banks.
We are considering here the position of the depositors and whether these assets really belong to them, and whether they had good cause to think that they belonged to them even if in fact in law they do not belong to them. Surely the way to deal fairly with that matter is to give all depositors a stake in the control and the prosperity of the Trustee Savings Banks. That is what this amendment, which I am suggesting to the House that we should insist on, does. I feel that in all the circumstances it would right to take the opinion of the House on this matter.
§ 8.25 p.m.
§ On Question, That this House do insist on their Amendment 5 to which the Commons have disagreed for the Reason numbered 6?
§ Their Lordships divided: Contents, 47; Not-Contents, 80.1286
|DIVISION NO. 2|
|Airedale, L.||Cledwyn of Penrhos, L.|
|Banks, L.||Collison, L.|
|Barnett, L.||Crawshaw of Aintree, L.|
|Beaumont of Whitley, L.||Darwen, L.|
|Blease, L.||Dean of Beswick, L.|
|Carmichael of Kelvingrove, L.||Diamond, L.|
|Elwyn-Jones, L.||McNair, L.|
|Ennals, L.||Mellish, L.|
|Ewart-Biggs, B.||Murray of Epping Forest, L.|
|Falkland, V.||Nicol, B.|
|Gallacher, L.||Ogmore, L.|
|Galpern, L.||Ponsonby of Shulbrede, L.|
|Graham of Edmonton, L. [Teller.]||Robson of Kiddington, B.|
|Grey, E.||Seear, B.|
|Grimond, L.||Shepherd, L.|
|Hampton, L.||Simon, V.|
|Hanworth, V.||Stedman, B.|
|Harris of Greenwich, L.||Stewart of Fulham, L.|
|Hooson, L.||Stoddart of Swindon, L.|
|Kilmarnock, L.||Strauss, L.|
|Lloyd of Kilgerran, L.||Taylor of Blackburn, L.|
|McIntosh of Haringey, L.||Taylor of Gryfe, L.|
|Mackie of Benshie, L. [Teller.]||Turner of Camden, B.|
|Airey of Abingdon, B.||Cameron of Lochbroom, L|
|Arran, E.||Carnegy of Lour, B.|
|Belstead, L.||Carnock, L.|
|Bessborough, E.||Coleraine, L.|
|Boardman, L.||Colwyn, L.|
|Boyd-Carpenter, L.||Cork and Orrery, E.|
|Brabazon of Tara, L.||Cox, B.|
|Brougham and Vaux, L.||Craigavon, V.|
|Bruce-Gardyne, L.||Craigmyle, L.|
|Caithness, E.||Cullen of Ashbourne, L.|
|De La Warr, E.||Mottistone, L.|
|Denham, L. [Teller.]||Murton of Lindisfarne, L|
|Donegall, M.||Napier and Ettrick, L.|
|Eden of Winton, L.||Newall, L.|
|Elliot of Harwood, B.||Norfolk, D.|
|Elliott of Morpeth, L.||Poltimore, L.|
|Elton, L.||Polwarth, L.|
|Glanusk, L.||Rankeillour, L.|
|Glenarthur, L.||Reay, L.|
|Gowrie, E.||Renwick, L.|
|Gray of Contin, L.||Rochdale, V.|
|Harmar-Nicholls, L.||Sanderson of Bowden, L.|
|Henley, L.||Sandford, L.|
|Hives, L.||Selkirk, E.|
|Hood, V.||Shannon, E.|
|Hooper, B.||Skelmersdale, L.|
|Hylton-Foster, B.||Stockton, E.|
|Inglewood, L.||Strathcarron, L.|
|Killearn, L.||Suffield, L.|
|Kimball, L.||Swinton, E. [Teller.]|
|Kindersley, L.||Teviot, L.|
|Lane-Fox, B.||Torphichen, L.|
|Layton, L.||Trefgarne, L.|
|Long, V.||Trumpington, B.|
|Lucas of Chilworth, L.||Vaux of Harrowden, L.|
|McFadzean, L.||Vinson, L.|
|Macleod of Borve, B.||Vivian, L.|
|Margadale, L.||Whitelaw, V.|
|Massereene and Ferrard, V.||Wise, L.|
|Mersey, V.||Wynford, L.|
§ Resolved in the negative, and Motion disagreed to accordingly.