HL Deb 20 December 1988 vol 502 cc1246-7

2.42 p.m.

Lord Jacques asked Her Majesty's Government:

What steps they will take to ensure that working class members of building societies are properly compensated when ownership of the net assets is taken from them on the conversion of the society to a company.

The Parliamentary Under-Secretary of State, Department of Transport (Lord Brabazon of Tara)

My Lords, this is already provided for by the Building Societies Act 1986 and regulations made in July. Members of a converting society not eligible to vote would be entitled to a cash distribution equal to their proportionate share in the society's reserves. Those eligible to vote have a continuing interest in the reserves through the priority liquidation account which the new plc is obliged to maintain. The main safeguard, however, is that the members themselves have to decide whether the society converts to plc status, and no one else. The voting requirements are very demanding, and each member has only one vote.

Lord Jacques

My Lords, I thank the Minister for his reply. Is it wise to provide for the conversion of a building society into a company when reasonable compensation to existing members can undermine the financial strength of the institution? Secondly, does not the 1986 Act and the 1988 amendments make it unnecessary for building societies to seek conversion because they already have the powers needed for competition with the banks, so much so that two of the leading building societies, the Halifax and the Nationwide Anglia, have made it clear that they will not seek conversion?

Lord Brabazon of Tara

My Lords, the answer to both questions is that it is for members to decide whether or not conversion is a good thing for them. The Government are neither for nor against conversion. Regulations were made this year to remove both artificial obstacles and artificial inducements to conversion.

Lord Somers

My Lords, how does the noble Lord define the term "working classes"? Does it not apply logically to anyone who works?

Lord Brabazon of Tara

My Lords, the noble Lord makes a very good point. I should say that the answers I have given so far apply to anyone, irrespective of whether they might be described as working class or otherwise.

Lord Williams of Elvel

My Lords, has the noble Lord read today's Independent, which describes a serious loophole in the conversion procedures whereby large depositors can possibly benefit when conversion takes place? Will the Government make sure that that loophole is closed?

Lord Brabazon of Tara

My Lords, I am not aware of the article in today's Independent but I suspect that it may be on the same lines as the article in yesterday's Financial Times, which I did read. Should a member manipulate his account in order to draw a large distribution he can, of course, try to do so, but societies' rules provide appropriate means to prevent such abuse.

Lord Taylor of Gryfe

My Lords, in the light of the Minister's reply, may I take it that there is no danger of similar proceedings to those which took place on the privatisation of the Trustee Savings Bank, when the Government laid claim to the assets which belonged to the members or the shareholders?

Lord Brabazon of Tara

My Lords, there is no question of the Government laying claim to any of the assets of the building societies; nor, in fact, did we get anything out of the privatisation of the Trustee Savings Bank.