§ 6.18 p.m.
§ Lord Hayhoe
My Lords, I beg to move that this Bill be now read a second time.
1358 The Bill has come to us from another place, where it started life as a Ten-Minute Rule Bill introduced by my former colleague, Douglas French, the Member of Parliament for Gloucester. Subsequently, it was nodded through its Second Reading and remaining stages on Friday 10th February without objection—a very clear indication of its widespread all-party support.
Your Lordships will recall that a similar Bill was introduced by the noble Lord, Lord Dubs, and given its First Reading on Wednesday, 11th January. Let me say at once how grateful I am to the noble Lord for his help and co-operation. He and Douglas French should share the plaudits from all those who will benefit from this legislation. I should declare an interest as a non-executive director of a building society, although neither I nor any member of my family has any financial interest in this matter.
The Bill seeks to remedy an unfortunate quirk in the law which I believe first came to light some six years ago after the Abbey National Building Society decided to convert to plc status. It has been highlighted again as a result of the proposed take-over of the Cheltenham & Gloucester Building Society by Lloyds Bank. I should explain that the Building Societies Act 1986 empowers building societies to pay a bonus to investing members in the circumstances of a take-over, like that of the Cheltenham & Gloucester by Lloyds Bank, or a merger like that proposed between the Halifax and Leeds Permanent building societies, provided that certain conditions are met. Let me make it abundantly clear that I express no views on the merits or demerits of the C&G take-over by Lloyds or the Halifax and Leeds Permanent merger. I am dealing only with the conditions in which bonus distributions of cash or shares can be made. Those conditions restrict bonus distributions to sole account holders or to the first-named person of a joint account provided they have invested continuously for at least two years.
Let me say at once that the two-year loyalty requirement is generally accepted as sensible and reasonable. It is the restriction to the first-named of joint accounts which gives rise to serious anomalies which are generally seen as unreasonable and unfair. For example, widows who were the second-named in joint accounts with their husbands and whose husbands died during the qualifying two-year period are excluded from bonus payments. Under existing rules, in such cases the bonus cannot be paid to the widow whether her husband's name was simply deleted from the joint account or the balance in that account was transferred to a new account in her name after her husband's death. I do not believe that Parliament intended such unfairness; and this legislation is intended to put matters right.
Somewhat similar anomalies can affect newly-marrieds. For example, if the wife on marriage chooses to redesignate her building society investment account jointly in the names of her husband and herself, she would lose the rights accruing to her before marriage when the account was in her own name. Somewhat similar difficulties can arise when marriages are dissolved or when accounts are split for tax reasons.
1359 Regrettably, there are other anomalies implicit in the rather complicated provisions of the 1986 Act affecting bonus payments and the related subject of voting rights. But I must make it absolutely clear, as did Douglas French in another place, that this Bill is not a comprehensive measure. It does not attempt to tackle every related problem, and it does not deal with any matters affecting voting rights. The Bill has a limited objective as set out in its Long Title and I hope that that will be accepted when we come to consider the detailed provisions of the Bill in Committee and at Report. Indeed, I fear that if the scope of the Bill were to be widened, it may well be counter-productive as such an amended Bill could run into severe difficulties when it returned to another place. No doubt powerful arguments can, and perhaps will, be deployed to include other desirable objectives in the Bill. But in my view such actions will put at risk the survival of the Bill when it is returned to another place for consideration of Lords amendments.
Both Douglas French and I are grateful for the encouragement and help given and promised by Treasury Ministers and by the Building Societies Commission. As a former Treasury Minister myself, I know how difficult it is to draft new clauses or amendments which meet the high and exacting standards set by parliamentary counsel. I appreciate that considerable redrafting will be required in order to achieve the clear and limited but well worthwhile objectives I have detailed and in support of which the Bill was given what I might describe as fast-track approval in another place. I hope that my noble friend the Minister will, with the assistance of parliamentary counsel, table appropriate amendments for consideration in Committee so that those agreed objectives can be met.
Let me end by stressing that the Bill does not extend or confer rights to those who may benefit. It is a permissive measure. It is not mandatory and the decisions about who should or should not receive bonus distributions of cash or shares will be made by the building society concerned. The Bill seeks to redress specific and genuine grievances, particularly for the group of widows affected, and I commend it to the House.
§ Moved, That the Bill be now read a second time.—(Lord Hayhoe.)
§ 6.26 p.m.
§ Lord Dubs
My Lords, perhaps I may first declare an interest in that I hold a savings account with the Cheltenham & Gloucester Building Society, as does my wife, though I am bound to say that I see no personal advantage through the passage of the Bill either to myself or to my wife.
I give the Bill my full support and congratulate the noble Lord, Lord Hayhoe, for his clear exposition of what the Bill is and is not concerned with. As he said, it deals with one of a number of anomalies or injustices created or continued by the Building Societies Act 1986. I regret that, despite a great deal of urging, the Government did not feel it possible to bring about the 1360 changes in their own right; they left it to a Private Member's Bill to correct what is clearly a glaring injustice.
I hold a letter sent by the Treasury to one of the many people who wrote to me. It is dated December 1994 and signed by a civil servant rather than by a Minister. It states that the Government have decided that the controls on takeovers imposed by Parliament in 1986 are to remain in place. Therefore, somewhere between last December and today, the Government have had a most welcome change of heart.
Perhaps I can say in passing that I am not sure whether or not investors and borrowers as a whole will be better off if banks continue to take over building societies. That is not the subject of today's debate. But, while supporting the Bill, we should not necessarily say that the continued takeover of building societies by banks, and therefore as it were the diminution of building societies as borrowers and lenders, is a good thing.
A number of injustices exist, of which I shall mention three. The first is the subject of the Bill; namely, the position regarding the second-named account holder in the case of a joint account, whether as a result of death, marriage or for any other reason. The second anomaly is one that nobody can do much about—and perhaps should not do much about—and concerns the two-year qualifying period. There must be a qualifying period. However, enormous hardship is caused when somebody misses the qualifying period by perhaps one or two days and is therefore deprived of the benefit which would otherwise accrue to them.
For the reasons expressed by the noble Lord, Lord Hayhoe, one does not want to overload the Bill with further changes. But, again, the third anomaly is one for which I can see no justification. It concerns the situation where individuals switch their account with a specific building society from one type of account to another at the suggestion of the building society because the building society says that the customer will gain more interest. They then lose out in terms of the benefit because they no longer qualify under the legislation. The Cheltenham & Gloucester Building Society wrote in those terms to all people holding specific accounts. I certainly received such a letter and the reason I did not respond was simply inertia; I am now the beneficiary of that inertia. I regret that some people who acted diligently and sensibly in what seemed to be their own interests lost out. It is not an anomaly that we can put right on this occasion, but it is one which is hard to justify.
As soon as I had the privilege of taking my seat in this House last October I set about preparing a Bill, or having a Bill prepared, and I introduced it in early January. Although I was particularly concerned by the Cheltenham & Gloucester situation, my Bill is also relevant to the situation of other building societies. The same is true of the Bill now before the House. I wrote to the Government at the time asking them for their support. However, the postal system must be even worse than I thought it was because I certainly had no answer to my letter of early January as to whether the Government would be willing to support my Bill. It 1361 might have saved a lot of time had I received a reply because until today I was not sure of the Government's position. But the noble Lord, Lord Hayhoe, has made it clear that the Government support the Bill. A few days after I introduced my Bill in another place a Bill was introduced by Douglas French. That Bill is before us today.
As soon as I introduced my Bill I received an astonishingly large number of letters from all over the country. It is quite amazing how the press coverage and an item on the radio provoked such a large number of letters. Some gave direct support to the proposition contained in my Bill and in the Bill before us and others said that the Bills are fine but drew attention to the anomalies which I have already mentioned. I am grateful to the many people who took the trouble to write to me to express their views. I am also impressed by the enormous strength of feeling that can be seen in those letters. That strength of feeling is right because people, many of whom I am sure are not well off, will suffer an injustice unless the Bill goes through, although others will still suffer injustices which I fear the Bill cannot put right. I agree with the noble Lord, Lord Hayhoe, that it is not possible in a Private Member's Bill to rectify all these anomalies. If we try, we run the risk that when the Bill goes back to another place it will die a death, and we shall have achieved nothing at all. It is painful to have to write to people to say that to them, but it is the truth.
Perhaps I may say in passing that it makes me wonder what was going on when Parliament passed the Building Societies Act 1986. Our much-vaunted scrutiny of legislation in both places seems to have been a little amiss then. However, I have not read the Hansard reports of the proceedings on the Bill to see whether the issues about which we are talking today were debated at the time.
It is welcome that the Cheltenham & Gloucester Building Society has announced that Lloyds Bank has set aside the sum of £10 million to be made available to the second named account holders—I hope it means all second named account holders and not just widows—provided that the legislation goes through Parliament by 1st August this year. That means that the Cheltenham & Gloucester Building Society will not wish to delay a ballot of its members, which has to take place by 31st March. I have had a letter from the chief executive of the Cheltenham & Gloucester Building Society indicating why it would be technically very difficult indeed for that building society to delay yet again its proposed deadline for the ballot. I believe that there is some strength in that argument.
I shall shortly withdraw my own Bill, but before I reach that point perhaps I may say that I am slightly puzzled on one point. I have been asked on a number of occasions why, if my Bill is intended to achieve the same aim as the Bill under discussion, my Bill is so much easier to understand than the other Bill. That is no credit to me whatever. Perhaps I may give my thanks to the Public Bill Office in this House for the help it has been to me and for the fact that it has drafted my Bill in such a way that it is extremely simple to understand.
1362 The other Bill is jolly difficult to understand. Perhaps the noble Lord can explain whether there is anything in his Bill which is different from what is in my Bill. Otherwise, simplicity of English is something that is always thought desirable in these matters.
I need to explain to the people who have written to me why I am withdrawing my Bill. I have not sought to gain any party political advantage out of what I have done and I was slightly taken aback not only by the Government's failure to reply to my letters but also by one or two of the events surrounding the fact that there were two Bills rather than one. However, it would be churlish of me to go into that at great length. I merely assume that the Government preferred a Bill to go through both Houses in the name of Conservative Members rather than in the name of someone who is a member of the Labour Party.
Having said that, I wish to give my full support to the Bill. I urge its quick and sensible passage through this House in order that it can become law as quickly as possible. It is highly desirable in the interests of the many second named account holders who would otherwise suffer an injustice which they ought not to suffer.
§ 6.35 p.m.
§ Earl Russell
My Lords, I shall not detain the House long. I am only the understudy in this respect and I have not yet learnt all the lines. I should like, however, to put the support for this Bill on an all-party basis. I thank Mr. French and the noble Lords, Lord Hayhoe and Lord Dubs, for the work which all three of them have done on the subject. The Bill clearly remedies a mischief. When I consider why that mischief is perceived in 1995 and was not perceived in 1986 I think it may have something to do with the fact that the old-fashioned concept of the head of the household now looks a little more out of date than it did then. We on these Benches are happy to welcome that change.
We shall be happy to support amendments which are designed to improve the drafting of the Bill. We have heard what the noble Lords, Lord Hayhoe and Lord Dubs, have said about widening the scope of the Bill. That clearly depends on the possibility of getting the Bill through. On that point, I hope that the Minister may be in a position to give us some further guidance as we proceed. With those few remarks, and the wholehearted support of these Benches for the Bill, I am happy to support it.
§ 6.37 p.m.
§ Baroness Macleod of Borve
My Lords, I felt that I could not let this evening pass without adding my few words to the passage of the Bill. I do so because for very many years—noble Lords will know that I have been widowed twice—I have been involved with the National Association of Widows. I was president and then chairman and now I am a trustee of the association. It is a large organisation, which tries to help those who have lost their partners in life. Around 500 women are widowed every day and there are more than 3 million 1363 widows in the country. We try to help them by giving them shoulders to cry on, by giving them advice and by giving them other things to do with their lives.
One of the overriding problems which most of the widows in the country still face is a shortage of money. A great deal of money is no longer there because their husband is no longer contributing or earning any money. We do not give money to widows—we leave that to the state in its wisdom —but the passage of the Bill will be of enormous help to a great number of widows who have with their partners put money into the building societies. Why this change was not made many years ago I have failed to find out, but, as they say, better late than never.
As the noble Lord, Lord Dubs, said, the principle of the Bill is welcomed by many people throughout the country. I congratulate the noble Lord on thinking of his Bill at the same time as the Government thought of theirs. I am afraid that I do not know whose came first. As the noble Earl, Lord Russell, said, the all-party nature of the Bill will make it a great success throughout the country. I am sure that it will be warmly welcomed. I welcome it on behalf of those who are left, the widows. I should like to thank my noble friend Lord Hayhoe for tabling his Bill and for introducing it so ably tonight. I welcome the Bill on behalf of all the widows and, indeed, on behalf of anybody who will be helped by it. I wish it a swift passage through the House.
§ 6.40 p.m.
§ Lord Eatwell
My Lords, I am happy to join in the pleasing unanimity which has been expressed by those on all sides of the House in welcoming this throughly sensible measure, which clears up an obvious anomaly in the law. We on these Benches are delighted to support the Bill, not least because its essence was contained in the Bill of my noble friend Lord Dubs. The noble Lord, Lord Hayhoe, paid a most warm and kind tribute to the part played in the legislation by my noble friend Lord Dubs.
It would be inappropriate to pass from that point without telling a little of the intriguing story of what actually happened. My noble friend's Bill was introduced in this House on 11th January. Mr. French's Ten-Minute Rule Bill appeared about a week later, Mr. French having switched his topic 48 hours before he was due to introduce his Bill. My noble friend was told that the Second Reading of his Bill could not take place until this coming Wednesday because no Minister was available to deal with it. I have had the opportunity of enjoying the company of the noble Lord, Lord Henley, on numerous occasions over the past seven weeks, and I am surprised that he was not available to deal with my noble friend's Bill earlier than today.
However, enough of that carping—we are all delighted that Mr. French's Bill, which has been introduced in this House by the noble Lord, Lord Hayhoe, is before us today. As I understand it, the scope has been extended a little from my noble friend's Bill to include problems of divorce, marriage and the other ways in which joint ownership or joint account holding can occur.
1364 The anomaly that we are considering raises the interesting and important question of whether the anomaly occurs elsewhere. Clearly, a building society, as a mutual society, has a rather peculiar relationship between depositors and owners. But what of other mutual societies? Should the legislation be drawn more widely than to cover building societies alone? Given the fact that a significant number of other anomalies are associated with joint account holders, will the Government be bringing forward legislation in due course—perhaps soon—to deal with the wide range of anomalies that were pointed out by the noble Lord, Lord Hayhoe? It seems appropriate that such legislation should be introduced, even if not as an amendment to this Bill. If the Bill is to have a speedy passage, surely a new Bill should be brought forward to deal with those numerous anomalies which have emerged since 1986.
However, there is perhaps one point which should be considered in the context of this Bill. I refer to the extraordinary anomaly that was pointed out by my noble friend of the loss of bonuses or benefits when switching between accounts with the same building society. It is extraordinary that someone who holds an account with a building society and who simply moves between different categories of account should thereby lose the advantages associated with bonuses on mergers or purchases.
It would be appropriate for the Government to introduce a short Bill or an amendment to deal with that matter in short order. If the Government do not do so, perhaps the best thing would be for my noble friend Lord Dubs to introduce another Bill to deal with that anomaly, because we know that the Government will then produce a Bill out of the hat in very short order. Having said that, we are delighted to support this enormously successful measure.
§ 6.45 p.m.
§ The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Henley)
My Lords, I start with a small apology to the noble Lord, Lord Eatwell. I am in the rather strange position of being in agreement with what the noble Lord said. The alarm bells sometimes start to ring when I am in agreement with the noble Lord. I start with an apology that his noble friend Lord Dubs was unable to get in touch with me any earlier. However, I have to stress that I have certain other responsibilities within the Government which often have to come before occasions in this House. Perhaps I may also offer an apology to the noble Lord, Lord Dubs, for the fact that his letter of sometime in early January—I am not sure that I caught the date—has not yet been answered. I shall certainly chase that up with my right honourable and honourable friends in the Treasury to ensure that the noble Lord receives an answer in due course.
Perhaps I may also make one small point in response to the point that both he and the noble Lord, Lord Eatwell, made. We have no desperate desire to ensure that such Private Member's Bills are dealt with by my honourable friends in another place or by my noble friends in this House. In fact, I can cite an instance of a Bill in which I had some interest in my previous 1365 department, the Department of Employment, which was introduced by Mr. Keith Vaz, one of the noble Lord's honourable friends in another place. That Bill was taken through this House as a Private Member's Bill by my noble friend Lady Miller who was then on the Back Benches, but has since, happily, joined us on the Front Bench.
Perhaps I may say on behalf of Her Majesty's Government how much we welcome this Bill which was so persuasively introduced by my noble friend. I should like to pay tribute also to my honourable friend the Member for Gloucester for taking the Bill so quickly through all its stages in another place. I dare say that many of us wish that we could take Bills so quickly through all their stages in this House as well. I am confident that the Bill can complete its remaining stages as speedily as possible, and certainly by the end of July, and so benefit the many widowed joint account holders in the Cheltenham & Gloucester Building Society.
My noble friend and others, particularly the noble Lord, Lord Eatwell, have pointed out other anomalies in building societies legislation and have asked whether we could deal with those matters. As the House will be aware, the Treasury has carried out a review of the Building Societies Act 1986. The results of the second, and final, stage were announced by my honourable friend the Minister of State on Friday of last week. The Government are to change substantially the approach to building societies' powers, moving from the current prescriptive framework to a more flexible structure. This will enable societies to pursue their core business more efficiently, and to provide competition across a wider range of financial services. At the same time, the Government are bringing forward a 15-point package of measures designed to make societies more accountable, by improving the information given to members, and increasing the transparency with which societies conduct their business.
I can give the assurance that we shall bring forward legislation to amend the Building Societies Act as and when a suitable legislative opportunity arises. In the meantime, we shall continue to implement by secondary legislation the various changes which were announced by my honourable friend when he made his statement on the first stage of the review last July, when he made it clear that the Government do not plan to remove the stringent controls on building society conversions and takeovers. The "two-year rule", which outlaws cash payments to recently joined members of a society which converts or is taken over, is designed to stop destabilising flows of funds between societies on the basis of market rumours. We believe that this rule and the high turnout and voting thresholds which must be achieved for a conversion or takeover proposal to succeed are essential protections for the building society sector.
Nonetheless the Government have sympathy for those members of the Cheltenham & Gloucester Building Society who were caught by the two-year rule because of the way in which it interacted with the rules on joint account holders. Many of those, as my noble friend made clear in his introduction, were women who had 1366 been recently widowed. Although they had been members of the C&G for many years, they had held their savings in joint accounts, of which their late husbands were the first named holders. On inheriting those accounts, in relation to the rules governing cash distributions, the widows are treated in the same way as new members of the society. That means that most of those inheriting accounts after the end of 1992 are ineligible for a cash bonus as part of the takeover bid by Lloyds Bank.
As I have indicated, the Government recognised the concern of the investors who found themselves in that unfortunate position. It would not have been appropriate for us to bring forward piecemeal changes to the legislation, especially when a comprehensive review of the Act was under way. But we welcomed the introduction by my honourable friend in another place of a Bill to allow second named account holders to benefit from a cash distribution, provided that they had been shareholders for at least the required two-year period. It is an excellent example of a useful and constructive Private Member's initiative, and the Government will do all they can to ensure that the Bill is enacted in time to help C&G investors. In that connection, I commend also the efforts of the noble Lord, Lord Dubs, who attempted to tackle the issue of joint account holders' rights by introducing similar legislation, although drafted differently.
The Government support fully the aim of the Bill to secure the rights of second named building society account holders. We believe that, as well as helping widows who have inherited joint accounts, it should allow others who are, or have been, joint holders, but who have been members for at least two years, to be eligible for any distribution if their society converts or is taken over. My noble friend gave the example of a woman who has held a share account for a number of years. If she marries and puts her money into a joint account with her new husband, and his is the first name on the account, then she would lose her entitlement to a distribution. We believe that in future she should not so lose her entitlement. The Government are looking carefully at the wording of the Bill and will bring forward amendments in Committee.
My noble friend suggested that I might bring forward those amendments with some assistance from parliamentary counsel. I can assure my noble friend that I shall need considerable assistance from parliamentary counsel in drafting those amendments, but I am sure that they will advise me appropriately. I shall bring forward amendments in Committee to ensure that the Bill achieves its purpose of extending as far as possible the rights of second named holders, provided that they are consistent with the structure and the spirit of the Building Societies Act.
Again, I repeat the warnings made by my noble friend about making fundamental amendments to the Bill and the danger that that might mean losing the Bill in another place. I am advised that that would be the case if we were to deal with the anomalies relating to those switching accounts within the same building society, pointed out by the noble Lord, Lord Dubs. That is not something which we can deal with in this Bill as drafted.
1367 The Bill has been welcomed on all sides of the House. It will correct an unintended anomaly in the Building Societies Act and allow thousands of widows, who would otherwise lose out, to benefit if the members of the Cheltenham & Gloucester approve Lloyds Bank's takeover bid. It will provide reassurance for joint account holders in the Halifax and Leeds building societies, who may be concerned about whether they will qualify for any benefits which may be offered if the planned merger and conversion of their societies goes ahead. I commend the Bill to the House.
§ 6.53 p.m.
§ Lord Hayhoe
My Lords, perhaps I may say how grateful I, my honourable friend Douglas French, and those who will benefit when the Bill becomes law, as I hope it will, are to all who contributed to this short debate, and for the welcome support which has come from all parts of the House. Harmony reigns. It would be wrong of me to say another word since I might disturb that harmony. So I merely commend the Bill to the House with the hope that it will be given an unopposed Second Reading.
§ On Question, Bill read a second time, and committed to a Committee of the Whole House.