HL Deb 02 July 1996 vol 573 cc1429-31

10.58 p.m.

The Minister of State, Department for Education and Employment (Lord Henley) rose to move, That the draft order laid before the House on 5th June be approved [22nd Report from the Joint Committee].

The noble Lord said: My Lords, the purpose of this order is to continue for a further five years the power of the Building Societies Commission, conferred by Section 41 of the Building Societies Act 1986, to require a building society to apply for renewal of its authorisation under certain circumstances. The power was originally intended to be transitional, to allow the commission to review the deemed authorisations which had been given under the 1986 Act. That is why Section 41 has effect for only five years at a time, and requires to be renewed after that.

A Section 41 power is useful and necessary in circumstances where, and over a period of time, the commission has a number of grounds for doubt about the adequacy of the way in which a building society is conducting its business and where the society is not responding sufficiently to the commission's prudential concerns. The society has up to six months to put its house in order, if that is necessary, before it seeks to satisfy the commission that it is fit to continue to be authorised.

The power under Section 41 has so far been used only once, which suggests that it is a useful discipline. The draft building societies Bill, on which we have just completed public consultation, would make the power permanent. I beg to move.

Moved, That the draft order laid before the House on 5th June be approved [22nd Report from the Joint Committee].—(Lord Henley.)

11 p.m.

Lord Eatwell

My Lords, I am grateful for the Minister's introduction of this draft order which seems to me to be an entirely sensible and appropriate measure. I have a number of brief questions for him which may, I hope, carry the matter further.

First, he said that the power in Section 41 has been used only once, which suggests it is a useful discipline. I suggest to your Lordships that this is a non sequitur. It may be that it has only been used once because it has been inadequately enforced. I would be grateful if the noble Lord could assure us that the Section 41 disciplines have been appropriately enforced over the period of this order.

Secondly, as the noble Lord pointed out, this was introduced as a transitional arrangement. I understand that in the building societies Bill, which is to be placed before your Lordships' House some time in the near future, this order will be made permanent. On this side we support making this order permanent. It is an obvious security measure to ensure that building societies are conducting their business in an appropriate manner. I would simply be interested to hear the thinking of the Government as to why a transitional order now is to be made permanent. Although, as I say, this is entirely appropriate, it would be nice to know their reasoning.

Finally, the building societies Bill is a measure which we have been anticipating for some time in your Lordships' House. We have heard a number of discussions on various measures and orders associated with building societies during which we have often been told by the Government that we should wait for the building societies Bill, when the reasoning behind particular orders and their full ramifications will be made clear. Now that the consultation has been completed, can the Minister say when we can expect the building societies Bill to be placed before your Lordships' House?

Lord Henley

My Lords, I am very grateful for the response from the noble Lord, and I am grateful for his welcome for the Bill. He raised three questions, the first of which was the fact that the power has only been used once and therefore he suggested that possibly it is not necessary and is inadequate. I would suggest that the reverse is the case. The mere fact that it has only been used once suggests that that power was appropriate and has allowed the Building Societies Commission to act in the appropriate manner.

The second question the noble Lord asked was as to why this power was transitional. As the noble Lord will be fully aware, when the 1986 Bill was originally brought forward, it was brought forward merely as a transitional power. As I have explained in answer to the first question we then decided that, because this power was useful, we would extend it. As we still do not have the building societies Bill, it is obviously, therefore, essential to extend it even further.

That brings me on to the third question: when will the Bill come forward. As the noble Lord will be fully aware, we have just completed a wide-ranging consultation process. That consultation process ended the middle of last month. We are still awaiting responses from one or two of those from whom we would like to receive responses. We will then, in due course, bring forward the Bill. But as the noble Lord will also be fully aware, I cannot pre-empt what might or might not be in the Queen's Speech. But I can say, following the usual rubric, that it will be brought forward as soon as is convenient. I am very grateful for what I imagine I heard from the noble Lord, that this is something which will receive a degree of support from all sides of the House. I hope that when we bring forward this Bill, the noble Lord and others will give Her Majesty's Government as much assistance as possible. I commend the order to the House.

Lord Eatwell

My Lords, just to make myself clear, I cannot guarantee to support the measures in the building societies Bill that the noble Lord brings forward. But I certainly support this order, which is entirely sensible.

Lord Henley

Obviously, my Lords, I was not expecting total and utter support from the noble Lord on every aspect of the Bill, but I think that the general thrust of the Bill is something to which the noble Lord would give a degree of support.

On Question, Motion agreed to.