§ 12.9 p.m.
§ Lord Hayhoe
My Lords, I beg to move that this Bill be now read a second time. This modest, genuine Private Member's Bill is designed to correct a signal unfairness which denies entitlement to shares or cash bonuses to particular individuals when building societies abandon neutral status to revert to public companies.
I am afraid that the requirements of parliamentary drafting demand more than five pages and nearly 250 lines of legislation to achieve that objective by amendment of the Building Societies Act 1986.
The injustice being addressed applies to many thousands of building society customers who, for reasons of age, sickness, disability, handicap or other good reasons, are not the first named member on their building society account, that first named position being occupied by their trustee. Current practice generally 1428 means that only the first named can qualify for bonus cash or shares and, moreover, can only fully qualify once irrespective of the number of accounts held.
If, as often happens, the matron of a nursing home or the manager of an old people's home is looking after and, as trustee, is the first named on the building society accounts of, say, 20 or 30 of their patients or residents, then, under existing legislation, those patients or residents would not be entitled to share in the benefits when their building society converts. Put in more formal language, this Bill will require building societies to make more than one distribution, of cash or bonus shares, to members who have more than one account where the other account is held by the member on trust for another person where it can be shown that it is not reasonably practical for that other person to hold the account.
I should make it clear that building societies are able under existing legislation to do of their own volition what this Bill will require them to do; in other words, the Bill would not force societies to do anything which they cannot do at present, if they so decide. The Bill will not place unreasonable administrative burdens on the societies who will be affected in the future. Potential beneficiaries will be required to make claims by way of statutory declarations (before a JP, a notary or a solicitor) and, as your Lordships know, making a false statutory declaration is perjury and a criminal offence. The onus for making a claim therefore rests with the individuals concerned and the building society is not responsible for searching out such individuals by hunting through its records.
As I explained earlier, complicated drafting has been required to achieve the relatively simple objectives of this legislation, and perhaps it would be unduly burdensome on your Lordships for me to read out the explanatory notes that I have been given about each detailed subsection of the Bill. I have, however, provided a copy of these explanatory notes to those noble Lords who indicated their intention to speak in this short debate and I hope that that will have been of assistance. I have also placed a copy of the notes in the Library.
As noble Lords know, the Halifax Building Society decided to convert earlier this week and there has been some press comment and speculation about whether the provisions of this Bill will, or should, apply. I must quickly extinguish any false hopes that the Bill will of itself redress the very real sense of grievance felt by those Halifax customers who are disadvantaged by current practice. Whatever the merits of their claims—and, indeed, of similar claims from members of other converting societies—I fear that practical political realities have ensured that this Bill is very narrowly focused. It does not have retrospective effect on societies—for example, the Alliance and Leicester, the Halifax, the Northern Rock and the Woolwich—which announced their plans some time ago. Retrospection would impose considerable costs and difficulties on those societies and could disadvantage by delay the majority of their members who are looking forward to their bonuses later this year. The Bill will only apply to societies who make their announcements after 1429 22nd January 1997 and that trigger date is set out in Clause 2 of the Bill. As I understand it, no society has made such an announcement since 22nd January, so it will only apply to those societies which make announcements in the future.
I should explain that this Bill was introduced by my honourable friend, Douglas French, the Member of Parliament for Gloucester, under the Ten Minute Rule in another place on 22nd January of this year. As a result of widespread consultation and most careful drafting, it completed all its subsequent stages without discussion or debate—in effect, on the nod—on Friday, 14th February and came to this House on Monday, 17th February for its first reading. Perhaps I may pay tribute to the Treasury Minister, Mrs. Angela Knight and her officials, to the Opposition spokesmen concerned in another place, to the Building Societies Commission, the Consumers' Association and, not least, to Lesley Furlonger for her skilled drafting of this Bill.
I must also make it abundantly clear that this Bill, which is supported by leading charities like MENCAP, SENSE and the Royal National Institute for the Blind, can only reach the statute book in the current Session of Parliament in its unamended form. It does not deal with every difficulty or anomaly but if the smallest or the most sensible and reasonable amendment is made, which requires the Bill to go back to another place, it will not survive as I understand there will be no parliamentary time available for further consideration in another place. Either the Bill is agreed precisely in its present form by your Lordships' House, as I hope it will be, and as a result goes directly for Royal Assent, or it will fall due to lack of parliamentary time and many deserving people who stand to gain from its modest but well worthwhile provisions will be bitterly disappointed. I commend the Bill to the House.
Moved, That the Bill be read a second time.—(Lord Hayhoe.)
§ 12.16 p.m.
§ Lord Dubs
My Lords, I welcome the Bill. There is indeed quite a history behind Private Members' Bills on building societies and in particular about second named account holders. I believe that it was about a year and a half ago that two similar Bills were launched, one by Douglas French MP in another place and one by myself in this Chamber. As is only proper, I deferred to his Bill, withdrew mine and supported his. That Bill established certain rights for second named account holders, especially widows. However, it was conceded at the time that that Bill inevitably left a number of other gaps. I am happy to say that one of them is being filled by the Bill now before us.
Some time ago I discussed the whole principle with someone from a building society who said that it had been put to their lawyers who concluded that the problem was too difficult to solve; and, indeed, they had been unable to bring anything forward in that respect. Therefore, I am even more pleased that the noble Lord, Lord Hayhoe, and his colleague in another place, Douglas French, have managed to find a way to produce a Bill that seems to meet a particular and specific need.
1430 I am bound to say that I found the Bill rather difficult to understand when I read through it. Therefore, I am most grateful to the noble Lord, Lord Hayhoe, for sending me some explanatory notes. All became clear to me after reading those notes but, without them, it is a particularly difficult Bill to understand. I appreciate that it has to be complex because its provisions are quite difficult in legal terms to ensure that the legislation achieves its stated objectives.
One of the difficulties that has faced building societies up to now is that they have not known enough about the identity or the responsibilities of first named account holders. In my discussions with building societies, those concerned have said to me that, in future, they will need to find a different way of registering first named account holders so that they can distinguish between those who are trustees, wives, husbands or whatever. Had that been the case, I suspect that the Bill would in some respects have been much simpler. However, as I said, it is complicated because of the need to find a way in which people can declare what their position is as first named account holders and what their responsibilities are for other names on the list. In future, I hope that building societies will approach the matter somewhat differently so as to facilitate the process. Having said that, they will be helped significantly by the Bill.
I believe that building societies have been a little amiss in allowing the situation to develop. When I say "situation", I have in mind all the anxieties facing different categories of second named account holders. The whole process has led to a sense of unfairness. We have often talked about people who are very poor and for whom a small distribution of money could make a substantial difference. Having, so to speak, complied with all the requirements, people feel a sense of unfairness when they have been deprived of the money because of what seems to them to be a mere technicality. That is why there has been a need for this legislation. I welcome this Bill. I take note of what the noble Lord, Lord Hayhoe, said; namely, if it is amended, it will fall simply because there is no time between now and an election to get it through. In that spirit we shall look at the Bill in the hope of not needing to amend it as opposed to looking for amendments.
However, I am irritated by one other matter. This Bill is a Private Member's Bill; the previous Bill was a Private Member's Bill. Yet in a sense I should have thought it was up to the Government to introduce legislation on building societies. That was the thrust of some of the debates that took place on earlier Bills. The Government have a responsibility and because they have not exercised that responsibility, private Members have stepped in.
I was irritated to note that at 11 o'clock this morning a Building Societies Bill was introduced in another place. The only reason I knew about that was because I read articles in today's papers indicating that a Bill was to be introduced today. One of the articles suggested that the Bill would be passed today. I think there was some confusion in that newspaper between 1431 the new Bill and the Bill we are discussing. I managed to get hold of a copy of that Bill when the embargo was lifted at 11 o'clock this morning.
I am less irritated about that than about the late arrival of a Bill which many of us had hoped would be on the scene much earlier and which could have dealt with the matter in the Bill we are now discussing and other matters which still need some tidying up in the area of second-named account holders. It is somewhat irritating to note that the Government have not dealt with any of those matters; they have dealt with different matters. After all the discussion that has taken place and the hints from government Ministers that a Bill would be available before too long—that was said a year and a half ago—many of us thought that was a commitment, as it were, on the part of the Government to introduce a Bill. Now we have this other Bill today I have mentioned which I do not see getting through before an election, so it is simply a marker—
§ The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish)
It might get through!
§ Lord Dubs
My Lords, the Minister suggests it might get through before an election. However, it is a pretty hefty Bill to get through before an election; it has 109 pages. I am sure it is a worthwhile measure, although I have not had time to examine it. Perhaps I should not say I am sure it is a worthwhile measure; I hope it is a worthwhile measure. However, since I picked it up from the Printed Paper Office I have not had time to look at it. As I said, I am somewhat irritated that the Government have not done what they should have done.
Having said that, I welcome this Bill. It will deal with the sense of unfairness that a small number of second and lower-named account holders quite properly feel. It will put that matter right and I wish it a quick passage through this House.
§ 12.22 p.m.
§ Baroness Gardner of Parkes
My Lords, I appear to be speaking in the gap. I presume that the noble Lord, Lord Addington, will sum up the debate when he speaks and therefore this is the only moment when I can speak in the debate. I apologise for not giving notice, but I only arrived from Australia at six o'clock this morning and therefore I did not have an opportunity to do so.
The noble Lord, Lord Dubs, said that the Building Societies Bill in another place was expected earlier. I have spent some time on a building society board although I am no longer involved. I have also been a member of the all-party building societies group. The toing and froing between building societies and the Government has been extensive. I believe that is why the Bill has not arrived earlier in another place. It was a case of trying to produce a measure that would be acceptable to all the parties involved.
I add my voice to those who welcome this measure today. I note that other noble Lords who are currently members of building society boards are present in the 1432 Chamber. The administration of building societies is far more complicated than one realises. It is complicated to sort out who is entitled to what. I believe that this measure is a step in the right direction. I support the Bill.
§ 12.24 p.m.
§ Lord Addington
My Lords, all we can really say about this Bill is that we are thankful it is here and we wish it had been here earlier. It addresses a matter of natural justice. The people we are discussing had money in an account which was being held for them for their use and was accruing interest for their use. However, they were denied the bonus that was paid out when some building societies changed their status. That should not have happened. I believe that building societies and the Government have become totally reactive on this matter. They have waited for problems to arise and then waited for pressure from this House, another place and the press to build up before they did something about it.
When building societies were first created they were not expected to become banks. When they decided to change their status someone should have examined their future structure and any problems that might arise. This is a warning to all of us that, if we are considering great changes, we should spend a great deal of time planning for that. We should also be prepared to listen to people's opinions and to consult widely.
Those who have spoken before me have covered the technical details. I am only sad that we cannot do more for those who have been adversely affected prior to this point. We can wish the Bill well. The lesson we can learn from this matter is that when one undertakes change which affects the general public one must consider such change from their point of view. It is quite clear that that was not done in this case. I hope that any future government, of whatever colour or persuasion, will bear that in mind and will show far more consideration for those people who are directly affected by a change which is often thought of as an administrative one.
§ 12.26 p.m.
§ Lord Mackay of Ardbrecknish
My Lords, I start by paying tribute to my noble friend who has so persuasively introduced this Bill and who will take it through its remaining stages in this House. I also pay tribute to my honourable friend the Member for Gloucester, Mr. Douglas French, for his considerable efforts in drafting the Bill and his enviable achievement in ensuring its swift passage through all its stages in another place.
As all noble Lords have said, the concern behind the Bill is over cases where a carer or family member is the first-named on a building society account held for a person for whom it is not reasonably practicable to operate his account, and at the same time has another membership account with the same building society. Of course in the normal run of things, this makes little difference to either person. But recently it has made a difference where the accounts are held with a society which is proposing to convert or to be taken over.
1433 In these cases, the general practice is for only one bonus to be paid to the carer in respect of both accounts. Depending on the circumstances, there may well be a duty under trust law to pass on part of the bonus received to the disabled people, but as a consequence, the benefits accruing to the disabled person, and indeed to the first-named account holder, may well be substantially less than a first-named account holder would expect to receive.
Societies have generally paid only one bonus because their schemes are based on voting membership. Provided a scheme is within the law, it is for the society board and members to decide on a distribution scheme. Under the Building Societies Act 1986, only the first-named member on an account has a vote on the transfer proposals, or any other resolution of the society. This provision reflects the mutual constitution of societies. It also ensures against distortion of the voting base, for example by someone adding several names to an account to get extra votes. Likewise, a person with more than one account in his or her name will have only one vote. Both of these rules underpin the nature of mutual building societies, where the principle is one member, one vote.
I say "general practice" because there is no compulsion on converting societies to tie their distribution schemes to voting membership. A society embarking on conversion could propose a different scheme, including one with special provision for disabled and other second-named savers if it wished, not in precisely the way envisaged by this Bill, but with similar effect. This Bill is designed to make sure that in future, distribution schemes will specifically cater for savers who are limited, by disability, ill-health or age, in their ability to operate their accounts from day to day.
It is generally open to savers and carers to decide whose name should be first on the account, and so who has voting membership. Indeed, the 1986 Act gives joint savers and borrowers the statutory right to choose the order of names on an account if they wish. I hope that my noble friends and others will join me in welcoming the initiative of the Building Societies Association, which has issued guidance notes for its members in opening accounts where the saver—the person whose money it is—may not be the best person to manage the account on a day-to-day basis. In such cases, the saver may be the first-named member on the account, with a second-named member carrying out the practical operation of their account. Clearly that will go a long way towards resolving the problems that the Bill addresses.
The Bill we are discussing would address those cases where the first-named or sole named member on an account is acting on behalf of someone for whom it is not reasonably practicable to operate the account. At the time the account was opened it seemed sensible to put the account operator's name first, and no one could have foreseen that the order of names would have had the unwelcome consequence that it has turned out to have.
I started by praising the significant achievement of my honourable friend the Member for Gloucester, Mr. Douglas French. I hope that he will have a double 1434 whammy. The noble Lord, Lord Dubs, reminded us that my honourable friend has already to his credit a Private Member's Bill on building societies on a closely related topic. With a bit of luck, and with your Lordships' support, he should have two such Bills to his credit. That is pretty good going with Private Members' Bills in another place, and especially Private Members' Bills on such a complex and technical subject as this Bill and indeed, the other measure. I congratulate him, and my noble friend Lord Hayhoe on taking up this issue in this House. I thank the three noble Lords who spoke, including my noble friend Lady Gardner of Parkes, whom I welcome back. I am impressed with her stamina in speaking in the debate having got in on an overnight flight from the other side of the world. I thank all noble Lords who have taken part. Given the level of support, I am sure that the Bill will reach the statute book before the end of this Parliament.
§ 12.30 p.m.
§ Lord Hayhoe
My Lords, I am grateful for the support that this limited measure has received. In view of the comments of my noble friend Lady Gardner, perhaps I should declare an interest. I was—I underline "was"—a non-executive director of a building society, as the noble Baroness was of a different society. I hope that the building societies which are converting will take note of what was said in the debate, in particular what has just been said by the Minister. If the Bill becomes law, the Bill will require societies in the future to act to redress the grievance of the elderly, the handicapped, the sick and the aged. But there is nothing to stop building societies which are converting now from taking that action of their own volition. I hope that they will take note of what has been said and of the fact that the Bill had all-party support in another place. I hope that those building societies will find some way of helping those people who have a real sense of grievance with the present situation.
I am grateful for the support that the Bill has received. I hope that it will now receive a Second Reading.
On Question, Bill read a second time, and committed to a Committee of the Whole House.