HC Deb 19 December 1990 vol 183 cc175-6W
Mr. William Powell

To ask the Chancellor of the Exchequer what progress is being made on implementing the proposals in the Green Paper entitled "Friendly Societies: A New Framework".

Mr. Maples

Preparations for the proposed legislation are well in hand. The bulk of the instructions to counsel have been drafted and are today being sent to the Friendly Societies Liaison Committee and other interested parties for consultation. We also plan to consult on the draft clauses when they are available. A Bill will be brought forward in a future Session, when the parliamentary timetable permits.

The draft instructions reflect a number of modifications to the proposals in the Green Paper, in the light of the responses received. Most are technical, but the main policy changes are:

  1. (1) the proposed legislation will not include a statutory requirement for friendly societies to stand behind their subsidiaries, but it will include a power for them to meet the liabilities of a subsidiary;
  2. (2) the voting requirements for a decision to set up subsidiaries will be significantly modified. Only a special resolution of the society will be needed, but there will be provisions to ensure that all reasonable steps are taken to inform members of the vote in good time beforehand;
  3. (3) there will be no statutory limit on the proportion of its funds a society can invest in its subsidiaries. But there will be provisions to ensure that the financing of subsidiaries is transparent to members and to the regulator and does not deplete the insurance funds below a prescribed margin of solvency;
  4. (4) there will be a more flexible approach to solvency requirements, with different requirements for different classes of society according to the nature of their activities and powers of investment.

The legislation will also contain enhanced prudential powers for the regulator to intervene where the interests of members are at risk. In preparing the instructions to counsel, we have concluded that it would be more appropriate for these and other prudential powers to be vested in a commission rather than the Chief Registrar, and will be consulting the friendly societies on that proposal.

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