FRIENDLY SOCIETIES (Hansard, 16 January 1990)

The Paymaster General (The Earl of Caithness)

My right honourable friend the Chancellor today laid before Parliament a paper entitledFriendly Societies: A New Framework. This Green Paper sets out the Government's proposals for a new legislative framework for friendly societies. The main proposals are to give societies wider powers to offer a more comprehensive and competitive range of services through subsidiary companies. The main new powers would be to allow;

—establishment and management of unit trust schemes and personal equity plans;
—to act as agents of other insurers (life or general business);
—to give advice on insurance;
—to provide loans;
—and to reinsure other friendly societies' business.

This range of powers was requested by the Friendly Societies Liaison Committee in its submission to the Economic Secretary in 1988 and we have decided to accept its case in full.

The proposals include legislation to provide societies with a cheap and simple route to incorporation as a special category of body under the Industrial and Provident Societies Acts. This will enable societies to achieve the legal status which is necessary to own subsidiaries, and hence to offer services other than long-term insurance business, without losing their special identity as friendly societies.

The paper also proposes that the regulatory system for friendly societies should be updated to give improved investor protection. In particular, we propose that a solvency requirement should be extended to all friendly societies, that the Chief Registrar should be given enhanced powers to deal with moribund societies, and that the requirements for societies' systems of accounts and control should be updated to bring them into line with other financial institutions. We also propose that all societies should be required to join a statutory investor protection scheme and that a new ombudsman scheme should be established to deal with members' complaints.

We believe that the Green Paper will establish a satisfactory constitutional and legislative framework for societies which will allow for their continued development over the coming years. We hope that there will be support for these proposals from all sides of the House.