Not amended in the Public Bill Committee, considered

Third Reading

Queen's and Prince of Wales's consent signified.

I beg to move, That the Bill be now read a Third time.

I promise that this will be a very short speech, but I need to detain the House for a minute or so with an explanation. I originally introduced a similar measure on 21 January 2009. That went through the Commons without being amended and with all-party support, but it was unable to complete its passage through the Lords before Parliament was prorogued on 12 November 2009.

Concerns in relation to that Bill were raised in the Lords by the Select Committee on Delegated Powers and Regulatory Reform, and the Constitution Committee, as well as by Baroness Noakes, who introduced amendments in Committee that formed the basis for some of the changes that were made before I introduced the Bill that we are debating.

The Bill was introduced as a private Member's Bill in the House of Lords on 19 November 2009 with all the required changes having been made, thanks to my colleague, Lord Tomlinson. As we have heard, no amendments were made in a very brief Committee sitting following Second Reading. I therefore commend the Bill to the House.

I sincerely thank Lord Tomlinson for steering the Bill with great ingenuity and authority through Another place. I also thank colleagues on both sides of the House and in the co-operative movement for their support for the Bill.

I pay tribute to Malcolm Wicks. His handiwork was delayed in the previous Session, but this Bill is heading towards the statute book. He was right that the Delegated Powers and Regulatory Reform Committee identified deficiencies, and that they have now been rectified in clauses 5 and 6.

It is important to recognise that a great deal of the work to modernise the framework for mutual societies in the past few years has been done by virtue of private Members' Bills. My hon. Friend Sir John Butterfill and others, on both sides of the House, have introduced Bills in recent years. When a Bill such as this has the sponsorship of the Treasury, it is incumbent on the Treasury to ensure that the right steps are taken to ensure that it is robust, and that it meets the requirements of a proper legislative process. It is to the detriment of the Treasury that such a measure, which has a great deal of support, has been delayed because it did not take enough time to get the drafting right.

I am afraid that the Bill is not the only example of that. The legislative reform order for credit unions has had to be withdrawn because the Treasury's supporting documentation was inappropriate. That also delayed the process of reform for credit unions, so there is a lesson to be learned by the Treasury. When it seeks to use such a route to modernise and update legislation, it should do so in a way that meets the highest possible legislative standards.

My recollection is that the Bill was not debated on Second Reading. It was quite a way down the Order Paper, but in recognition of the fact that there was quite a full debate on a similar Bill in the last Session and cross-party support, it went through on the nod. That is unusual-very few Bills receive that treatment, as it were-so the right hon. Gentleman should be grateful that the procedure of the House worked to his advantage. As he said, the Bill was not amended in Committee this time, nor was it the first time. The Bill is therefore unamended today.

We all recognise the importance of mutuals, which play a huge role in the economy. There are some very well-known mutuals, such as the Co-operative Retail Society, and credit unions are another form of mutual society. The Wine Society-the right hon. Gentleman and I are both members-is an industrial and provident society. There are mutuals across the country and they are increasingly being used as a way of delivering services and opportunities to communities. This is a booming sector, so it is important that the legislation affecting it is up to date, and provides people with the protection that they would expect in a modern, 21st century economy. The Bill would make some fundamental changes that we should reflect on before it receives its Third Reading, especially as it did not receive a proper outing on Second Reading a few weeks ago.

There is huge support for mutuals on both sides of the House, although I think that everybody recognises they have some limitations and the mutual sector has had some problems in recent years. We do not need to dwell on the Dunfermline building society or the Presbyterian mutual society, but we know that mutuals fail occasionally, and we need to think carefully about what happens then. Directors of friendly societies, building societies or limited companies are disqualified in such instances, but the directors of industrial and provident societies would be able to move on to another such society and continue to serve in that role, and that creates a risk for consumers. It is right that the powers in the Company Directors Disqualification Act 1976, which apply to building societies and friendly societies, should be extended to industrial and provident societies to provide that protection for consumers, creditors and employers. That is an appropriate modernisation measure.

The Bill would also modernise the language involved. Industrial and provident societies are redolent of Victorian times, when so many of them were established. In the Second Reading debate on the original Bill, I recall that someone suggested that the Romans had set up co-operatives, but in the UK their origins are the Victorian sense of self-help, with communities coming together on a voluntary basis to establish businesses and enterprises that help to meet the needs of their members or employees. Industrial and provident society is a rather out-moded term and it does not reflect the modern uses to which such societies are put. For example, several football supporters' clubs are industrial and provident societies, and foundation hospitals also take that route. It sounds like a very restricted category, but it has now broadened out. If we are to modernise the methods of organisation for enterprises in establishing themselves and setting up governance models, we should also try to modernise the language that is used.

Clause 1 would require new industrial and provident societies to register as co-operatives or community benefit societies, and that recognises that the nature of such institutions is to benefit the whole community, rather than being some relic of the industrial revolution. As part of that, clause 2 would rename seven Acts of Parliament, dating back to 1965, which will now use the new nomenclature. The mentions of industrial and provident societies in the titles of those Bills will become co-operative and community benefit societies and credit unions. Again, that would modernise the back catalogue-as it were-of legislation governing industrial and provident societies. We would welcome that move.

As I said, the Bill tackles a second issue in applying the Company Directors Disqualification Act 1986 to industrial and provident societies. I think that Members from both sides of the House will recognise the need to ensure that officers of mutual societies are subject to the same disciplines as directors of limited companies, friendly societies and building societies. That function is provided for in clause 3, and it is a welcome approach. The language has also been modernised to reflect the different nature of governance of those entities. Proposed new section 22E(3)(b) modernises

"references to a director or an officer of a company" to

"a member of the committee...of a registered society."

There are also provisions in the Bill relating to extending the equivalence of companies legislation to those societies. For example, provisions are being made to bring societies in line with companies when it comes to striking them off: a company can be struck off the register of companies, and now, in this case, a society's registration could be cancelled.

The Bill gives the Treasury powers to apply other provisions in companies legislation to industrial and provident societies, including powers of investigation into companies, and provisions relating to company names, the dissolution of companies and restoration to registers. That is another aspect of how the legislative framework has been set up. As with many Treasury Bills, it creates enabling powers, and indeed there will be secondary legislation to work through the detailed application of the provisions to individual societies.

The hon. Gentleman is singing the praises of the legislation, but does not seem to have any criticisms of it. Were he to make an extended contribution, is there he any danger that he might be perceived as actually being less positive about the legislation than his comments would imply?

It is important that legislation is properly scrutinised. Although there was discussion about the Bill in the previous Session, so far there has been no such discussion or debate on the Floor of the House. It is the responsibility of parliamentarians to scrutinise legislation properly, to identify its benefits and to ensure that it is clear to people what its purpose is and, in this case, where it takes the legislative framework around co-operative, industrial and provident societies and credit unions. That is the right thing to do. The hon. Gentleman will also know that, although one can make a speech about a measure, the balance of opinion in the House will be revealed in a Division on Third Reading, if there is one.

Can the hon. Gentleman detail any criticism he has of the Bill?

My concern is that, when the Bill was first tabled before the House in the previous Session, it turned out, on further scrutiny, to be deficient, but thankfully it has been corrected. That was the right approach. All of us would want to ensure that a Bill is not simply rushed-or railroaded-through on the nod, and that there is proper scrutiny, because sometimes that can identify issues that need to be teased out. I am afraid, however, that the hon. Gentleman's interventions are prolonging the rather brief speech that I wanted to make. As I said, we support the Bill, which is why it was given a fair passage when it returned from the other place, after Lord Tomlinson's very able stewardship of it through the Lords.

This is an enabling Bill, giving the Treasury the flexibility to apply the existing provisions of company law to industrial and provident societies or to make new, equivalent provisions. Although we want to ensure the right framework for industrial and provident societies so that their governance is on a par with that of companies, part of the challenge is that, in essence, industrial and provident societies are different from limited companies because of the role of their employees or members. We therefore need to ensure that we do not allow the crude application of company law to industrial and provident societies, but instead take a nuanced approach. I am sure that the Treasury will work with a number of organisations to ensure that such an approach is adopted.

The fourth issue that I want to address is supported credit unions. All of us across the House recognise the importance of credit unions in providing an alternative to the banking system. A number of moves have been made in recent years to modernise the legislative framework for credit unions, to ensure that they are capable of being sustainable and viable, and can provide a proper alternative to banks. I meet regularly the Association of British Credit Unions to talk about such issues, and I know how keen credit unions are to see this Bill put in place and for the legislative framework to be modernised.

This Bill is not the only such measure-I referred earlier to the legislative reform order that was tabled, but which subsequently had to be withdrawn because of the inadequacy of the supporting documents-but it enables primary legislation to be amended to facilitate the application to the credit union movement of various provisions in the legislation on building societies. The Bill does that by inserting a new section 23A in the Credit Unions Act 1979. It also gives the Treasury the power to amend by regulation the statutory provisions for credit unions to bring them more into line with those applicable to building societies. Again, the power is drawn broadly: any provision in the building societies legislation deemed to be appropriate can be adapted to credit unions.

Indeed, the Bill also includes provision to create equivalent criminal offences, which was one of the areas of concern for the Delegated Powers and Regulatory Reform Committee. There was a concern that the criminal offences created in the previous versions of the Bill perhaps went further than those in the comparable legislation. The amendments made to the Bill address that problem, and we are all grateful that the two sponsors of the Bill were happy to make those changes.

One of the clear themes to emerge from the Bill is that if we are to ensure that industrial and provident societies continue to play an important role in the provision of services, adapting to reflect the needs of a modern society, the legislative framework needs to be enhanced to ensure that the consumers, employees and suppliers of industrial and provident societies are protected. That is why we welcome the measures dealing with disqualification. The change in language is also important, in ensuring that people recognise that industrial and provident societies play a role in modern society and are not remnants of the industrial revolution. For those reasons we support the Bill. I pay tribute to the right hon. Member for Croydon, North for his persistence in taking it forward. The Bill makes an important contribution to the legislative framework and will be widely welcomed by those in the credit union and co-operative movement who have long looked forward to the day when it is passed.

Let me confirm the Liberal Democrats' absolute support for the Bill and congratulate Malcolm Wicks. We are committed to championing the role of mutuals, and we see great potential for extending their role as we seek to transform our economy. In particular, I am a passionate supporter of the role of employee-owned businesses and mutuals; indeed, I see a considerably greater role for them in the delivery of all sorts of public services, including in the health service. I have also seen credit unions developing in my area, offering people who are often on low incomes a vital alternative facility to that offered by doorstep lenders who charge high interest rates. We need to do everything that we can to encourage and promote credit unions.

The Bill, which is rather dull but necessary, modernises the regulatory framework- [ Interruption. ] Well, if hon. Members get excited by these things, they need to get a life. The Bill also provides added consumer protection and aligns the rules relating to company directors with those of companies, as Mr. Hoban rightly said. It is essential to have a modern regulatory framework to ensure that the mutuals can flourish in the future. We are therefore very happy to support the Bill.

I congratulate my right hon. Friend Malcolm Wicks on at last getting the Bill closer to the statute book. I also congratulate and thank our noble colleague, Lord Tomlinson, who played a significant role in bringing the Bill forward in the other place. The Government support wholeheartedly the benefits of mutuals in providing choice and diversity in the financial marketplace, particularly during these uncertain times.

I also welcome the gracious, if slightly extensive, support from across the House, and the work of the Co-operative group of MPs and the Co-operative party, whose chairman, my hon. Friend Mr. Thomas, is sitting next to me on the front bench. The party's general secretary, Michael Stephenson, has also played a sterling role in helping to steer the Bill through the House.

The Bill will modernise the legislative framework for about 500 credit unions and about 8,000 industrial and provident societies. It will benefit those bodies and their many millions of members, so that, after an illustrious history over the past couple of centuries, they can move forward proudly into the 21st century. The fundamental nature of the mutuals will not be undermined by the legislation; they will be strengthened by the Bill. The sector will continue to grow, as the legislation will increase member confidence in the societies by improving their standards of corporate governance, thus placing the mutual sector on a firmer footing.

This week saw the laying in Parliament on Monday of the Legislative Reform (Industrial and Provident Societies and Credit Unions) Order 2010, the secondary legislation that partners the Bill. The Bill seeks to address matters that could not be dealt with under the powers of the legislative reform order but that are equally important for the legislative and regulatory reform of this valued sector of the financial services field. I am delighted that my right hon. Friend the Member for Croydon, North has brought it this far, and I commend the Bill to the House.

As the sponsor of the Bill in this House, I hope that I am not dull; I am, however, necessary, because it was necessary to take the Bill through the House of Commons again. It might seem strange to anyone reading the record that the sponsor of the Bill in the House of Commons made the shortest speech on it, but I believe that over the past two years we have scrutinised and improved the legislation across the parties in both Houses of Parliament.

The expert exposition by the Shadow Minister, Mr. Hoban, was most welcome, and I also welcome the full support for the Bill from Norman Lamb. Furthermore, it is always useful to give a Whip an opportunity to speak in the House of Commons. This might, in a sense, be a Treasury Bill, but the Treasury Minister clearly had so much confidence in me that he or she did not feel it absolutely necessary to be here in person to voice their support. I commend the Bill to the House.

Question put and agreed to.

Bill accordingly read the Third time and passed.