Co-operative and Community Benefit Societies and Credit Unions Bill [ Lords]

Part of Prayers – in the House of Commons at 1:17 pm on 12th March 2010.

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Photo of Mark Hoban Mark Hoban Shadow Minister (Treasury) 1:17 pm, 12th March 2010

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 The legislative reform order for credit unions has had to be withdrawn because the Treasury's supporting documentation was inappropriate.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.