Community Benefit Societies (Restriction on Use of Assets) Regulations 2006

Part of the debate – in the House of Lords at 4:29 pm on 2 February 2006.

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Photo of Lord Howard of Rising Lord Howard of Rising Deputy Chief Whip, Whips, Shadow Minister, Treasury 4:29, 2 February 2006

My Lords, I thank the Minister for his kind remarks and for easing my debut on this occasion. I thank him for the introduction of the regulations and the order, with which we on these Benches broadly agree. The support of community and friendly societies is to be welcomed. No doubt the ability to restrict assets to the purpose for which they were intended could be helpful in attracting new members.

Will the Minister please clarify whether the asset lock is reversible should there be a genuine and overwhelming wish on the part of the members so to do? The Financial Services Authority already has many responsibilities. It is to be hoped that it will take the necessary time and trouble to create regulations for this sector which are simple and easy both to understand and to operate; a light-handed approach rather than overkill. The Financial Services Authority has also been given powers to impose penalties in the event of breaches of regulations. Does the Minister think it is wise to give the FSA a free hand when some argue that its record in this field does not bear scrutiny?

I am told that systems have been improved but the FSA has an unenviable reputation for imposing disproportionate fines for the most trivial offences. The Financial Services Authority disciplinary procedures have only once been examined by an outside body. That was in the matter of the Legal & General company where the Financial Services Authority's internal appeal rejected Legal & General's case. Legal & General appealed to the Financial Services Tribunal, a process available only because of an amendment introduced in this House by my noble friend Lord Saatchi. The company was shown to be substantially correct and the Financial Services Authority wrong. The costs of making an appeal of this nature would not normally be available to those looking after a community benefit society.

With regard to the order, I agree that any step which reduces the present level of regulations is to be welcomed. However, if it is appropriate for non-charitable friendly and industrial and provident societies not to have their accounts audited when their turnover is below £5.6 million, might it be sensible for charitable friendly and industrial and provident societies and charities to have the same level of turnover below which accounts need not be audited, rather than the £500,000 proposed in the Charities Bill? I hope that the Minister can offer some answers in his response and I am pleased otherwise to agree to the two measures.