Clause 3 - Power to modify, etc. to assimilate to company law

Industrial and Provident Societies Bill – in a Public Bill Committee at 11:00 am on 13th February 2002.

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Question proposed, That the clause stand part of the Bill.

Photo of Mr John McWilliam Mr John McWilliam Labour, Blaydon

With this it will be convenient to take the following: New clause 5—Power to modify, etc. to assimilate to company law—

'(1) If at any time, whether or not on any modification of the statutory provisions in force in Great Britain relating to companies it appears to the Treasury to be expedient to modify the relevant statutory provisions for the purpose of assimilating the law relating to companies and the law relating to industrial and provident societies, the Treasury may, by order, make such modifications of the relevant statutory provisions as they think appropriate for that purpose.

(2) If, on any modification of the statutory provisions in force in Great Britain relating to companies, it appears to the Treasury to be expedient to modify any provisions of the Industrial and Provident Societies Act 1965 to 1978 for the time being in force for the purpose of assimilating the law relating to companies and the law relating to industrial and provident societies, the Treasury may, by order, make such modifications of those Acts for the time being in force as they think appropriate for that purpose.

(3) The ''relevant statutory provisions'' are the following provisions of the Industrial and Provident Societies Act 1978 as for the time being in force:

(a) the following sections of the Industrial and Provident Societies Act 1965: Section 1(1)(b) and Schedule 1 paragraphs 2 and 6 and section 14 so far as necessary to assimilate the law as to: limitations on the society's capacity;the power of its board of directors, officers or committee to bind the society or authorise others to do so; and remove any duty on parties to transactions with the society to enquire as to its capacity or those powers of the board of directors or committee; Section 3 in so far as it refers to a common seal, section 1(1)(b) and schedule 1 paragraph 13 (custody and use of seal); Section 5 (name of society); Section 29 (contracts); Section 39 (annual returns); Sections 41, 42 and 43 so far as necessary to assimilate the law as to the accountability of, and fair dealing by, directors, committee members and officers of societies with the equivalent provisions applicable to company directors and officers; Sections 47, 48 and 49 inspection of books by the Authority, production of documents and provisions of information, the appointment of inspectors,and the calling of special meetings; Paragraph (a) of section 55 (application of Insolvency Act 1986 to societies) to apply to societies of any provisions of that Act or of the Company Directors' Disqualification Act 1986 applicable to companies whether on or involving the dissolution of a society or not; Section 61, 62, 63, 64 and 65 (General offences by societies, officers, members or others); Sections 66, 67, 68 and 69 (Proceedings and costs) Section 74 (Interpretation);

(b) any section of the Industrial and Provident Societies Act 1967 (borrowing by registered societies and registration of charges); and

(c) any section of the Friendly and Industrial and Provident Societies Act 1968 (society accounts, audit and group accounts).

(4) The powers conferred by subsections (1) and (2) of this section include the power to modify the relevant statutory provisions or any provision of the Industrial and Provident Societies Acts 1965 to 1978 as the case may be so as to—

(a) confer power to make orders, regulations, rules or other subordinate legislation;

(b) create criminal offences; or

(c) provide for the charging of fees but not any charge in the nature of taxation.

(5) An order under this section may—

(a) make consequential amendments of or repeals in any provisions of the Industrial and Provident Societies Acts 1965 to 1978; or

(b) make such transitional or saving provisions as appear to the Treasury to be necessary or expedient.

(6) The power to make an order under this section shall be exercisable by statutory instrument and no order shall be made unless a draft of it has been laid before and approved by resolution of each House of Parliament.

(7) In this section—

''modification'' includes any additions and, as regards modifications of the statutory provisions relating to companies, any modification whether effected by any future Act or by an instrument made after the passing of this Act under an Act whenever passed; and

''statutory provisions'' except in the expression ''relevant statutory provisions'' includes the provisions of any instrument made under an Act.'.

And the following amendments thereto: (a), after first ''If'', leave out

'at any time, whether or not'.

(c), leave out paragraph (b) of subsection (4).

(d), in subsection(4)(c), at end insert—

'(3A) No power conferred by subsections (1) and (2) of this section shall extend to the creation of criminal offences.'.

Photo of Gareth Thomas Gareth Thomas Party Chair, Co-operative Party

The Committee should reject clause 3 and put in its place new clause 5. I have considered carefully the constructive criticism from those on both Front Benches and the new clause is the result. Instead of the apparently sweeping power under the clause to amend any piece of industrial and provident society law in line with company law, the new clause contains a specific list of aspects of I and P law in which change in line with company law would be permissible.

Both my hon. Friend the Minister and the hon. Member for Christchurch suggested that the Treasury would have too much power under the clause. Since I was elected, I have considered the Treasury to be a hugely beneficial and magnificent force. I have high regard for its officials and even higher regard for its Ministers. However, I recognise that the scenario may have been different before I was elected and unable to make such a judgment, and that the situation may not continue. Although I have confidence that it will continue for the foreseeable future, I recognise the need to limit the powers available under clause 3(1).

Clause 3(1) includes a power to modify by statutory instrument the relevant provisions to bring I and P law into line with company law. The clause defines the relevant provision by excluding those parts of the Industrial and Provident Societies Act 1965 that make I and P societies essentially different from companies.

Every other provision of the Act could be amended by statutory instrument under clause 3 if it was different from company law.

New clause 5 substantially changes that scenario by listing instead those provisions of I and P law that can be modified. In fact, consequential changes need to be made in only eight or nine areas. Whole areas of I and P law are therefore completely untouched by new clause 5. They would probably have been left untouched by clause 3, mainly because a suitable comparison with company law could not be made. For example, I have omitted from new clause 5 those parts that go to the essential nature of industrial and provident societies—for instance, sections 16 to 18 of the Industrial and Provident Societies Act 1965 that deal with cancellation, suspension or refusal of registration. I left them out because they can be changed only by primary legislation and they cannot be assimilated into company law. I have omitted also those parts that are merely permissive and those parts that are not substantially different from company law—or, if they are substantially different, those parts that do not cause issue on whether there is a level playing field.

Section 11 of the 1965 Act on funds for the purchase of Government securities is untouched by new clause 5 and so too is section 21 on advances to members. Similarly, section 14 on rules to bind members and section 44 on the register of members and officers are untouched. Potentially, of course, they could have been changed by clause 3. Similarly, section 58 of the 1965 Act on instruments for dissolution and section 60 on decisions on disputes are not at risk of being changed by new clause 5. Crucially, the new clause would not allow every change proposed in the Treasury consultation document that was published in 1998—the document to which the hon. Member for Christchurch and others alluded.

I draw the attention of the Committee to the excellent House of Commons Library brief that touched on the Treasury consultation document. That document listed five areas where change might be appropriate and it went out to consultation on them. It looked first at a set of measures designed to change registration procedures. That would require primary legislation and it is not, therefore, touched by the new clause.

The original Treasury consultation document appeared to want to change the provisions on the statutory definition of eligible societies contained in the 1965 Act, but that, too, would have required primary legislation and could not be achieved under the Bill or by new clause 5. I shall deal shortly with a particular area where I think a statutory instrument would be appropriate, but more general changes to the registrar's powers would require primary legislation and are therefore not included in new clause 5.

Nothing that could be proposed by statutory instrument under new clause 5 is new in principle. At the very minimum, it has to have been considered at least once by Parliament in the context of changes to

company law. In six of the eight areas that are listed, it is also being considered under reforms to either building society law or friendly society law, or both.

At the very least—in terms of the eight areas that might allow statutory instruments under the clause—inspiration will have come from a change to company law that has already been considered by Parliament. However, six of the eight cases might have been considered during Parliament's second or third opportunity for scrutiny of changes to building society law or friendly society law. The opportunity to change under the eight areas is relatively narrow, albeit important to industrial and provident societies. That narrowness is ensured by the requirement for assimilation with company law.

There is nothing in the list of provisions set out in new clause 5 that is radically different from anything in existing company law. Radical change to the rules and regulations under which I and P societies operate is not possible under a statutory instrument delivered under this clause. The net effect of the differences between I and P law and company law in the eight areas is that the legal form of I and Ps is significantly out of date and problematic.

Perhaps it will illustrate my point if I briefly go through the eight areas listed in new clause 5(3). Under section 1(1)(b) and schedule 1 paragraphs 2 and 6 and section 14 of the Industrial and Provident Societies Act 1965, the provisions seek to allow statutory instruments to be brought forward—if the Treasury is so minded—to bring industrial and provident society law into line with section 35, 35(a) and 35(b) of the Companies Act 1985. That is briefly sectioned for the benefit of third parties dealing in good faith with companies that do not need to be concerned whether under a company's constitution there is the capacity to enter into a transaction or not, or whether the power of the board of directors to bind the company is subject to any limitation.

I give the example of a rugby club that wants to borrow money from a bank in order to modernise its bar. There could be, under section 35 of the Companies Act, a scenario in which the rugby club does not have the provision of social facilities within the objects of its constitution. Under the changes that are being introduced for the Companies Act, that is not a problem for the bank lending the money because its loan is protected. However, if the rugby club is an industrial and provident society and the provision of social facilities is not included in its objects, that loan agreement is potentially ineffective, because the bank could lose its money. That is the issue of capacity—the ultra vires issue that company law reforms have already dealt with. Surely it is relatively straightforward to apply the solution that is appropriate for companies that have to deal with this question to industrial and provident societies.

I can offer assurance that the provision has not only been considered under reforms to company law, but has been considered by, and is incorporated under,

sections 8 and 9 of the Friendly Societies Act 1992. Section 5(8) and the second part of schedule 2 of the Building Societies Act 1986 achieve the same result for building societies.

There have been three occasions on which Parliament has had the opportunity to scrutinise these issues. Surely, therefore, it is sensible to allow the Treasury, if it so wishes, to amend the law governing I and Ps in this regard and to create that level playing field.

The reform proposed to section 3 involves assimilation with company law by allowing documents to be executed by the signature of officers rather than by seal. The equivalent reform was included in section 36(1)(a) of the Companies Act 1985 and the changes consequential on that provision.

Section 5 concerns the name of the society. No society can currently be registered with a name that is undesirable. The situation is extremely vague and unclear and the interpretation of the statute is unpredictable. Company law was changed in this regard by section 26 of the Companies Act 1985, which made the situation clear and straightforward. It would be sensible for the same principles to apply to industrial and provident societies. This is another part of creating a level playing field. Again, the innovation is not radical. Parliament has already considered it and it is a sensible update.

Section 29 concerns contracts, and the explanation for its inclusion in the new clause is similar to that for the inclusion of section 3 concerning the execution of documents by signature of officers.

The inclusion of sections 41 to 43 in the new clause is intended to allow assimilation with company law provisions that govern the accountability of and fair dealing by directors, committee members and officers. The issue relates to part X of the Companies Act 1985, and reflects the requirements that have applied to companies since 1980 concerning substantial property transactions involving loans, or certain other dealings with directors.

The inclusion of the sections ensures that beyond the existing common law duties of honesty, good faith and the avoidance of conflicts between duty and interest, which apply to both company and society directors already, certain specific transactions are prohibited under the Companies Act 1985 or require shareholder approval.

I shall give another hypothetical example concerning a rugby club. The club owns a large amount of land and wants to sell a couple of acres at the bottom of its fields, which it does not use and which are worth more than £150,000. One of the club's directors is a property lawyer. If the rugby club is a company, under company law such a transaction must be approved by its shareholders at a general meeting. If it is an industrial and provident society, however, such a transaction does not have to be approved by members.

The new clause offers the opportunity to ensure that there is appropriate transparency and that appropriate information is available to members. Similar provisions were brought into force for friendly

societies and building societies by section 27 and part II of schedule 11 of the Friendly Societies Act 1992 and sections 62 to 68 of the Building Societies Act 1986. There have been three opportunities for Parliament to debate this proposal. This is the one area of the provisions that is out of step with company law, and the new clause would allow the opportunity for sensible change by means of statutory instrument.

Sections 47 to 49 govern the power of the regulator to appoint inspectors or to investigate the running of a society or company, and are similar to those found in part XIV of the Companies Act 1985. The Department of Trade and Industry can investigate companies in cases of suspected fraud or some other form of wrongdoing to protect the interests of shareholders, creditors or others. The powers in the 1985 Act can be exercised by the DTI on its own initiative, or at the request of a proportion of members of a company. However, under I and P law, the opportunity to act on the regulators' initiative is not available to the regulator. That is the one difference between company law and the provisions governing I and P law, in this respect. It is surely a sensible area for change.

For some industrial and provident societies, the situation has already been rectified. Sections 17 to 20 of the Credit Unions Act 1979 changed that scenario, so changes have been considered under not only company law reforms but credit union reforms. The Financial Services Authority also has extensive powers under the Financial Services and Markets Act 2000 in respect of building societies and friendly societies. Substantial opportunities have been granted to Parliament to consider the principles at stake, or potentially at stake, under the new clause. We are discussing only that narrow difference—the fact that the regulator cannot act on his own initiative. The new clause would make that provision available if the Treasury wanted to propose change by statutory instrument.

Paragraph (a) of section 55 of the 1965 Act would apply sensible provisions in terms of rescue of industrial and provident societies. Here the focus is, again, on administrative receivership, administration orders and company voluntary arrangements, which were debated and reformed under the 1986 legislation. The provisions were also made available to building societies under part XI and schedule 15(a) of the Building Societies Act 1986. Already, therefore, the provisions have given two opportunities for parliamentary scrutiny. The new clause would simply allow a reading across of the provisions by statutory instrument.

Rather than going through all the other changes, which are even more minor, I should summarise the position that the new clause offers. By doing so, I shall hopefully persuade my hon. Friend the Minister, other Labour Members and Opposition Members, of the worthiness of the new clause.

Crucially, the new clause limits the Treasury's power to the provisions listed in subsection (3) alone, and to the eight areas that I mentioned. Under the original clause 3, the power of the Treasury was limited

by the provisions of the 1965 Act that it could not change. Therefore, there is a significant tightening of the opportunity for change.

Photo of Christopher Chope Christopher Chope Shadow Spokesperson (Transport) 11:30 am, 13th February 2002

Will the hon. Gentleman expand on the position in relation to sections 61 to 65 and the subsequent sections relating to general offences by societies, officers, members, proceedings and costs, as they may impact disproportionately on the very small industrial and provident societies? He has been so helpful in explaining all the other provisions that it would be a pity not to have a full list.

Photo of Gareth Thomas Gareth Thomas Party Chair, Co-operative Party

I am happy to oblige the hon. Gentleman. The sections to which he referred allow any necessary changes to the general provisions on offences and proceedings, and interpretation from them, that would flow from other possible changes that I have already set out.

New clause 5(3)(b) would allow the amendment of the Industrial and Provident Societies Act 1967 to bring the procedures for registering charges against societies' assets into line with the equivalent procedure applicable to companies. The type of charges that have to be registered obviously differ. For societies, it is only floating charges, but for companies, certain other charges are included. The details are entered on the register.

If a statutory instrument were made to bring about that change, and the provisions of the I and P Acts were consistent with those that apply to companies, societies obtaining finance would be facilitated because lenders would feel more secure. Again, that provision has been debated for building societies as well as for companies. Section 104A of the Building Societies Act 1986, inserted by section 42 of the Building Societies Act 1997, allows that change to be made for building societies by statutory instrument.

On the provisions for accounts, new clause 5(3)(c) would allow the amendment of the Friendly and Industrial and Provident Societies Act 1968, which governs the accounts and auditing requirements for societies. The purpose of permitting statutory instruments to do that is to apply a stricter regime, requiring the publication of more information, to larger societies as to larger companies, and to permit small and medium-sized societies to enjoy the exemptions and limited obligations that apply to companies of such size.

The hon. Member for Christchurch rightly made a virtue of recognising the differences between industrial and provident societies. The changes to accounts and auditing would mirror company law provisions and rightly introduce a stricter regime for the larger societies that compete with large companies but allow smaller societies to benefit from exemptions and limited obligations. I refer again to the analogy of the rugby club. Why should one rugby club, which is a company, have less rigorous auditing requirements than a rugby club of similar size that is an industrial and provident society?

These changes have also been considered for building societies. Part VIII of the Building Societies Act 1986 achieved that for building societies, and section 104(2)(c) of that Act allowed for further updating by statutory instrument as company law changed. The equivalent legislation for friendly societies is part VI of the Friendly Societies Act 1992, and section 102(2) of that Act permits updating by statutory instrument. I hope that that gives the additional information needed.

I shall summarise the case for accepting new clause 5 and for not allowing clause 3 to stand part of the Bill. There has been substantial modification to the areas where the Treasury can act. All these areas have already been considered by the House of Commons for company law reform. In six of the eight areas, changes to building societies or friendly societies have also been considered. I therefore suggest that the new clause is a sensible tightening of the provisions, reflecting the concerns aired on Second Reading.

Photo of Christopher Chope Christopher Chope Shadow Spokesperson (Transport)

I am grateful to the hon. Gentleman for setting out so clearly the detail of new clause 5, which is eminently preferable to the provisions that it would replace. It goes some way to addressing the concerns that I expressed on Second Reading. However, he has not addressed the concern that I flagged up in my amendment about the creation of new criminal offences. I cannot understand why we should contemplate the introduction of new criminal offences by secondary legislation that cannot be subject to amendment.

Photo of Gareth Thomas Gareth Thomas Party Chair, Co-operative Party

I am grateful for the opportunity to clarify that point. Crucially, only criminal offences that have been created by company law can be considered for industrial and provident societies. I give the hon. Gentleman the analogy of a Royal British Legion club, or better still a rugby club, which is a company. Criminal offences can be brought against the directors of such a rugby club, and a similar sized rugby club that is an industrial and provident society would currently be subject to the same offences. It is sensible to ensure that there is like provision across different sections.

Photo of Christopher Chope Christopher Chope Shadow Spokesperson (Transport)

Is not the hon. Gentleman getting into the dangerous area of unintended consequences of secondary legislation for small players and participants? At present, we are all familiar with lobbying from individual parish councils, the members of which are suddenly finding that they are subject to the same requirements for declarations of financial interests and keeping a register as councillors and Members. I am receiving information from my parish council that that may be appropriate for many councillors, but not for very small parish councils.

Photo of Gareth Thomas Gareth Thomas Party Chair, Co-operative Party

I cannot comment on the hon. Gentleman's example of parish councils because I do not represent an area with them.

Company law addresses different sizes of companies, which are as wide and various as industrial problems, if not more so, by drawing distinctions between those sizes. New clause 5 would allow, where appropriate, a read-across of those sections of company law for industrial and provident societies. To return to the rugby club analogy, provisions, and potentially criminal offences, are already in place for the directors of a rugby club that is a company. Those criminal offences are appropriate for rugby clubs that are similar in size but happen to use different models of industrial and provident society. The hon. Gentleman's concern has already been addressed by sensible differences in company legislation. We are simply seeking to read-across.

Photo of Mark Francois Mark Francois Conservative, Rayleigh

I use the opportunity to place on record the number of parish councils in the Rayleigh constituency that are equally unimpressed by the severity of the proposals.

Mr. Chope rose—

Photo of Mr John McWilliam Mr John McWilliam Labour, Blaydon

Order. We are not debating parish councils because they do not come under the Bill.

Photo of Christopher Chope Christopher Chope Shadow Spokesperson (Transport)

It is not my intention to debate parish councils, Mr. McWilliam, but there is an obvious analogy with the effect of secondary legislation on such organisations. In that instance, a power was given in primary legislation to the Government to introduce model rules. The implication of that primary legislation was that the model rules would allow flexibility, but in the end they did. My concern about the new clause is how can we contemplate what the implications of suddenly being liable for a range of new criminal offences might be for certain officers and committee members of friendly societies? At present, they are not liable because they are not directors of companies. If the hon. Gentleman wants to turn all friendly societies and industrial and provident societies into companies, that could be achieved through legislation.

There are important distinctions between industrial and provident societies and companies. I do not share the hon. Gentleman's belief that assimilation between industrial and provident societies and companies is, by definition, a good thing. The retention of the differences may be valuable.

Photo of Gareth Thomas Gareth Thomas Party Chair, Co-operative Party

I entirely agree that the retention of the key differences between industrial and provident society law and company law is essential. Under new clause 5, certain areas of the 1965 Act have been deliberately excluded from the Treasury's power to change by statutory instrument because they are fundamental to the difference of the industrial and provident society legal form.

I want to recognise the limited differences in eight areas that would be appropriate for inclusion in industrial and provident society law. I refer to the example that I used earlier of a rugby club director who is a property developer, and might want to buy up a couple of acres at the end of the rugby club's pitch that are worth £150,000. At present, if the rugby club

is a company, the director of that transaction would have to be reported to, and agreed by, the members of the rugby club. That is not the situation for a rugby club that is an industrial and provident society. There is no transparency for the members of the industrial and provident society rugby club, although there is for the club that is a company.

I will give the hon. Member for Christchurch an example of a new criminal offence that we envisage under the statutory instrument. If the property director of the industrial and provident society rugby club buys the property and does not report to the members of the society that the asset sale has taken place, a criminal offence would have been committed. That offence already exists for the rugby club that is a company. We are simply allowing a read-across from company law in a relatively narrow way.

Photo of Mr John McWilliam Mr John McWilliam Labour, Blaydon

Order. I assume that the hon. Member for Christchurch resumed his seat and that the hon. Member for Harrow, West was making an intervention. If that was an intervention, it must rate as the longest in parliamentary history, and it was completely disorderly.

Photo of Christopher Chope Christopher Chope Shadow Spokesperson (Transport)

I am grateful, Mr. McWilliam, for your flexibility. However, I am sure that the Committee is also grateful to the hon. Member for Harrow, West for expanding at such great length on that matter.

The Minister cites the example of the rugby club that is registered as an industrial and provident society, compared with one that is registered as a company. If there is a need to assimilate the criminal law relating to such circumstances, we can debate that in the House. We can introduce and discuss primary legislation. What has happened today is a demonstration of the House at its best. We have been able to amend primary legislation. In less than an hour and a half, we have considered and focused debate on a series of amendments.

If we had, instead, been discussing a statutory instrument dealing with a range of issues, we could have had a one-and-a-half-hour debate with no opportunity to amend the legislation. The many constituents and organisations concerned about the consequence of the change in the law would effectively not be heard and hon. Members would not have the flexibility to adjust to points made in the debate.

Photo of Joan Ryan Joan Ryan Labour, Enfield North 11:45 am, 13th February 2002

I take it that the hon. Gentleman does not object to statutory instruments per se. I note that, when he was Parliamentary Under-Secretary of State at the then Department of the Environment for five years, approximately 100 per year were passed. During the three years that he was at the then Department of Transport, 335 were passed.

Photo of Christopher Chope Christopher Chope Shadow Spokesperson (Transport)

I keep those figures always at the forefront of my mind and I am delighted that the hon. Lady is so well briefed. If she is kind and generous enough to acknowledge that I have some experience of the issue as a Government Minister and as a Member of the House, it is that experience that guides me to the

belief that we should be concerned about giving too much power to produce statutory instruments that cannot be amended. Both the Government of which I was privileged to be a member and the present Government have got into difficulties with statutory instruments.

We must ensure that legislation does not have a disproportionate effect on small organisations—the little platoons, as the former Prime Minister, John Major, described them. We referred to the example of parish councils and I will not dwell on that again. However, the prospect of people who take on office as committee members and officers of a small industrial and provident society suddenly finding themselves unwittingly brought before the courts and subjected to criminal charges, fines and public humiliation might act as a deterrent to taking on a role in the best interests of the society.

There may be a case for assimilating the laws for companies and those for industrial and provident societies. If we want to do that, the Government are free to introduce primary legislation. It does not have to be discussed at tremendous length and, if the Modernisation Committee has its way, there will be scope for us to consider amendments and properly discuss primary legislation much more quickly than we have in the past. Primary legislation allows flexibility that statutory instruments do not.

I was concerned when the hon. Member for Harrow, West said that it would be appropriate to assimilate the criminal law relating to offences under company law and under industrial and provident law in the case of the rugby club—perhaps it was a slip of the tongue. I thought that the purpose of the new clause was to say that it might be appropriate, but he is already saying that it would be. If it would be appropriate, he can table a new clause on Report, so that we can debate the proposal on its merits.

Photo of Gareth Thomas Gareth Thomas Party Chair, Co-operative Party

On a couple of occasions, the Chairman has chastised me, and I am happy to be chastised by the hon. Gentleman. He is absolutely right. Such a proposal might be appropriate.

I am a member of a united services club in my constituency that is set up as a company. I aspire to be a member of the Tithe Farm social club, which is of a similar size but is an industrial and provident society. Their services and operations are virtually the same. If I seek office in the club that is a company, however, duties will be placed on me that would not apply in the case of the other club. If I seek office in the club that is an industrial and provident society, I can do things that, rightly, I could not do as an officer of the social club that is a company. New clause 5 would make it possible to read across for industrial and provident societies the protection that exists under company law for social clubs, which are companies.

Photo of Christopher Chope Christopher Chope Shadow Spokesperson (Transport)

I understand the purpose of the new clause, but my concern is that it is too wide-ranging, even in its restricted form. We should not introduce new criminal offences in secondary legislation, which

we cannot amend. As many officers are almost volunteers, industrial and provident societies might face new burdens of regulation.

I look forward to hearing the Minister's comments. She, too, expressed concerns on Second Reading about the scope of clause 3, which has effectively been withdrawn by the hon. Member for Harrow, West. I am still concerned that whatever changes may be desirable, which could be introduced in this or subsequent legislation, should be discussed fully rather than introduced on the quiet.

Photo of Ruth Kelly Ruth Kelly Economic Secretary, HM Treasury

First, I congratulate my hon. Friend the Member for Harrow, West on comprehensively outlining how the new clause would work and where updating industrial and provident society legislation would be most useful. The Government fully sympathise with his aims in the clause, and although we have some concerns about its drafting, we recognise the need for the legislation on industrial and provident societies to be updated. My hon. Friend provided some useful examples of how that could be achieved. We shall carefully consider those issues, and I look forward to consulting with the movement about where changes are necessary. The useful exchange with the hon. Member for Christchurch brought out some of the details of the issue and the debate has been constructive.

I return to the argument that was put a little too strongly by the hon. Member for Christchurch about the appropriate checks and balances that Parliament would usually expect to be put in place in relation to such delegated powers. We have some concerns about the clause, but I can see the advantages of my hon. Friend's new clause. The Government would retain the flexibility to move quickly to update important areas of industrial and provident society legislation even where there had been no corresponding change in company law. The movement is likely to benefit most speedily from any modifications in primary legislation that occur as a result. However, it would remain out of line with provisions available under building society and friendly society legislation and it is clear that the Treasury can update legislation only once there has been a change in company law, and even then, only certain specified relevant provisions.

My hon. Friend and other Committee members may be worried about what changes might be possible after the review of company law has taken place. We expect the review to be far reaching—the most important reform of company law in a generation and, perhaps, the most important in 150 years or so. It is unlikely that the review would disqualify the Treasury from looking into particular areas of industrial and provident society legislation that might need to be updated, although we must wait for the results of the review to be absolutely sure.

I must express the Government's reservations. We would prefer a clause that tied industrial and provident society legislation more closely to that concerning other relevant mutuals.

Photo of Gareth Thomas Gareth Thomas Party Chair, Co-operative Party

I am grateful to my hon. Friend for giving way and for the opportunity of an exchange with the hon. Member for Christchurch. I hear the concerns of those on both Front Benches. If the Committee were minded to allow new clause 5 to make progress on this occasion, I should consult further on changes to it to try to deal with those concerns.

Photo of Ruth Kelly Ruth Kelly Economic Secretary, HM Treasury

I thank my hon. Friend for his useful intervention, in the light of which I am happy to consider the clause further with him.

The hon. Member for Christchurch has tabled an amendment to new clause 5 that would move the Bill—as amended by the new clause—more closely into line with other mutual society legislation. However, it would not deal with all of our concerns about the scope of Treasury powers. I would like to consider the amendments further to see whether it is possible to offer additional flexibility to the movement to update legislation, while ensuring that power delegated to the Treasury is appropriate; it should be consistent with our relationship with Parliament and the role that Parliament needs to play in the consideration of what is proposed.

We have already had an interesting exchange about amendment (d), tabled by the hon. Member for Christchurch, which would deny the Government the power to create criminal offences when updating industrial and provident society legislation under clause 3 provisions. We are not prepared to accept the amendment. My hon. Friend has already fully responded to it. If a criminal offence exists for a certain action under company law, I do not see why it should not be considered for the equivalent area of industrial and provident society legislation. That does not mean that we would always be obliged to create a criminal offence. The clause as drafted would allow some discretion as to how company law was assimilated.

I hope that that provides some reassurance to the hon. Gentleman. However, enacting such a prohibition now would reduce the chances of maintaining a fair and level playing field in relation to companies, where we think it is appropriate. We might, for example, feel that the creation of a criminal offence in some contexts would be the most appropriate way to protect the interests of society members. At the moment, I would not like to prejudge the circumstances in which that might happen.

The provision to create criminal offences is present under the equivalent provisions in building society legislation and I see no reason why we should not have the option to treat industrial and provident societies similarly. I therefore ask that the amendment be withdrawn.

Photo of Mr John McWilliam Mr John McWilliam Labour, Blaydon

Order. The amendments have not yet been moved, so they cannot be withdrawn.

Photo of Christopher Chope Christopher Chope Shadow Spokesperson (Transport)

The Minister has dealt with two of my amendments, the first of which she said did not go far enough, so I look forward to hearing further comments about that in due course.

In response to what she said about amendment (d) on the power to create criminal offences, I remind her that she just said that the Government are on the threshold of introducing the most radical reform of company law for perhaps 100 years. That will be an enormous piece of legislation. There seems to be no reason why it should not cover industrial and provident societies and offences relating to those who hold office in them—or, indeed, in friendly and building societies and perhaps the new vehicles and not-for-profit companies. Who knows what may be in the legislation?

Surely it would be better for all that we are considering to be dealt with in primary legislation, rather than piecemeal through statutory instruments without sufficient consultation or discussion in public. The Minister spoke on Second Reading of the response that had been received to the consultation paper that was launched in 1998. Those responses have not yet been published, but when they are, perhaps they could lead to discussion of detailed measures to amend further the industrial and provident societies legislation. Surely that would be better dealt with through primary legislation. However, I do not want to press my amendments. If the Committee accepts new clause 5, the issue will be subject to review. I am grateful to the hon. Member for Harrow, West for his flexibility. New clause 5 is much preferable to the clause that it replaces.

Question put and negatived.

Clause 3 disagreed to.

Clause 4 ordered to stand part of the Bill.