Skip to main content

Co-operative and Community Benefit Societies and Credit Unions Bill

Volume 493: debated on Friday 12 June 2009

Consideration of Bill, not amended in the Public Bill Committee.

Third Reading

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

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

As I trooped through the No Lobby, I reflected that, given the fervour for the modernisation of Parliament, I hope that the modernisers will look critically at the way in which we spend our Friday mornings. The shenanigans that go on are not fit for purpose in a serious parliamentary democracy.

It is my pleasure to present the Bill for its Third Reading. I thank hon. Members for their useful contributions on Second Reading on 24 April. I am grateful for all their comments and questions, and encouraged by the unanimous cross-party support for the measure. We had an equally useful, albeit short, exchange in Committee, and I am impressed with the commitment that hon. Members continue to show to the cause of mutuality and co-operation.

The Bill represents something of a rebranding of societies. It provides for all new societies registered under the Industrial and Provident Societies Act 1965 to be registered as co-operative or community benefit societies and it sets out the basis on which societies may be registered. The criteria are essentially those in existing legislation and no major change is made to the qualifying criteria.

The introduction of the registration requirement will also ensure that societies can be properly supervised by the Financial Services Authority, thus improving corporate governance over the sector. By modernising the name from “industrial and provident society”—which, I admit, has a historical resonance and status—to terms which are, in any case, in common usage, we can help the sector adopt a modern 21st century status and persona.

Societies that are already registered do not have to register again. If my Bill becomes an Act, societies that register before it is implemented will not be affected by the definitions of “co-operative society” or “community benefit society” in the measure.

The Bill also deals with circumstances in which a society’s registration may be cancelled so that it reflects the new registration provisions. The FSA, as registrar, will be able to cancel a society’s registration when it does not meet the new statutory definitions. Again, the Bill caters for the status of societies registered, or treated as registered, under the current section 1 of the 1965 Act.

The Bill changes the name of the Industrial and Provident Societies Act 1965 and that of other Acts concerning such societies so that “industrial and provident societies” is replaced by “co-operative societies” in the titles. That is part of the rebranding of industrial and provident societies.

On modernisation, perhaps the right hon. Gentleman will consider, given that “industrial” has gone out of vogue, whether that also applies to “Labour”, and whether the party should be branded “the Co-operative party” again. Will he remind the House that the registration of credit unions is unchanged, although some provisions affect them? Will he reflect on whether it is right to provide for “the Treasury” to have power to do things when, normally in Bills, power is given to “the Secretary of State”, which allows for greater flexibility in Government in later years?

I will deal shortly with one or two of those issues, not least credit unions, which both the hon. Gentleman and I regard as particularly important in the current economic climate in some of our poorer communities. On his useful—as ever—advice about the name of the Labour party, as every schoolboy and schoolgirl knows, there is a separate Co-operative party, of which I and many other Members are members. Indeed, some colleagues are returned as Labour and Co-operative Members. However, it is always useful to have a tutorial from the hon. Gentleman about the history of the Labour movement, although it is not the subject of the Bill.

The Bill applies the Company Directors Disqualification Act 1986 to officers of industrial and provident societies, as it applies to officers of companies, building societies and friendly societies. The 1986 Act provides for the disqualification of officers of companies and various bodies when such officers have seriously mismanaged those bodies. Disqualification means being prohibited from involvement in the management of a company or from acting as an insolvency practitioner for a period of time. Under the law as it currently stands, officers of industrial and provident societies who have mismanaged a society cannot be disqualified. Clause 3 will make their disqualification possible.

The Bill provides for greater investigation of societies. It gives the Treasury powers to apply to industrial and provident societies specific provisions of company law on investigating companies, company names, dissolution, and on restoration to the register, which the FSA keeps, of industrial and provident societies.

The Bill also applies part 31 of the Companies Act 2006, which contains provisions to strike defunct companies off the register of companies, to societies. It therefore provides a significantly more streamlined procedure than that which currently applies to societies, and one that will be less onerous on the FSA. The onus to prove that a society is defunct currently rests with the FSA as registrar. The FSA can act only in limited circumstances, frequently after having to devote considerable resources to investigation of a society’s status. The new regime will place the responsibility on a society to demonstrate that it is still active. The Companies Act 2006 provisions also contain related procedures governing voluntary striking off, treatment of the property of a dissolved company and restoration of companies to the register.

Parts 14 and 15 of the Companies Act 1989 also come into play. They cover a power by the Secretary of State—by that I now mean the Secretary of State for Business, Innovation and Skills; I think that is the correct name for the Department, after a period of being Business, Enterprise and Regulatory Reform and a longer period of being Trade and Industry. I have not walked along Victoria street this morning, but I think I have got the name right this Friday. The Bill gives powers to the First Secretary of State to investigate companies and their affairs, and to requisition documents.

Under the law as it stands, the FSA has certain powers to investigate industrial and provident societies. However, such powers are limited, particularly in respect of those societies that are not regulated by the FSA as providing financial or insurance services. In contrast, the Secretary of State has more extensive powers to investigate companies. That partly tackles the issue that the hon. Member for Worthing, West (Peter Bottomley) raised about the Secretary of State’s powers. The Bill will enable the Treasury to give the FSA powers of investigation of industrial and provident societies, equivalent to the powers that the Secretary of State has in respect of companies.

The Bill also includes important provisions for credit unions. It enables provisions that correspond to building society law to be made for credit unions. The power will allow any provision in building society legislation, which is deemed appropriate, to be mirrored for credit unions. Credit union membership has expanded significantly in recent times; indeed, perhaps I should declare that I have recently joined the excellent Croydon credit union. The best way of allowing credit union law to keep pace with that expansion in membership and operations is to bring it into line with building society law, which is tailored to deal with issues specific to institutions that accept deposits. The power is widely drawn, so as to allow any provisions of building society legislation deemed appropriate to be mirrored for credit unions.

There are restrictions, however, to ensure that specific provisions of existing credit union law cannot be modified. Thus, provisions regarding registration, the use of the name “credit union”, the general prohibition on deposit taking, amalgamations or transfers of engagements and conversion of status between credit union companies are safe. There is a requirement that the Treasury consult with the appropriate persons before using the power, which is a reflection of its potentially wide scope. Depending on which provisions of building society law are converted into credit union law, the Treasury might need to

“confer power to make orders, regulations and other subordinate legislation; create criminal offences; provide for the charging of fees (but not any charge in the nature of taxation).”

On Second Reading, hon. Members raised a number of important points, to which I promised to respond in due course. I would therefore like to take a little time today to put on record my reflections on those questions. The hon. Member for Southport (Dr. Pugh) cited some illuminating research by the Joseph Rowntree Foundation that pointed out some of the risks associated with increasing state and local authority involvement. He wanted assurance that the Bill would not denature credit unions. I think it fair to say that credit unions would welcome the opportunity to attract savings from larger community organisations and local authorities. I welcome that as well, but also recognise the hon. Gentleman’s concern. The legislative reforms that this Bill, and, indeed, the Government’s legislative reform order, seek to introduce will ensure that the role that people play as individual members, contributors and depositors will not be diminished. Individual membership will continue to be the main focus of credit union membership.

When I spoke at the annual general meeting of the Croydon credit union the other day, I was impressed by the fact that 40 or 50 people had gathered there as members of the credit union to spend an hour and a half discussing the affairs of the union and looking at how it could improve itself. That seemed to be self-help—to use an old-fashioned term—at its very best. Certainly, nothing in the Bill will interfere with that. Indeed, I think it will help to maintain and develop that honourable tradition and ethos.

On the issue of informal financial education for credit union members, I know that the Government, together with the FSA, have launched a scheme, under the brand name “Money made clear”, aimed at creating greater financial literacy in education. They have also been working together with credit unions under the auspices of the umbrella group, the Association of British Credit Unions Ltd, to increase financial education among members.

On Second Reading, the hon. Member for Fareham (Mr. Hoban) emphasised the importance of getting the regulatory regime right for societies, citing the recent fate of the Presbyterian Mutual Society in Northern Ireland as a case in point. Indeed, the problems at the PMS have emphasised the need for societies to make absolutely clear to their members the nature of their investment. That also highlights the need for vigilance by the registrar. I understand that the administrator for the PMS is due to present his report on this sad incident, and it would therefore not be prudent for me to comment further on the matter. However, I would like to say that we all sympathise with the plight of that society and its members, and that we hope that the matter ends in a satisfactory resolution for all those affected.

The hon. Gentleman also inquired why the enabling power granted under the Industrial and Provident Societies Act 2002, allowing the Treasury to amend industrial and provident societies legislation using secondary legislation in line with any changes made to companies law, had not been utilised. I am informed by colleagues at the Treasury that there is every intention to use that power at the appropriate time. They explain that it can be exercised only to apply to industrial and provident societies a “modification” of company law—in other words, a new provision. A large number of the provisions of company law covering the areas that the Bill intends to make applicable to industrial and provident societies are not modifications or new law, and these powers cannot therefore be used in this instance.

Based on my discussions with Treasury colleagues, I can also confirm that the Government intend to consult later this year on the application and applicability of the Electronic Communications Act 2000 to credit unions and industrial and provident societies. It is important for the sector to be able to communicate electronically with its members and with statutory bodies, and I am assured that this matter will be dealt with using all the diligence and urgency that it requires.

My hon. Friend the Member for Edmonton (Mr. Love) sought reassurance that the Rochdale principles would be applied when registering industrial and provident societies. The Rochdale principles of voluntary and open membership, democratic member control, member economic participation, autonomy and independence, education, training and information, as well as co-operation among co-operatives, are already enshrined in the International Co-operative Alliance’s statement on co-operative identity. I am not aware of any provisions in the Bill that will detract from those important central tenets.

The Bill has received all-party support, and I hope that that will continue today. On one level, it is a legal, technocratic Bill. It is about modernising, and about improving what we might call corporate governance. It is also about introducing measures for co-ops and credit unions to bring them into line with best practice in the corporate sector. We have mentioned the applicability of building society provisions for the credit unions in that regard. It might appear to be a rather dry Bill, but it comes at an important time when we are seeing a revival of interest in the principles of mutuality and co-operation. That revival is partly driven by consumers’ concern that goods should be appropriately sourced—without the use of child labour, for example—and by their increasing interest in the quality of products, given rising concerns about health and obesity, for example. The Bill is also being introduced against a backdrop of some corporate financial institutions, not least in the financial sector, having seriously let down the public. It is therefore unsurprising that we are seeing a greater interest in the co-operatives.

Following the historic great leap forward in earlier times, building societies have experienced many years of decline. Sadly, too many of the great societies were de-mutualised and most of them are now totally lost to the benefit of their communities. After that period of demutualisation—which got a lot of excited support at the time from certain segments of society—and a period during which the Co-op shop was simply not competing with the likes of Sainsbury’s and Tesco, we are now seeing a revival. I understand the problems that are affecting some of the building societies at the moment. The West Bromwich building society is a topical case in point. Nevertheless, my guess is that a lot of us are rather pleased that our savings and bank accounts are with the Co-operative bank or with one of the mutual societies, rather than with one of the private sector banks that have run into trouble.

Some interesting developments are now taking place that support my optimism about the co-operative and mutual sectors. First, the whole range of local and regional co-operative societies have at long last amalgamated into one Co-op Group. Some societies are not yet members, but 80 or 90 per cent. have amalgamated. Secondly, the Co-op Group is now taking over the Somerfield retail outlets to make it a significant player in the retail sector. Thirdly, we have seen the Co-op bank—perhaps I should declare an interest as I have been a long-term member or account holder of that bank ever since my student days—merge with the Britannia building society to form what some people are referring to as a “super mutual”. If we also add on the number of small organisations that are co-operatives—in fishing or some of the big agricultural sectors—we can identify a flourishing of this ethos of co-operation and mutuality.

Should the Bill receive support and eventually Royal Assent, and in some small way succeed in improving corporate governance and modernising such societies and credit unions, that would mean progress towards making the mutual and co-operative sector a significant one in the British economy once again. For that reason alone, the Bill will be most welcome.

I warmly congratulate the right hon. Member for Croydon, North (Malcolm Wicks) on his Bill and on the way he has conducted it through the House. We have seen a perfect example of the right approach, with him answering points that were quite properly raised by other hon. Members in earlier stages and shepherding his Bill to what I hope will be a successful conclusion today.

I do not know whether it is a proper interest, but I should declare that I am a long-standing member of the Witham Friary friendly society, one of the oldest in the country. That entitles me to attend a quinquennial dinner and, should I ever be debilitated and unable to work, to receive the princely sum of six old pence a week. I am sure that The Daily Telegraph will take a considerable interest in that extra emolument available to me if I am ever disadvantaged by illness.

I would like to point to a historical precedent in that one of my most distinguished predecessors as the Liberal MP for Frome was the author Thomas Hughes, who was a great advocate for the co-operative movement. He was the Liberal MP for Frome for only a short time, subsequently becoming Liberal MP for Rochdale, where the connection with the movement is perhaps more obvious. Our part of the world can nevertheless be said to have played its part in the development of the co-operative and mutual movement.

I shall not detain the House with a long speech. The right hon. Gentleman is absolutely right to say that the appetite for mutuality and co-operative arrangements is increasing. A few years ago I was worried, and said so at the time, when we saw the demutualisation of our great building societies. Members of all parties at the time sounded the warning bells that that was an abandonment of the principles under which those organisations had been built up, in an unholy scrabble after major capital for members and the organisations themselves, that could—and, in many cases, certainly did—end in tears. Now, however, there is a real understanding that working in a co-operative way for the common wealth is a beneficial way of organising a business. As the right hon. Gentleman said, we have certainly seen that in the agricultural sector in the selling of produce, but also in other sectors.

I thus greatly welcome further development from the bottom up of these smaller organisations in the financial sector, but they need to develop in some sort of framework—otherwise, they will be open to threats from those who have alternative motives. The right hon. Gentleman’s Bill, small as it is—he is right that this is not earth-shattering stuff; it is in some ways a technical Bill—will help to put the smaller mutual arrangements into a proper system of corporate governance and regulation. That seems to me a worthy aim, so I commend the Bill and I will encourage all my hon. Friends to support it.

My right hon. Friend the Member for Croydon, North (Malcolm Wicks) would have been as surprised as I was when, on looking into the history of the co-operative movement, I found very little connection with Islington. I know that he has a long-standing connection with Islington, so he will appreciate how much of the history of the labour and socialist movement began there. The only historical information I could find on Islington that is comparable to Rochdale in this respect, however, was that Thomas Paine wrote the “Rights of Man” at the site of the current Co-operative bank at the Angel. [Interruption.] I have an excellent researcher, so please leave her a note.

I echo my right hon. Friend’s comments on the need to look again at the way in which we conduct our time and ourselves on Fridays; if we modernised, we might be able to use our time for the betterment of Parliament.

It is right to look at the history of the co-operative movement and to understand what has happened so far. Although the Bill has been seen as largely technical and of small import in itself, it remains important if it puts the final brick in the wall needed to ensure that the co-operative movement is properly protected and able to fight on a level playing field with other financial institutions. At a time when we are going through such enormous convolutions and have been hit by dreadful threats to our financial system, the co-operative movement and the system of mutual finance is one that we really must look at carefully and protect. I share the aspirations of other Members to ensure that the co-operative movement once more assumes a very important role in the conduct of our business and financial institutions. I commend my right hon. Friend for the support to the movement that his Bill will provide.

Although the history shows that we have moved a long way from the roots of the co-operative movement, many of its core values continue to inform us today. Despite the changes over the last two centuries, co-operatives remain the same in one crucial respect: they exist to provide mutual self-help for their members rather than to generate profit for investors. They have been driven by their core values of ethical behaviour, and the absence of external shareholders throughout the sector means that there are no conflicts of interest between the claims of consumers and owners, leaving co-operatives no incentive to exploit their customers for short-term gain.

When I met the staff and management of the Co-op shop on Caledonian road, I was struck by the pride they have in their store. It is difficult to run a shop in the Caledonian road area and a number of other shops have closed, but the Co-op is committed to ensuring that a shop is maintained there. It offers a wide range of high-quality products—Fairtrade products, for example, that perhaps have a wider appeal on the Barnsbury side of the Caledonian road—but also good-quality cheap goods. The shop has had to increase its security and, in the teeth of opposition from the local Liberal Democrat council, place cameras outside in the street. It has expanded the shop and shown great commitment—

It is, I think, important for an institution such as that one in my constituency to be supported.

I look to you for guidance, Madam Deputy Speaker, but another event took place in my constituency shortly after I was elected. One member of staff at the Co-operative bank at the Angel was killed and another badly injured as a result of what happened on 7/7. The reaction of the staff and management there was remarkable. They worked with me on arranging a community meeting to celebrate the lives of those killed or injured. Islington continued to pull together—another example of co-operative values that we should all be proud of.

I am not a member of the Co-operative party, although frankly I wish that I were. I have made a number of attempts to become a member. When I stood for election in Canterbury and Whitstable, I wanted to stand as a member of the Labour and Co-operative party, but unfortunately—

Order. I am afraid that I really must bring the hon. Lady to order. I repeat what I said earlier: her comments must relate to the content of the Bill.

The purpose of the Bill is to remove all legislative obstacles faced by the co-operative and credit union movements, and to level the playing field in relation to other organisations. It represents the culmination of more than 10 years of work done by the Co-operative party in partnership with Government to level the playing field between co-operatives, credit unions and other corporate forms.

The first piece of legislation for the purpose—the Bill that became the Industrial and Provident Societies Act 2002—was tabled by the then chair of the Co-operative party, Gareth Thomas. It increased protection against the demutualisation of co-operatives, and enabled the Government to use statutory instruments to bring industrial and provident society legislation into line with company and building society law.

The second Bill piloted by the Co-operative party was Mark Todd’s, which became the Co-operatives and Community Benefit Societies Act 2003. It built on Gareth Thomas’s earlier Act by providing an asset lock for community benefit societies including housing associations, community child care facilities and football supporters’ trusts. It prevents the demutualisation of community benefit societies, making them more secure and much more suited to the running of public services. It also addresses a number of contractual and corporate governance issues for societies.

Sir John Butterfill’s Building Societies (Funding) and Mutual Societies (Transfers) Act 2007—

Order. I am sorry to have to interrupt the hon. Lady again, but when she mentions Members of the House she should refer to their constituencies rather than their names.

I am grateful for that assistance. I believe that Sir John Butterfill is the hon. Member for Bournemouth, West. His 2007 Act made it possible for different categories of mutual to transfer to each other without demutualising. The success of that Act was key to the proposed merger between the Co-operative bank and Britannia building society.

The long-awaited review of the industrial and provident societies legislation was launched by my right hon. Friend the Member for Normanton (Ed Balls) on Thursday 21 June 2007. It was fitting that the task was performed by the first Co-operative party Member of Parliament to fill the post of Economic Secretary to the Treasury, as it represented the culmination of 10 years of work by the party to level the playing field for the co-operative sector.

The following June, my hon. Friend the Member for—another hon. Member—[Laughter]—announced the publication of a number of proposals for legislative reform orders to level the playing field further. The fact that so much legislation can be delivered in this manner is a result of the success of the original Industrial and Provident Societies Act 2002.

The legislative reform orders are due to come before Parliament on 6 April. They will modify the provisions specifying the minimum ages for membership of an IPS and for becoming an officer of an IPS, modify the rules on share capital, modify the provisions relating to the fee paid for a copy of the society’s rules, facilitate easier dissolution of registered societies, give societies the flexibility to choose their own year ends, and remove the requirement for societies to have interim accounts audited. A recent legislative reform order announced a series of measures for credit unions. There is also a second tranche of orders to be consulted on and laid before Parliament.

This Bill represents the final piece of primary legislation in the jigsaw, and will tackle all outstanding issues that cannot be dealt with by secondary legislation. It proposes to change the term “industrial and provident society” to “co-operative society” or “community benefit society”. That strikes me as an excellent change, which will make the purpose of such societies much clearer to people. It is felt that the current title is a disadvantage when the aim is to portray societies as a modern way of addressing contemporary issues. Although the change is mainly presentational, it may be crucial to the way in which societies are perceived, and could play a role in attracting funds for investment.

The Bill also applies the provisions of the Company Directors Disqualification Act 1986 to the special circumstances of the mutual sector. There are currently no powers to disqualify the directors of an industrial and provident society under the Act, nor is there any statutory prohibition on disqualified directors from being members of a committee or board of a society. That seems nonsensical to me, and I am very pleased that we shall be able to bring it to an end.

There appears to be no reason not to apply this legislation, which would be helpful in terms of parity and oversight. It would ensure that industrial and provident societies were regarded as a no less reliable source of governance and oversight than other corporate forms, as well as protecting the public interest.

The Bill gives the registrar powers to require the production of information and documents, to appoint investigating accountants, and to wind up societies in the public interest. There are currently no powers to require the production of information and documents, or to appoint investigating accountants in relation to industrial and provident societies. It is important for that to be changed, and for societies to be brought into the 21st century. Such powers exist in relation to both building societies and companies. There are also currently no powers to wind up societies in the public interest, although such powers exist in relation to companies. The introduction of the new powers would also be helpful in terms of parity of statutory oversight, and in protecting the public interest.

At present, only an Act of Parliament can update credit union legislation in certain respects. The Bill permits the use of statutory instruments when building society law is changed in future to assimilate credit union law with building society law. That may prove crucial in ensuring that credit union law is kept up to date with the latest developments in related fields. There is a credit union in Islington, the Islington and City credit union, which was established in 1997. I hope that we can change the law in order to support that credit union, which is going from strength to strength, so that it can continue to assist my poorest and most vulnerable constituents. There are far too many loan sharks on the streets of Islington, and I wish the Islington and City credit union all the best.

I support the Bill, and I am very pleased that it has been presented.

The House will have enjoyed becoming familiar with the hon. Lady’s speech just as much as I suspect she did—with the bits that were in order, that is. I had not realised that we had to find something written in our constituencies before taking part in the debate. Oscar Wilde came to Worthing for three weeks, where he wrote “The Importance of Being Earnest”, which has no relevance whatever to this debate.

I should declare an interest—or rather not an interest, but a matter of fact. I have a Co-operative bank account and I am a member of the West Sussex Credit Union, which I commend to others. It provides both safe savings and sound borrowings, and I expect many commercial banks to adopt similar principles from now on.

Let me say to the right hon. Member for Croydon, North (Malcolm Wicks), who has kindly nursed the Bill through its stages so far, that he has done an excellent job. If he is thinking of any kind of modernisation, he might suggest that this should be a Government rather than a private Member’s Bill, although I understand that the various parts of the co-operative movement have had an interest in developing its principles.

If we are going to have to modernise everything—and I note that every candidate for the Speaker’s Chair is now a moderniser—it might be an idea, if a Bill is non-controversial, for the Government to consider inviting members of other parties to put their names to Government Bills to show that it is not a case of one side fighting another or taking all the credit for something. Having offered that thought, which I hope is in order, I shall move on.

I know that the hon. Gentleman was not implying this, but he will know that my Bill is sponsored by members of the Conservative party and by the hon. Member for Twickenham (Dr. Cable), the Liberal Democrats’ Treasury spokesman, as well as by members of my party. I understand the other point that he made, and we would welcome Conservative support for one or two controversial Bills that are due to be presented.

I thought that the Postal Services Bill had been delayed, but we will do what we can to help the Government.

The right hon. Gentleman made a serious point in observing that the Bill has been sponsored by two Liberal Democrats and two Conservatives. That is what prompted me to suggest that where there are non-party Bills, even though there may be controversy about parts of them, the Government might consider saying, “Why don’t we have a big-tent approach to the sponsorship of these Bills, just to show that, behind the principles, there can be all-party agreement?”

The focus on co-operative provision of services should not be to the exclusion of the private sector. It is just as possible in the private sector as in the co-operative movement for a failing shop to be taken over by someone who provides a proper service, and for the shop to develop and grow and for its customers to be grateful. Such a private shopkeeper might be a recent immigrant to this country, and I pay tribute to the many people who came here when the Asians were thrown out of Uganda. They showed that such businesses could be successfully established as family concerns, and that they could serve their customers with just the same commitment as those in the co-operative sector.

The co-operative sector has an honourable tradition, and it comes in many forms. A few days ago, there was a function in Parliament for employee-owned businesses. The range of them is much greater than most people are aware of. I do not think they are covered by this Bill, but they are part of the tradition of co-operation or common ownership, and of alternative forms of ownership more broadly.

As the Bill passes to another place, I would like the Government to think about whether the approach summed up in the expression, “The Treasury can do this, and that, and the other,” is always the most appropriate. I do not argue that it is wrong, but I think that the tradition in our legislation of giving power to the Secretary of State is worth considering. I remember being told by my father, who was at the time a junior civil servant, that he had to get a letter to his Secretary of State, who was in Australia. He arranged with the Royal Mail that it would be taken to Hounslow—or whatever Heathrow was called at the time—where it would be put into the hands of a pilot, who would then fly to Sydney and find the Secretary of State. Two hours later, however, No. 10 asked if it could have the letter back—a reshuffle had probably been cancelled, as usual—so my father got in touch with the Royal Mail to ask for the letter to be returned. “Under whose authority?”, he was asked. He said, “The Prime Minister’s”, but he was told that that was not good enough as the relevant Act says the Secretary of State has the power and that this Prime Minister was not a Secretary of State. He was told that the only Prime Minister to have been a Secretary of State was the Marquis of Salisbury, who was Foreign Secretary at the time. As a result, my father had to wander around Whitehall until he found Chuter Ede, the Home Secretary, to whom he said, “Excuse me, my name is Bottomley from the Dominions Office, will you please sign this authority to get back a letter from your colleague the Prime Minister to your colleague Viscount Addison?” and the letter was then withdrawn from the mail. I therefore offer the thought that using the expression “the Secretary of State” allows any Secretary of State to sign a document if and when needed.

The Bill is useful. Most of its provisions are necessary; some are window dressing, but I do not think that that matters too much. The explanatory notes are valuable and they make it plain that the Bill does not change the registration requirements of credit unions themselves. I therefore hope that those in credit unions will see such references to credit unions in the Bill and will not feel that they have a problem with their current registration.

I hope that credit unions such as the West Sussex Credit Union will grow not just in the provision of services for savers and borrowers, but also in order to raise financial literacy—I think that is the right expression. I hope that young people will get to understand the range of provision of financial services, and also that the old rules about money are probably the right ones: it is all right to borrow, if it is safe; and it is right to save, but the real reason for saving is not just to get a return on the money, but to have something put by for a rainy day, because, as we all know, summer does not last for ever.

It is, as always, a pleasure to follow my hon. Friend the Member for Worthing, West (Peter Bottomley), who made a thought-provoking speech.

Until now, I have had no dealings with the Bill, so I should start by reassuring the right hon. Member for Croydon, North (Malcolm Wicks) that my presence at the Dispatch Box reflects the day of the week rather than any U-turn on behalf of the Conservative party, because we welcome what is a useful Bill. On a personal note, I would like to extend heartfelt congratulations to the right hon. Gentleman for taking the Bill so far. I have had the pain or privilege of taking a private Member’s Bill through Parliament: it eventually became the Sustainable Communities Act 2007. Notwithstanding his understandable frustrations at the process, I hope this is a part of his political life that he will look back on with great pride, and perhaps reflect on the irony that so far it has proved easier to change the law of the land as a Back Bencher than it proved to install renewable energy in his home in Croydon despite being Energy Minister at the time.

We welcome this useful Bill. My hon. Friend the Member for Fareham (Mr. Hoban) spoke in support of it on Second Reading. The hon. Member for Islington, South and Finsbury (Emily Thornberry) made an entertaining speech—although I noted how difficult it was for her to get her mouth around the words, “my right hon. Friend the Member for Normanton”. She reminded us that the Bill should be seen as the latest in a series of private Members’ Bills sponsored by Members from both sides of the House that seek to update the legislation on mutuals.

We value the work of mutuals. I do not know whether the right hon. Member for Croydon, North keeps a copy of the “Mutual Yearbook 2008” by his bedside, but it is a good read, and it reminds us of the economic importance of this sector. It employs close to 1 million people and has annual revenue of more than £84 billion. It is therefore a sector that has significant economic weight, as well as an important social impact in the country.

It is probably wrong to pick out any particular sector, but I happened to meet housing association representatives yesterday and they were keen to remind me that they are not just about bricks and mortar; they are also about providing community services through employment, health and education projects. They are important partners of regeneration. A recent audit of those services found that they annually invest at least £435 million in that work.

Whether the bodies in the sector are building societies, housing associations or football supporters’ clubs, they need the right legislative framework, and one that is suited to the 21st century, and this Bill provides that. As the right hon. Gentleman said, the Bill addresses four key issues. First, it requires new industrial and provident societies to register as co-operatives or community benefit societies. Secondly, it calls for the renaming of the Industrial and Provident Societies Acts; it has been agreed that the term “industrial and provident society” is arguably an outdated term, and hides the wide range of bodies that can be constituted as mutuals. Secondly, it applies the Company Directors Disqualification Act 1986 to industrial and provident societies. It is my understanding that there was no outstanding reason why officers of mutual societies should not be dismissed for negligence, as they can be under company law. Thirdly, it gives the Treasury powers to apply to community benefit or co-operative societies the company law on investigation of companies, company names and dissolution and restoration to the register. Finally, it gives the Treasury powers to make provisions for credit unions corresponding to any provisions applying to building societies. The clear theme is one of recognising the contribution mutuals have made to our economy by passing legislation that updates the framework within which they operate.

The Bill has been widely consulted on, and the mutual sector is broadly happy with the proposals. It is customary now to thrash out any issues left hanging after Committee stage, but this Committee stage lasted 14 minutes, at least two of which, I understand, were taken up by my hon. Friend the Member for Macclesfield (Sir Nicholas Winterton) praising the Bill’s sponsor for his integrity and experience. Given the career implications of that, it must have been the longest two minutes of the right hon. Gentleman’s life, but I am glad to see that he has recovered from the experience, and has been here today to guide us through proceedings at a steady pace.

At this point, however, we must sound a note of caution. Cross-party consensus must not become an excuse for lack of scrutiny. The Bill is important. It will modernise the legal framework of co-operatives and protect the interests of their members and industrial and provident societies through the provisions. It is not simply a tidying-up exercise. There are instances where co-operatives should be considered as companies and credit unions should become more like building societies, but mutuals are not companies and credit unions are not building societies and should not strive to be. We need to make sure that these legislative reforms are able to deliver the necessary modernisation while protecting the unique status of societies and credit unions. They are not the solution to all our problems either. There have been many casualties in the mutual sector throughout the financial crisis. It is not the case that all mutuals are well managed and it is in the interests of the members and customers of mutuals that their directors are brought within the remit of the Company Directors Disqualification Act 1986. As a result, although support for the ethos of mutuals is unanimous, so should be the recognition that they need effective regulation and the right legislative framework in which to operate. The Bill is principally an enabling one, and much will depend on the secondary legislation and the legislative reform orders that will follow. The standard of scrutiny that we have seen thus far must be maintained. The one thing that did emerge from the Committee was the news that the secondary legislation is yet to be drafted, and even when that has happened, it will be subject to extensive consultation. It is vital that those changes have the support of the sector, and that can be achieved only by proper consultation.

In conclusion, Conservative Members welcome the Bill, which should help mutuals to achieve their full potential through a more modern legal framework. We welcome both the protection that it gives members of mutuals from poor directors and the modernisation of credit union legislation. We wish this welcome Bill well.

I am delighted to provide the Government’s response to this Bill. I thank my right hon. Friend the Member for Croydon, North (Malcolm Wicks) for the leadership that he has shown in introducing this Bill and I pay tribute to his commitment to the cause of mutuality. I echo what the hon. Member for Ruislip-Northwood (Mr. Hurd) said about the achievement that this Bill represents. I know that this is not the first time that my right hon. Friend has piloted a private Member’s Bill through the House—he did so with carers legislation—so this is a field in which he is well experienced and this Bill reflects that. It makes an important contribution to improving the framework within which co-operative and community benefit societies and credit unions will be able to work in future.

The Government place a high value on the role that co-operatives and credit unions play in the UK economy. Along with other mutuals, such as building societies and friendly societies, they have had an immense influence on the development of our financial system as it stands today. The hon. Member for Ruislip-Northwood is right to underline to us the extent and scale of this sector of the economy; mutuals provide a very wide range of services to millions of people up and down the country. The building society sector has traditionally had a very strong presence in savings and mortgage markets, but it is a particular characteristic of mutuals such as credit unions and industrial and provident societies that they reach into communities to help people who might otherwise not have any access to mainstream financial services. That is a particularly important strength that the sector offers.

Mutuals have combined total assets in excess of £400 billion and about half the UK population has membership of at least one mutual, so there is absolutely no doubt that mutuals are a major part of the financial landscape. This debate has touched on the history of demutualisation and people sometimes give the impression that there is nothing left following the demutualisations that have taken place, but that is certainly not the case; this is a large sector that makes a very important contribution, and we need to support it in the way that this Bill will help us to do.

From the Government’s point of view there are three major benefits of this Bill. First, by providing support to the mutual sector the Bill will promote choice and diversity in financial services. The hon. Member for Worthing, West (Peter Bottomley) warned us against the danger of placing too much reliance on the mutual sector and that is a fair point. Nobody in the House—I include my right hon. Friend the Member for Croydon, North in this—would argue that we should be solely reliant on the mutual sector, but there is an important point to make about diversity. After the problems that we have seen in the financial sector over the past year or two, it is particularly clear that the alternative model offered by the mutual sector is one whose value we should not underestimate. Choice and diversity in financial services are an important gain from the agreement of this Bill.

The second benefit to which I wish to draw the House’s attention is the Bill’s ability to encourage saving and confidence in it. There has been a big rise in the saving ratio over the past couple of years, for reasons with which all of us will be familiar, but it is important that we encourage a culture of saving and that we encourage people to be confident about saving. The mutual sector is making a very important contribution, not least in the availability of child trust fund savings products, individual savings accounts and other products that it offers, which are attractive to an important cohort whom we wish to encourage to save. Credit unions are also clearly making a very important contribution to the culture of savings. That is a second benefit that we can anticipate from the agreement of this Bill.

The third benefit, which was also touched on by the hon. Member for Worthing, West, lies in the promotion of financial inclusion and capability—ensuring that people have information on and access to a range of products that suit their needs. As my hon. Friend the Member for Islington, South and Finsbury (Emily Thornberry) rightly underlined, we should seek to provide an alternative to loan sharks and the very high cost sources of credit of which we are seeing too much in our constituencies at the moment. It is pretty clear that difficulties in the credit market more generally have pushed people towards those very high cost sources of borrowing over the past couple of years.

The financial crisis has highlighted, in a new way, the traditional strengths of the co-operative model—the mutual model; it has stood up very well through this crisis. As we have been reminded in this debate, this model has a very long tradition and is based on the values of support, the common good and community. I was not present in the House for the Second Reading debate, but I gather that my right hon. Friend the Member for Croydon, North was able to point to a lineage that stretched back to the Romans, so this model has a very long history indeed. In Britain, it arose, in particular, from initiatives on the part of workers to provide their own social safety net at the time of the industrial revolution and from community-based self-help in newly burgeoning towns and cities that allowed poor working families to secure at least some protection from the harsh insecurity and ravages that accompanied industrialisation and urbanisation. The hon. Member for Somerton and Frome (Mr. Heath) was right to remind of us Rochdale. I did not know that its Member of the House at the time had previously been a representative of his constituency.

This model has a very long tradition, whereby local community cohesion has provided a very good way of managing credit risk. The bonds formed in communities have proved to be a resilient and sound basis for the development of what went on to become some very impressive and substantial financial institutions. Workers have saved together and borrowed from each other, inspired by the writings of Robert Owen and adopting the model that was put in place by the Rochdale pioneers with the principles that they formulated. My right hon. Friend has reminded the House of that.

Credit unions have a rather different heritage. They originated in rural Germany among agricultural workers and then spread to much of Europe, including Britain, by the end of the 19th century. However, the modern credit unions in Britain have more recent roots, which go back to the 1960s and are linked particularly with immigration from the West Indies, where the credit union movement was a good deal more firmly established at that time than it was in the UK.

We have heard about some of the legislative underpinnings for credit unions, and the Credit Unions Act 1975 set in law the requirement for a common bond, which characterises the movement today. Like my right hon. Friend and others who have spoken in the debate, I am a member of my local credit union, NewCred, the excellent Newham credit union. Unfortunately, unlike my right hon. Friend and his local credit union, I was not invited to address its annual general meeting, although I have spoken to meetings of NewCred in the past. It is another of the patchwork of excellent organisations that several hon. Members have mentioned, strengthening the financial resilience of the communities that we represent.

I wish to associate myself with what my right hon. Friend said about the Presbyterian Mutual Society and the expectation that the administrator will present a report shortly on what happened. I add my sympathies to those that he expressed about the predicament of members of that society and the great anxiety that they have suffered in recent months. I hope that those difficulties will be satisfactorily resolved before too long.

The hon. Member for Worthing, West raised the issue of the Treasury’s role in this matter. It is right that the Bill gives powers to the Treasury, because it has policy and legislative responsibility for the mutual sector, of which industrial and provident societies are a part. It is consistent with the powers that the Treasury has in respect of such societies in the existing IPS legislation. The Financial Services Authority has the regulatory role, so in these circumstances—notwithstanding the hon. Gentleman’s illuminating anecdote about retrieving a letter from the Royal Mail—it is appropriate that the power is vested in the Treasury.

If the Bill reaches the other place, perhaps it might be possible to unpack in public what the words “the Treasury” mean. Otherwise, perhaps the Minister could write to me. I accept his point, but do those words mean that an official can do it or is a Minister required to do it? That would be useful information to have at some stage.

It would depend on the circumstances, but I would be happy to drop the hon. Gentleman a line setting out a response to that point in more detail.

We are living through extraordinary economic times. The global economy is forecast to contract this year for the first time since the second world war. We have seen a worldwide financial crisis more severe than for generations. Against that backdrop, the strengths of the mutual sector have been highlighted, and we have seen mutual organisations playing an important part. We have also seen mutuals suffering alongside other institutions, as several hon. Members have pointed out, but the availability of an alternative model during the difficulties that we have experienced in recent months has been valuable, and the importance of that alternative model has been highlighted in a way that has not been the case in the previous few years.

There was a time when lots of demutualisations were taking place, and it looked as though the value of the mutual sector was not well understood. It is better understood now, for several reasons—and my right hon. Friend has drawn attention to some of them—but not least because of the backdrop of the very serious difficulties that others in the financial services industry have experienced.

In response to the crisis, the Government have taken a range of steps to reinforce the financial system and prevent its collapse, which was on the cards in the autumn of last year. We have also provided direct support for the economy, and we have seen data this week showing that those steps have had the desired effect. We have also cleaned up the banks, enabling them to restructure and increase lending. In the Budget, we also introduced measures to prepare to make the most of the opportunities of the upturn.

At every stage, we have been acting with other countries, because the issues faced by the mutual sector and the financial services industry more generally are being tackled around the world, given the global nature of the crisis that we have been through. That is why we have taken action to strengthen the whole financial system and to restore the flow of credit, which is critical to the success of the economy. We recognise that although banks are the main source of credit in the economy, they are not the only source. We need to build a financial system for the future and my right hon. Friend the Chancellor will lay out the Government’s thinking on the future shape of financial regulation before the summer recess.

Against that backdrop, and given the problems that we have seen with access to credit for families and businesses, the importance of the mutual sector and the significance of its potential contribution is clearer today than ever. So the provisions in this Bill will stand credit unions and other co-operative financial institutions in good stead to be part of the renewed financial services industry, meeting Britain’s needs as we grow out of this crisis. I know that hon. Members on both sides of the House will want to see the importance of the mutual sector reflected in Government proposals for financial services regulation in the future.

The problems that we have seen in the credit crunch have trickled down to households across the country—pensioners worried about their savings, young couples struggling to find a mortgage, and people facing redundancy or the repossession of their home. Issues of personal finance have been pushed to centre stage, and the potential contribution of the mutual sector has also been highlighted. We have been able to commit to additional funding to boost the capacity of citizens advice bureaux in these difficulties to provide local face-to-face debt advice. In several instances, that will involve pointing people to the opportunities offered by their local credit union. We have also committed an extra sum of money to increase the provision of free telephone advice from the National Debtline service.

The Minister is right to talk about the concerns that people have about personal finance. To that extent, it would help them to understand how the Government’s spending plans bottom out over the next few years. The Minister is an honest man: can he confirm that the Government plan a 7 per cent. cut—

Order. The hon. Gentleman knows that we are on Third Reading, and any question must relate to the content of the Bill.

I will, of course, respect your ruling, Madam Deputy Speaker, although I am disappointed not to have the opportunity to answer the hon. Gentleman’s point.

The Government want to see a vibrant and self-sustaining mutual sector, offering high quality services and greater choice for its members. We recognise that one tangible way in which that can be achieved is to ensure that the sector is managed under a modern legislative framework. Increasing expectations from members and global competitive pressures make it important that we have such a framework that will facilitate the growth and expansion of the mutual sector, as well as enable the provision of a high quality service to its members. Those are some of the primary reasons why we welcome and support the Bill.

The main purposes of the Bill, as we have heard, are to modernise and update the law on industrial and provident societies by changing their name; to help to improve their corporate governance framework; and to give the Treasury the power to modify some aspects of the law on co-operative and community benefit societies in line with company law—

Proceedings interrupted (Standing Order No. 11(4)).