Motion made, and Question proposed, That the sitting be now adjourned.—(Helen Jones.)
This is the last time that I shall chair a Westminster Hall sitting in my House of Commons career. I say to the hon. Gentlemen and hon. Lady from Northern Ireland that it is not inappropriate that I should be chairing a debate relating to the province of Ulster and Northern Ireland. I call Rev. Dr. William McCrea to address the Chamber.
Sir Nicholas, I count it an honour to sit under your chairmanship today. I thank you for the courtesy you have shown to my hon. Friends over the years. I wish you well in your retirement and thank you for your superb chairmanship and leadership. Thank you for calling me to open what I trust will be a profitable debate on a subject that touches the hearts of many of my constituents.
I welcome the opportunity to open this timely debate on an issue that needs to be resolved to the satisfaction of all of the people involved. I ought to start by painting a backcloth to what is an injurious situation that affects the lives of many ordinary people and their families. The Presbyterian mutual society is an industrial and provident society with about 10,000 members. Its aims are
“to promote thrift among its members by the accumulation of their savings; to use and manage such savings for the mutual benefit of members; to create a source of credit for the benefit of its members at a fair and reasonable rate of interest; to procure or provide legal, accountancy, consultancy or secretarial services and advice to members towards assisting them in the establishment, improvement or expansion of their business or financial affairs and generally to undertake all or anything expedient for the accomplishing or incident or conducive to or consequential upon the attainment of all or any of the objects including the acquisition of property and any rights or interest therein.”
Membership of the society was obtained by the purchase of shares. The maximum shareholding was £20,000. Members who wanted to place more money with the society could do so by making loans to it. A dividend was paid on shares and those who made loans received interest. The society grew rapidly, with its assets rising by more than 12 times from £24 million in 2002 to £309 million in 2008. It made significant advances for buy-to-let properties, and development and agricultural land.
It is clear from the rules of the PMS that it was intended to be a thrift institution, as it aimed
“to promote thrift among its members by the accumulation of their savings”.
That the PMS was accepted for registration with that rule indicates that it was acknowledged by the authorities to be a thrift institution. PMS savers who put in their money as shares had every reason to believe that they were in the same position as those in credit unions, who likewise deposit their money in the form of shares and are none the less recognised by Government as savers.
PMS members are certainly not shareholders in the ordinary sense of the term. The shares did not derive their value from being traded and were withdrawable at any time at their original value. The value of the shareholding did not determine the voting power of the member; all were equal. As the recent court case indicated, shareholders could turn themselves into creditors at the stroke of a pen by applying to withdraw their shares. As the Treasury Committee report of February put it,
“it is understandable that PMS members considered them as analogous to deposits in a building society”.
In the light of that, I cannot understand how the Treasury can justify regarding the members as akin to equity-style shareholders.
Like so many things in life, all went well until circumstances outside the control of the PMS took centre stage. As a result of the collapse of the Icelandic banks, the Government effectively guaranteed all deposits in conventional banks. Although that had a stabilising effect on the wider financial system, it prompted many PMS members to move their money from the society. In the first three weeks of October 2008, the PMS responded to many members’ requests for withdrawals, which reduced the balance of the PMS current account from £25 million to just £4 million.
On 25 October 2008, the board met and decided that no further payments should be made to members until it had been professionally advised on the liquidity of the society. By the time of a subsequent meeting on 6 November, a further £50 million worth of requests had been made and three members had announced their intention to commence legal proceedings for the recovery of their investments. Faced with that problem, the priority of the board became asset protection and it was resolved to place the society into administration to achieve that.
Legislation was passed quickly in Northern Ireland by my colleague Arlene Foster, the Minister of Enterprise, Trade and Investment in Northern Ireland. That news was welcomed at the time because it protected the assets of the society and prevented a fire sale that would have resulted in many small savers not getting back any of their invested money.
On the Iceland situation, does the hon. Gentleman agree that, whatever the technical legal position, which we will hear from the Government Front Bench, it is ironic that Government action to help savers in Icelandic banks helped to precipitate the problems in the PMS and caused its members to suffer? Although the Government may make a technical argument for not treating PMS members and Icelandic savers equally, they are real people who depend on their savings. Does he agree that whoever forms the next Government should treat those Irish savers and savers in the Icelandic banks equally?
I agree wholeheartedly with the hon. Gentleman’s sentiments. It is correct that, whatever technical point the Minister may come up with to get out of doing what should be done, it will not rest easy with people in Northern Ireland. Should there be a Government of a different complexion after the election, I hope that they will consider the matter seriously and prove themselves faithful to the people of Northern Ireland.
I congratulate my hon. Friend on securing this important debate. He mentioned that the Presbyterian mutual society was allowed to go into administration as a result of action taken by Arlene Foster, the Minister of Enterprise, Trade and Investment in Northern Ireland. As the then Minister of Finance, I was part of a meeting between devolved Ministers and the PMS. Is not the swiftness with which action was taken in the Northern Ireland Assembly an illustration of the benefits of devolution to Northern Ireland, which allows local politicians to respond with flexibility, imagination and rapidity to crises that arise in the affairs of the people of Northern Ireland?
I agree wholeheartedly with my hon. Friend. I will touch on some of his points as my speech develops.
There is little merit in apportioning blame for the PMS’s difficulties. Last month, on 18 February, the Treasury Committee, chaired by the right hon. Member for West Dunbartonshire (John McFall), published a report entitled, “The failure of the Presbyterian Mutual Society”. Although I welcome the fact that the report highlighted the fact that many people are still suffering, I feel that it entered the territory of who was to blame for the crisis, without finding any solutions. The questions posed when the Chair spoke at Stormont might have added to the debate and, indeed, such finger pointing might have momentarily given a grain of comfort to those who are hurting most. However, the report was disappointing, because it contributed nothing in terms of the real positive solutions that are necessary. That is exactly what I want this debate to touch on today: the positive solutions.
During this morning’s debate, I will not be distracted by a blame-game attitude. I will strain every muscle to focus every effort on seeking a quick and genuine resolution to the issue. We must all vigorously pursue such a resolution, so that we can alleviate the distress and hardship that are genuinely being experienced by these savers, many of whom have been caught in the valley of despair. Many ordinary PMS savers are asking how we have got into this situation, and it can be rightly acknowledged that many factors were at play, including the downturn in the property market and the instability of the UK’s established financial institutions.
Again, I stress that we need to find a solution for those people who have been affected by the difficulties, rather than simply blaming those at fault. I have no doubt whatsoever that the matter of who is to blame will be a challenge for another day, but it is not something to be considered now. We must recognise the impact that the crisis is having on thousands of savers who lodged money in the PMS. We, as politicians in Northern Ireland, have received hundreds of letters from distressed savers who cannot afford to pay the fees of old peoples’ homes, their children’s university tuition fees or the tax bills incurred by selling off property and lodging money in the society until they purchased their new home.
It is, of course, delightful and regrettable that this will be the last time I will serve under your chairmanship, Sir Nicholas. The hon. Gentleman will be well aware that in North Down I, too, have many Presbyterian savers with the PMS. I am a Presbyterian, but I am not a saver with the PMS. My constituents, like his constituents, were looking forward to a positive outcome from the Prime Minister’s working group that was set up on 17 July 2009. A Treasury report states that the group was set up with the expectation that it would
“report back to the Prime Minister in the autumn.”
To my knowledge, no such report has appeared. My constituents and the savers in Presbyterian churches not just up and down North Down but throughout Northern Ireland are greatly disappointed with the attitude of the Prime Minister and the Government, who I am sure the hon. Gentleman would agree have a moral obligation to support PMS savers. Will he perhaps enlighten hon. Members as to why no report was forthcoming last autumn?
I thank the hon. Lady for her intervention. We will have to wait for the later part of the debate to find out why the report has not been forthcoming. However, I want to develop that matter a little further and I will touch on it again in my remarks.
Many of the people I have been speaking about put their life savings into the PMS because they were assured that the society was safe and honest. They were also assured that it would help the furtherance of God’s work and, of course, that they would get a return on their money. Comforting expressions of concern and sympathy will not suffice in dealing with this crisis; we must actively engage with the Government to reach a solution that will allow pensioners, families and ordinary citizens to have access to their hard-earned money. The crisis is impacting not only on families, but on many Presbyterian Church congregations throughout Northern Ireland, who had money saved to build new church halls and so on. The Presbyterian Church plays a vital role in civic society by organising after-school clubs, old age pensioner groups, youth groups and so on. Many of those groups must now endure financial hardship.
Only yesterday, the administrator of the PMS announced that people who have more than £20,000 in the society will get a payout of 12p for every pound they had in the PMS. That is the first payout since the PMS went into administration in November 2008, and although it will provide a crumb of comfort for those who have more than £20,000 in the society, it will do absolutely nothing to comfort those who have less than £20,000. Many of those people are hurting most.
I congratulate my hon. Friend on obtaining the debate. He is touching on a critical point. Although all the savers are obviously hurting because of what has happened over the past 17 months, many senior citizens had up to £20,000 in the PMS. They are totally dependent on that money for the remainder of their lives and many were going to use the relatively small sums of money that they had for their funeral costs. We need to try to assist those people as well as the others.
I wholeheartedly agree and thank my hon. Friend for his intervention. I have major concerns that yesterday’s announcement will only put many of the smaller savers into deeper despair. Unfortunately, in February this year, the High Court in Belfast made a ruling that investors with less than £20,000 could not be considered creditors of the PMS and therefore could not share the £20 million of income that the society has generated since it went into administration. We need Government action to resolve the issue, so that all who placed money in the PMS—both small and large savers—can get their money back.
I am not suggesting that nothing has been happening to take the issue forward. I know that the First and Deputy First Ministers have had meetings with the Prime Minister and Treasury officials on several occasions. In addition, my hon. Friend the Member for East Antrim (Sammy Wilson), the Minister for Finance and Personnel in the devolved Administration, and Mrs. Arlene Foster, the Minister of Enterprise, Trade and Investment, have been actively engaged in these negotiations. I pay special tribute to them for that. However, the bottom line is that my constituents are still without their much needed money—indeed, the point made by my hon. Friend the Member for East Londonderry (Mr. Campbell) showed how much that money is needed and how people are hurting.
Some people have been credited with talking a good talk on the issue, and have gleefully pointed the finger at others while stating that others have all the responsibility to resolve the matter. However, we all carry a responsibility to use our best efforts to bring about a solution. The Moderator—and, indeed, the past Moderator—of the Presbyterian Church in Northern Ireland can confirm that I, as the Chief Whip of the Democratic Unionist party, have hosted with my right hon. and hon. Friends a number of meetings to discuss the in-depth issues that are pressing their congregational members. Indeed, I have made a further request with the Prime Minister’s office for a meeting with the moderator.
In June 2009, the Government set up a ministerial working group to deal with the issue. The group comprised the Chief Secretary to the Treasury, the Economic Secretary to the Treasury, the Secretary of State for Northern Ireland, the Northern Ireland Minister for Finance and Personnel, the Northern Ireland Minister of Enterprise, Trade and Investment and the First and Deputy First Ministers of Northern Ireland. Much work has been done and continues to be done behind the scenes to find a satisfactory resolution to the matter for those who have lost money through the PMS. However, it is vital—indeed, imperative—that the Government here in Westminster, together with the local Administration in Northern Ireland, redouble those efforts and work to find a resolution to the problem.
Savers with the PMS have waited too long; they need assistance from the Government on the matter. We have already seen our Government help to protect the interests of those who have money saved in the Icelandic banks. Is it too much to ask for the Government to help savers who have money saved in Northern Ireland? The PMS is not simply a Northern Ireland issue any more than Dunfermline was simply a Scottish issue. Only a UK solution is fair and equitable.
One might well ask what the rationale was for what is believed to be the Treasury view that the Northern Ireland Executive and the Presbyterian Church should contribute to a hardship fund. That is only necessary because the Government have failed to treat PMS members like other savers in other failed financial institutions. Why were the Scottish Executive not required to contribute to the rescue of the failed institutions within their jurisdiction? I am sure that the Treasury is aware that the only resources available to the Presbyterian Church are those contributed every Sunday by the people in the pews. Is it not wholly unfair that the community that has been directly hit by the failures of the PMS should be required to pay in part for the rescue?
The PMS was a completely autonomous institution over which the Church had no control, and its failure was a local manifestation of a general failure of the UK financial sector. Do the Government realise the huge sense of injustice and unfairness that the handling of the PMS issue has generated? We are talking about thrifty, decent and hard-working people who had every reason to believe that they were ordinary savers. They believe that they have been singled out for discriminatory treatment by the Government, who have shown little regard for the dire consequences of what they have failed to do. My constituents genuinely feel that the Government have not seriously addressed the arguments put forward in support of their case by the PMS lobby group.
The reality of the situation is that for eight months after the PMS collapsed, London displayed a lack of interest. Although I appreciate that the ministerial working group and supporting officials have been working closely with the administrator to seek a commercial resolution to the winding-up of the PMS and are considering other alternatives to assist PMS savers before reporting to the Prime Minister when they conclude their deliberations, the savers are the only ones in the UK who have been denied access to their savings during the most severe period of the recession.
In the Minister’s opinion, is the idea of facilitating a commercial solution still a viable and practical option that is being followed seriously? I have been asked whether a commercial solution for the PMS would be facilitated if, as was done in some other cases, the riskiest assets were removed for separate, bad bank-style treatment. Did the Treasury consider such a move and feature it in any discussion with the financial sector? If not, is that not another example of the lack of innovative thinking in tackling the matter, compared with the resourcefulness and urgency shown in the rescue of other failed financial institutions?
It is also fair to say that as recently as 3 March the Secretary of State for Northern Ireland told the Northern Ireland Affairs Committee that a commercial solution was the best solution. What role has the Treasury, which is the lead Department for the financial sector, played in seeking to interest a bank in absorbing the PMS assets and liabilities? How many meetings did the Treasury have with the financial sector on the PMS and what kind of support did it offer? Perhaps the answers to those questions would give concrete evidence of the significant action taken by the Treasury and the Westminster Government.
Perhaps I should also touch on the question of culpability. Reference is sometimes made to the culpability of the PMS for the misfortune of its members, but the same could be said of other failed institutions and the culpability of their boards, managements, advisers and auditors. The crucial point that I want to make in response is that none of the savers in any of those institutions was allowed to suffer as a result. The Government’s declared aim throughout was to protect the innocent victims of the economic and financial crisis. Surely their treatment of the PMS savers must stand out in sharp contrast as the exception. Indeed, the Government go even further and find the PMS savers themselves culpable for not appreciating, as the Government continue to assert, that they were not savers at all, but investors. I resolutely challenge that contention.
I appreciate that many other Members want to speak in this important debate, but before concluding I will ask the Economic Secretary a further question. Does he subscribe to the view expressed by a Treasury official to a visiting delegation that a major reason for the PMS not being treated in the same way as other failed financial institutions was that, unlike them, it posed no systemic risk to the economy? In other words, the others were too big to be allowed to fail, whereas 10,000 savers in Northern Ireland are expendable. Does he not agree that that is a shameful and deeply offensive comment that fully justifies the suspicion that the Government never intended to include PMS savers within their boast that
“no saver has lost money as a result of the economic and financial crisis”?
We all believe that we must do something, but time is running out. Possibilities seem to be getting limited, but one possibility that is not acceptable to my constituents and, I believe, those of my right hon. and hon. Friends, is for those honourable people to be left stranded. Reams have been written on the subject and column inches thick with suggestions have been recorded by the wise and the good, but a resolution is still not a reality. I hope that in the debate we will get cross-party support on the matter. I urge Members to encourage the Government to redouble their efforts to find a solution to that urgent and important matter. I tell the Minister to be innovative and bold, to take the lead and to make his name for the good people of Northern Ireland.
It is always a pleasure and an honour to serve under your chairmanship, Sir Nicholas, but today is touched with sadness. This is the last occasion on which you will preside, with your keen interest and intense sympathy, over our deliberations on matters affecting people in Northern Ireland. I congratulate the hon. Member for East Antrim—[Interruption.] That was a map-reading error. I congratulate the hon. Member for South Antrim (Dr. McCrea) on securing this timely debate on a hugely important matter.
The hon. Gentleman said that people do not want blame games in relation to this matter, and the Presbyterian mutual society savers I have talked with—both constituents and others—do not want claim games either. People are concerned that there is some partisan tripping going on in relation to things that emphasise the role of Ministers of particular parties in certain ways. I remind him and other right hon. and hon. Members that when the crisis happened, the Minister rightly and alertly moved to legislate. That was supported by all parties and by the Committee for Enterprise, Trade and Investment in the Assembly, which I happened to chair at the time.
The Committee took a keen and active interest and engaged with officials and the administrator in ways that did not cut across what the Minister and her colleagues were doing and did not distract in any way or compromise the role of Ministers in their engagements with the Treasury and others. That must be remembered as an important matter of context.
Reference was made to the Treasury Committee report published last month, which was a welcome intervention in the matter. I hope that we Northern Ireland Members will not waste time today, in front of the Economic Secretary, disagreeing with and quibbling about aspects of that report. The report tried to inject urgency into the situation and show a real and keen sympathy. It was particularly helpful in cutting through the fog of obfuscation coming from the Treasury and others in London on the status and circumstances of the PMS savers.
In particular, the report effectively refuted the nonsense that the savers should be treated as investors rather than bona fide savers and as shareholders with regard to the equity, as though commercial and tradable shares had been involved; they were simply withdrawable shares that the savers thought were the form of their savings engagement, on a mutual basis. That is what they always understood them to be, no matter how others have sought to characterise them.
The Treasury Committee had to look at the background of what had happened, with regard to the performance and conduct of the society and the regulatory environment in which it all took place.Were there issues and lessons there?
One reason why the Treasury Committee had to look into the background was that it has done exactly that in respect of every other banking or financial institution failure. If we are going to say that the Treasury and others should not treat the PMS any differently from any of the other institutions that have collapsed or got into difficulty, we cannot ask the Treasury Committee to treat the PMS and its circumstances any differently from how it has treated any other institution. For other institutions, it has drawn attention to mistakes, misjudgments and misdeeds on the part of the institutions. It has also drawn attention to some of the regulatory failures, assumptions, oversights and gaps—the kind of twilight zones that have given rise to the difficulties that were caused, which people are still locked into. It was right and proper that the Treasury Committee should do that.
I regret the fact that people in the Department of Enterprise, Trade and Investment were perhaps a bit oversensitive to some of the observations. Indeed, I could have taken issue with aspects of the Treasury Committee’s report, which rightly and understandably questioned why no one in the Assembly knew that this problem was about to come up. Why did the Enterprise, Trade and Investment Committee, which I chaired, not realise or anticipate that there might be a problem? I could say, “That is misplaced. It is undue criticism, and an unfair question to ask of us. How could we know, in the circumstances?”, but the issue here is not civil servants, Northern Ireland politicians or Ministers of whatever party in Northern Ireland. The issue is the need and plight of the PMS savers, and we have to roll with the punches when questions are asked about the political and regulatory systems.
The hon. Member for South Antrim rightly highlighted the circumstances of PMS savers, and when we consider logic, circumstances and emotions, we can see that two statements made this morning—in response to the announcement of 12p in the pound being given to people who had more than £20,000 committed to the PMS—are true: one, there is at last some welcome comfort for some savers; and, two, it is too little, too late.
We need to ensure that things move forward from here. The ministerial working group was established last year on the back of an intervention during Northern Ireland Question Time by the Chair of the Treasury Committee, who called on the Secretary of State for Northern Ireland to convene a meeting of Treasury Ministers, devolved Ministers and Northern Ireland Office Ministers. That initiative then became the ministerial working group. Savers are waiting for outcomes and results. They feel that what they have had from all of us who are involved in this has been a lot of finger-pointing and hand-wringing. They want answers—not insults to their intelligence and motives, or mischaracterisations of them as speculative investors.
I have constituents who are members of the PMS; some of them had their life savings or life-start funds for their families committed to the society. Not all of them are actually Presbyterian, even though it is a condition of membership. One constituent is a woman who received significant but hard-won compensation for serious brain injuries resulting from a road traffic accident. Her solicitor, who helped her for many years in that fight, said, “I know a good place for that money.” So, as well as £20,000 in withdrawable shares, more than £900,000 awarded by the court to look after her for life was committed to the PMS in trust through the solicitor. She is in a dire situation, as are many others. She has cause to resent the insinuations made by some people that those who have more than £20,000 invested are fat cats who do not really deserve sympathy as smaller savers with less than £20,000 do. She does deserve sympathy.
I have another constituent who has significant money involved—well over £600,000—in a charitable trust in his family’s name. The trust does good work in my constituency and the constituencies of other hon. Members, including the hon. Member for East Londonderry (Mr. Campbell), and in Africa. There are many good causes and worthy circumstances that need to be borne in mind and considered, and the Treasury needs to show more sympathy and urgency in that regard.
We need from the Treasury a firm indication that it gets what is wrong. It is no good its pretending that we can afford to allow the PMS savers to linger in their plight because they are not systemically significant. It is no good its saying, “There are serious questions for the PMS itself; some of what it was doing was illegal.” If some of what it was doing was illegal, it was not down only to the DETI in Northern Ireland to spot that. The illegalities were in the areas of interest and oversight that were the business of the Financial Services Authority. What was that institution doing during that period about sectors in which it should have had an interest?
As the hon. Member for South Antrim said, we need to look at everyone else who has faced difficulties because of pressures on their institutions. It needs to be borne in mind that in those cases there were institutional mistakes and misjudgments, and regulatory oversights and failures, but in none of them did the savers themselves end up having to pay the price or carry the can. PMS savers in Northern Ireland are uniquely put in that position, and the indifference that has been shown by the Treasury borders on injustice.
It is an honour today, as it always has been, to serve under your chairmanship, Sir Nicholas. We have always appreciated the extensive interest that you have taken in the affairs of Northern Ireland, and you will be greatly missed by this House, not least for the authority and command that you have exercised. The House is to lose one of its star performers. We very much appreciate the role that you have played and your interest in the affairs of our Province.
I have no direct interest to declare, as I am neither a Presbyterian nor a saver, anywhere, but I should at least declare my membership of the Prime Minister’s ministerial working group. The working group was not set up as the result of any call made in the House of Commons. I was present at the meeting when the group was put together; I was present when its terms were agreed; and I was present when the statement was agreed on its being set up in direct response to a request made by the Deputy First Minister and myself. The Prime Minister readily made that response because he accepted that there was a “moral obligation”—that was the term that he used—on the Government to assist the savers of the Presbyterian mutual society. He did not use the term “savers”—that has always been my term. He prefers “investors”, but we have already heard the challenges to the use of that term.
Like others, I do not want to involve myself in a blame game, nor do I want to make claims about how we might move forward. It is clear to me that the problems faced by the PMS arise directly from the fact that the Treasury restricted the guarantees if offered to financial institutions to those that were authorised by the Financial Services Authority. There is a special set of circumstances in relation to the PMS which I believe should have been taken into account. The society should have been covered by that umbrella, but it was not, which led to a run on the liquid assets of the PMS as soon as it was discovered that guarantees were available in other banks. People started to move money across and pressure came on the PMS, with the consequences about which we are all aware.
I have constituents who are facing real hardship as a result of their circumstances, just as my hon. Friend the Member for South Antrim (Dr. McCrea) and the hon. Member for Foyle (Mark Durkan) outlined. I have a constituent who is in precisely the circumstances outlined by the hon. Member for Foyle: they were seriously injured in a car accident and received a compensation payment, which was placed in the PMS, but they cannot get access to the funds for their care and are having to rely on family members to provide them with help, enabling them to mark time until the moment when the problem is resolved.
There are four ways forward. One of them, which in my view should not be entertained, would be to allow events to take their course and allow someone to go to the courts and force the administrator to have the fire sale that my hon. Friend the Member for South Antrim spoke of. That would be the worst set of circumstances. I suspect that that course of action would lead to most, if not all, of those who have lent money receiving their funds back, but all those who have less than £20,000 probably not getting anything back. That would lead to considerable hardship on the part of those who need the funds most of all.
The next option is to set up a hardship fund, which would allow the previous option to play out, but ensure that help was available to those in the greatest difficulty. That would have limited appeal. It might take away some of the pain, but it would take a very long time for the administrator to work through his end of the problem, it would probably be several years before the fire sale took place, and it would take considerable time for the hardship fund to be put in place.
The next option is for assistance to be given for an orderly run-down of the affairs of the mutual society. All of us recognise that the administrator has indicated that we are not dealing with a society that is holding on to toxic assets. The fact that it was said that, recently, lenders were given 12 pence in the pound because funds of more than £20 million were available to the administrator to disburse indicates that funds are coming in to the mutual society. Its assets are solid and strong. It is the problem with the property market that gives the greatest difficulty to the administrator. Given time for the property market to recover, I believe, on the basis of what the administrator has indicated, that it will be possible for the administrator to be able to recover the funds not only of the lenders, but of those who would be described as shareholders—those with less than £20,000 saved.
That option should be seriously considered, but only if there is no commercial option available—that is, no banking option. That is much the best option open to the society. All of us recognise that, the longer we go without someone stepping forward and indicating that they are prepared to take over responsibility for the society, the more likely it is that we will have to consider other alternatives. I understand that a commercial interest is still looking at the society’s affairs and carrying out due diligence, so there is a strong possibility that something may come from that.
The Deputy First Minister and I have been considering this matter for a long time with our colleagues, including the Finance Minister and the DETI Minister. I say to the hon. Member for Foyle that those people happen to be members of my party, but their portfolios and their ministerial responsibilities bring them together with the Deputy First Minister, who, in spite of the fact that he can, like myself, say that he is neither a Presbyterian nor a saver in the PMS, has shown an interest and has attempted at all times to be helpful in this matter. We are agreed on a proposition that we have put to the Treasury. It would be a fall-back position—an option to be picked up if it is not possible to move ahead with a commercial proposition. It would require the support of the Executive and the Assembly, and changes to Assembly legislation would be required to bring it about.
The real problem is timing. The more I speak to savers with the PMS, the more I realise that this affair cannot go on until the next Government are in place. It has to be brought to a head and dealt with now. This Administration have the detailed knowledge of the issues involved. On behalf of all those who have been involved with the ministerial working group, I want to put on the record our appreciation of the work done by the Economic Secretary to the Treasury, who has at all times been helpful and has been prepared to extend himself to see if a solution can be found. I trust that, working closely with the Northern Ireland Executive, we can within days, and certainly within a few weeks, allow some hope to be expressed tangibly to those who have funds locked in the PMS.
All of us know about the difficulties being experienced by people in our constituencies, including those whose money is in the PMS for the purposes of funeral expenses. I cannot overstate the extent to which the thought that their funds will not be available in such circumstances causes anxiety and concern to elderly people who are without other means. Businesses have funds locked in the PMS, as do churches, whose building programmes have ground to a standstill because funds cannot be realised as a result of the present difficulties.
I urge the Minister to look favourably on the solutions and to assist in whatever way he can any commercial interest that is still sitting there, so that this matter can quickly be resolved.
To me, it is not a solution if it does not resolve that issue as well. Those of us in the ministerial working group are of the view that the lenders could probably have their funds returned to them through a fire sale, but those with less than £20,000 saved with the PMS would be harmed and left outside. It is a solution that helps to resolve the matter, or at least removes the greatest element of pain for people in that category. I urge the Minister to use all his influence and ability to try to get a commercial outcome; but, in the absence of that, to give the Treasury support that would be necessary for the Administration’s option, should that be required.
As well as congratulating my hon. Friend the Member for South Antrim (Dr. McCrea) on securing this debate, I join others in congratulating you, Sir Nicholas, on your esteemed career in this House, not only as a friend of Northern Ireland, but—dare I say it?—as a loyal friend to Northern Ireland. You were a great help to me when I was a young—[Interruption.] I thought that that would raise a reaction—first-time MP. I thank you for your help and guidance over the past five years, and I wish you and your wife well for the future.
The Presbyterian mutual society is an issue that has hung like a dark cloud over our Province for far too long. My constituency has been steeped in Presbyterianism for many hundreds of years. Indeed, the current Moderator, who is with us for this debate, lives there. I pay tribute to him for his tireless efforts in trying to resolve the problem for his congregations. I also pay tribute to his predecessor.
The prolonged crisis of the Presbyterian mutual society has many complex and technical aspects, but above all we must never forget the severe impact on ordinary, decent people. Suddenly, in October 2008, as a result of a dramatic run on its resources, caused by the Government’s decision to guarantee deposits in conventional banks, the PMS collapsed and savers were plunged into a nightmare. Not surprisingly, they were consumed by panic and despair. If words could solve the problem, it would have been sorted a long time ago. We have had numerous debates and questions in the Northern Ireland Assembly, and the matter was debated again as recently as Tuesday last week, but words are not enough; we need action. My party has worked tirelessly to try to achieve a satisfactory outcome.
When the news broke, we took immediate action to try to create some stability, and to allow room for a solution to be found. Following an approach by the directors of the PMS, my party colleague, Arlene Foster, the Minister of Enterprise, Trade and Investment, made an order under insolvency legislation to give the society the option of going into administration. That prevented an immediate sale of the assets belonging to the society and provided an opportunity for an administrator to manage its affairs with a view to safeguarding its assets and funds, and preserving the interests of its members.
The Minister of Enterprise, Trade and Investment has worked tirelessly, as have the First Minister, who is with us today, and the Minister of Finance, to bring the crisis to a satisfactory conclusion. The PMS working group was set up as a result of pressure from my party and it continues to work for a resolution. With my hon. Friend the Member for East Londonderry (Mr. Campbell), I sit on the Assembly’s Select Committee on Enterprise, Trade and Investment, and the matter is regularly raised. I also sit on the Select Committee on Northern Ireland Affairs at Westminster, with the hon. Member for North Down (Lady Hermon), and again the matter is raised regularly, because we know the difficulties that many savers are going through. We continue to lobby hard on behalf of investors.
I was disappointed by the recent court ruling, which indicated that savers who had deposited £20,000 or less could not be classed as creditors and therefore would not be entitled to a share of any of the £20 million income generated by the PMS since it went into administration. I, for one, certainly see considerable merit in the idea of a bank-based rescue plan, and I look forward to hearing what the Minister says about that commercial route.
Last month’s report from the House of Commons Select Committee on the Treasury has not helped. Instead of suggesting a solution, it seemed more concerned to pass the buck by blaming Stormont, particularly the Department of Enterprise, Trade and Investment. We want a resolution.
Will the hon. Gentleman take this opportunity to clarify a point? When his party—I am pleased to say—reached agreement at Hillsborough on 5 February, there was speculation and unfair criticism that a side deal had been negotiated by his party. I am sure that the hon. Gentleman would like to take this opportunity to clarify that that was not the case.
I have a lot of respect for the hon. Lady, but that is a separate issue. The issue that was dealt with at the Hillsborough talks was policing and justice. The PMS was a totally separate issue, but I understand the hon. Lady’s concern, because her constituency, like mine, is steeped in Presbyterianism. We all want a resolution.
I agree with my hon. Friend that we should never apologise for that. Every opportunity should be used to try to achieve a resolution.
We must all play a full part in the search for a resolution, but the ultimate responsibility to help rests with Her Majesty’s Government. I cannot state more strongly that the people who invested in the PMS need help, and they need it now.
I declare an interest as a member of the Presbyterian Church in Ireland and the Banbridge Road Presbyterian church congregation, but I am not a saver in the PMS. Right hon. and hon. Members have shared the problems encountered by their constituents, and their hardships. Recently, the Minister for Social Development in Northern Ireland indicated that PMS savers who do not have access to their savings and apply for social security benefits, including tax and pension credits, would not have their savings taken into account when determining their entitlement to such benefits or tax credits until such time as the PMS matter is resolved.
When the Minister responds, will he be cognisant of the difficulties that some PMS savers face in relation to tax liabilities? I have a constituent who owes tax—capital gains tax I believe—which was to be paid from the savings that they hold with the Presbyterian mutual society. They have not had access to their savings for over a year, and I am aware of other people who owe income tax, capital gains tax and, in some cases, inheritance tax, who were planning to use their savings to pay off those liabilities. I ask the Minister and the Treasury to make Her Majesty’s Revenue and Customs aware of the difficulties faced by PMS savers, and to ask for special arrangements to be put in place in circumstances where savers are unable to access their savings. In advance of a solution being found, leniency should be shown and flexibility demonstrated to allow those savers more time to pay their tax liabilities, without facing significant penalties that would only add to their distress and financial difficulties at a difficult time. I ask the Minister to take account of that issue.
Thank you, Sir Nicholas. It is always a privilege to serve under your chairmanship, and it is always a pleasure as well. I want to pay tribute to the humanity and kindness that you have shown to many hon. Members, and to your constant good humour. I have never known you to have a bad day or look remotely miserable; perhaps the hon. Member for Congleton (Ann Winterton) could advise me differently, but I have certainly not experienced it in the House. I also congratulate the hon. Member for South Antrim (Dr. McCrea), who introduced this important debate. Hon. Members have spoken from their personal and local experience, and I do not want to trespass on that, other than to make a few brief and general remarks.
This is a sorry state of affairs. The 10,000 members of the Presbyterian mutual society have become victims of that society. Obviously, one contributing factor to that was poor lending behaviour and unauthorised activities, which was all part of the age of profligacy, and we must acknowledge the poor decision making by executives of the PMS. However, many people who have suffered from such decision making have been bailed out, including bankers themselves. Members of the PMS are particularly unfortunate because the PMS is not a bank. It is not covered by the Financial Services Authority and therefore there has been no bail-out. There is not yet any satisfactory regulatory structure for mutual societies, although an excellent private Member’s Bill, which I played some part in, is going through the Commons and will deal with that problem to some extent, although only in a retrospective way.
As with Equitable Life, there is an issue of regulatory failure. As the Treasury Committee stated, no reasonable person, and none of the members of the society, could have supposed that such errant behaviour would have been allowed. There is a feeling, which seems to be manifest in what hon. Members have said, that all the organisations that ought to have worked on behalf of members of the PMS have to some extent let them down or washed their hands of the issue. The FSA does not think that it was its responsibility to have done otherwise, and the Treasury Committee points the finger at the Department of Enterprise, Trade and Investment in Northern Ireland. It does, however, recognise that although that Department might have had the knowledge to act, it had no legal power. Furthermore, even the Department of Enterprise, Trade and Investment could not have anticipated the effect that Government guarantees to other banks would have had on the PMS, and that view has been stated by the directors of the PMS.
To members of the PMS—the sufferers in this case—it can seem that blame is a pass-the-parcel kind of affair. The PMS is faced with £20 million of assets, when the original assets were £300 million, and the organisation is in administration. Members of the PMS seem sadly caught by the semantics of the situation. They are unprotected because they are classified as investors rather than savers, and they stand at the back of the queue because, according to the courts, they are lenders and not creditors. I am sure that that is no comfort to them whatsoever as their situation is pretty grim. There are no interim payments in prospect, and they are not first in the queue for claims. There is no date for when administration must finish, and no clear idea of how it will finish—it could go on for years.
Those people are a sad casualty, but normally that would be mitigated a little by the fact that in all investment there is a hazard and a fair risk. However, the Treasury Committee made clear its view that there was no rational reason why members of the PMS should have suspected that the organisation would get into such a plight, and there was no obvious in way in which they could have found out about it. There was a general presumption that, since the society was backed by the Presbyterian Church, the most prudential ethics would have applied.
To cut to the quick, the hon. Member for South Antrim talked about this being the time for real positive solutions. There seem to be four possible solutions. One is to rely on existing procedures such as administration and the courts in order to work a way out. However, on objective examination, it seems that the levers are simply not there to resolve the situation in a timely and effective way. Another solution that has been alluded to would be to wait for another company to step in, or for something to turn up—a kind of Mr. Micawber solution. The retrospective solution is obviously to ensure that such things never happen again, and I think that we will do that, although that is retrospective. The fourth solution, which appears to be the burden of the debate, is to call on the Government to be “innovative”—that was the word used by the hon. Gentleman—and to take some ad hoc Executive action to ameliorate the situation of the principal sufferers in these sad events.
I join right hon. and hon. Members in saying what a pleasure it is to serve under your chairmanship in the last debate in Westminster Hall over which you will preside, Sir Nicholas. The hon. Member for Southport (Dr. Pugh) suggested that you have an almost permanently sunny disposition, but I remember an occasion—the final sitting of the Finance Bill 2008 Committee—when that was tested to the extreme—[Laughter.] Your laughter now is a good sign that we did not push you too far on that occasion. It is an honour to take part in the debate today.
I congratulate the hon. Member for South Antrim (Dr. McCrea) on securing the debate. This is an important matter and it is not only hon. Members from Northern Ireland who have received correspondence about it. In my role as part of the Conservative Treasury team I have received a number of letters from people in Northern Ireland who are savers with the Presbyterian mutual society. They have expressed concerns about their financial plight and are looking for a solution.
One of the points that came across strongly in all contributions made this morning is that we cannot forget the personal circumstances of those who have put money into the Presbyterian mutual society and are suffering as a consequence. Although there are legal distinctions between those who put in less than £20,000 and those who put in more, everyone is suffering hardship as a consequence of what has happened. The hon. Member for Foyle (Mark Durkan) gave an example, and the right hon. Member for Belfast, East (Mr. Robinson) made a similar point about people who have locked up significant sums of money for their long-term needs and are suffering as a consequence.
The distinction about whether someone is a shareholder, a saver or a creditor reminds us of the importance of ensuring that people are aware of their rights in the event of a financial problem. We saw that in the financial crisis more generally, and we must ensure that people are aware of the limits and guarantees of the Financial Services Compensation Scheme. When people invest or save with organisations, they should be aware of their rights. It is the duty of those who run such organisations to ensure that their customers, members and shareholders know what their rights are in the event of a financial crisis and can take decisions about the appropriate amount of exposure to a particular entity.
As the hon. Member for Foyle said, the Treasury Committee has published its report on the Presbyterian mutual society. It raises important issues about the regulatory structure and the need to make progress in resolving the crisis facing members of the Presbyterian mutual society. It is helpful that we have present two members of the ministerial working group: the right hon. Member for Belfast, East and, of course, the Economic Secretary to the Treasury. I had hoped that we might get more of an insight into the workings of that group. The right hon. Gentleman set out four options for resolution. I hope that the Minister will go further and set out more clearly the Government’s position.
The right hon. Gentleman was right to stress the urgency of resolving the issue. It is important to resolve it before the general election. People have been waiting quite some time for a proper outcome. I hope that the Minister will make some positive remarks on what the solution might be, because in the absence of that, there will be a hiatus before a new Government are formed and are able to consider the matter. However, I am sure that if the present Government do not resolve it, the Government formed after the election will deal with it as a matter of urgency to bring about some resolution.
I am most grateful to the hon. Gentleman for taking an intervention. Picking up on his last comment, let us suppose that, unfortunately, resolution is not achieved this side of the general election. I hope that it is resolved, and the right hon. Member for Belfast, East (Mr. Robinson) has given us some hope this morning that it will be, but in the event that it is not, will the hon. Gentleman explain how often he has discussed the PMS with the Leader of the Opposition and what exactly the Conservative party would do if it was returned after the general election as the Government? What would it give the PMS savers in Northern Ireland? What is its express commitment to them?
Our commitment on the PMS is the same as our commitment on Equitable Life: if the problem is not resolved by the time of the next election, we would want to resolve it quickly. That is our obligation to the people who save with the PMS. I think that we all want to see a quick resolution to the problem. It has been hanging around too long. I hope that people will not have to wait until a new Government are formed.
Will the hon. Gentleman go further and give us a clear assurance? The Prime Minister says that there is a moral obligation to find a solution, but can we have a clear expectation that the resolution will guard the rights of those savers with savings of less than £20,000 as well as those with more than £20,000?
The hon. Gentleman makes an important point. I said earlier that I am very conscious that those people with savings of less than £20,000 are suffering hardship as a consequence of the problem. A solution needs to involve very careful thought given to how the rights of the two groups are balanced. The pay-out that has been made already—12p in the pound—benefits those with greater savings but, as the hon. Member for Foyle pointed out, we cannot just think that those with greater savings are fat cats. A balance needs to be struck in any deal.
One concern that people rightly have is the time that it has taken to get to the present point. Last July, the Treasury announced that there would be a working group of Ministers involving the Northern Ireland Executive, the Treasury and the Secretary of State for Northern Ireland. At the time of the statement, on 17 July 2009, the working group was scheduled to report back to the Prime Minister in the autumn, but no report was published. When I checked yesterday whether anything had been published, I found that, still, nothing had been published. Here we are, eight months since the announcement, still waiting for a resolution to the problem.
The Treasury Committee was right to point out that problem. A logjam has been created. The administrator has apparently been waiting for the group to report, but the Minister of Finance and Personnel in the Northern Ireland Executive, the hon. Member for East Antrim (Sammy Wilson), said that while the administrator was
“seeking that resolution with other financial institutions, the report cannot be completed”.
There appears to be a logjam, with the administrator waiting for the ministerial working group to report, and the ministerial working group waiting for the administrator to sort out what is happening. That has created a significant delay. We need to make progress.
The Treasury Committee was quite robust in its criticism. Knowing the work of the Committee well, I thought that the language it used was a mark of its unhappiness with the slow progress. In paragraph 62 of its report, it stated:
“We consider it unacceptable and farcical that both the UK Government and the Northern Ireland Executive appear to have suggested some responsibility for solutions but have failed to act.”
It pointed out that the people losing from that were the members of the Presbyterian mutual society.
That is the point on which I shall conclude: people are waiting for a response. It is right for the Government to take responsibility for resolving the issue and to doing so before the general election, but let me reiterate what I said earlier. I am sure that, if the present Government do not solve the problem but leave it for their successors to deal with, their successors, whoever they are, will deal with the problem with greater urgency and expedition.
It has always been a pleasure to serve under your chairmanship, Sir Nicholas, and it is a particular honour to be present for your valedictory performance as Chair of our proceedings.
I congratulate the hon. Member for South Antrim (Dr. McCrea) on securing this important debate and I am very grateful for the contributions made by right hon. and hon. Members on both sides of the Chamber. It is clear that we all share a deep concern about the very difficult circumstances in which many members of the Presbyterian mutual society still find themselves. I reiterate that the Government remain greatly sympathetic about the serious financial difficulties faced by many PMS members. Personally, I want to do all that I can in my remaining time in the House of Commons to ensure that we bring matters to an acceptable conclusion.
As many hon. Members have said, it is right that we should not get into the blame game; instead, we should focus on solutions. However, it is worth taking a few moments to remind hon. Members of the factual background to the situation of the PMS, as it sheds light on some of the difficulties encountered by both the Northern Ireland Executive and ourselves in charting a way forward, and it explains some of the delay and frustration that many people who have put money into the PMS have experienced. Again, I assure PMS members that we are doing all we can to work with the Northern Ireland Executive to come up with an agreed way forward.
The PMS is an industrial and provident society, set up in 1982 to operate for the benefit of its members and the Presbyterian Church in Ireland, and registered under the Industrial and Provident Societies (Northern Ireland) Act 1969. The legislative framework for Northern Ireland industrial and provident societies is a devolved matter, falling to the Department of Enterprise, Trade and Investment of the Northern Ireland Executive. The PMS is therefore registered with DETI, although DETI’s role does not include or require any regulatory oversight.
The PMS, like other industrial and provident societies in Northern Ireland, is not a deposit-taking institution. IPSs are not normally regulated by the Financial Services Authority or covered by the Financial Services Compensation Scheme. The legal situation is that investments in the PMS were in the form of withdrawable share capital—that is, those investments of up to £20,000, which I recognise are a particular concern of the hon. Member for South Antrim—and interest-bearing loans to the society. That relates to those investments of more than £20,000. The legislation imposes a £20,000 limit on the withdrawable share capital that an IPS may issue to any member, and an IPS with withdrawable share capital may not carry on banking business.
The PMS holds the same status as other IPSs in Northern Ireland and the majority of IPSs in Great Britain—they are not authorised to conduct financial services business. IPSs in Great Britain and Northern Ireland are required to apply to the Financial Services Authority for authorisation should they wish to carry out regulated activity. IPSs issuing withdrawable share capital up to the £20,000 statutory limit are exempt from the authorisation requirement for deposit-taking under the Financial Services and Markets Act 2000. IPSs that engage in mortgage lending, as the PMS did, require FSA authorisation.
As hon. Members will be aware, an FSA investigation into how the society was run concluded that the PMS
“was conducting regulated activities without the necessary authorisation or exemption.”
Reports by the administrator of the PMS to DETI make it clear that the manner in which the society was run, and the actions of certain directors, were highly questionable. FSA guidelines are very clear—that it is for a society to establish whether its activities are such that the law requires it to be regulated, and for a society to notify the FSA if it does need to be regulated. Responsibility clearly lay with the PMS to seek the appropriate authorisation.
The circumstances of PMS members are different from those of depositors in other collapsed financial institutions in at least two respects. First, it is important to remember that the PMS was acting illegally. Secondly, financial institutions supported by the Government, such as the Dunfermline building society, were appropriately regulated and authorised by the FSA and paid a levy to the Financial Services Compensation Scheme. Government support to depositors in institutions such as Dunfermline and Icesave was clearly about banks and other deposit-taking institutions that were regulated by the FSA or European economic area equivalents and which contributed to the Financial Services Compensation Scheme or European national deposit guarantee schemes.
Several hon. Members suggested that Government action to support banks and building societies that got into difficulties created the problems with the run on the PMS, but I do not find that argument compelling. Other IPSs in Northern Ireland and elsewhere in the United Kingdom did not find particular difficulties; rather, the PMS’s business model and members’ ensuing lack of confidence in it led to the collapse. That is not to say, however, that this is not a serious situation, and we need to do something about it.
As the recent Treasury Committee report observed, PMS members should have been informed that the society was unregulated, that they were ineligible to access the Financial Services Compensation Scheme and that risks were associated with investments in commercial property. Many PMS members feel that they were savers, rather than investors, and that issue has been explored in the debate. I repeat that I want to see an acceptable solution achieved during this Parliament, and I will do what I can to bring that about.
As has been mentioned, the Prime Minister set up the PMS ministerial working group, which demonstrates the Government’s commitment to addressing the issue and to working with the Northern Ireland Executive to identify what might be done to assist investors in the PMS. I do not need to go into the working group’s terms of reference in detail, but I do want to address some of the issues that have been raised.
First, I recognise that it has taken longer than expected for the group to produce a report on a solution to give to the Prime Minister, but the matter has proved particularly complex. Notwithstanding the best endeavours of the Northern Ireland Executive and Treasury officials, efforts to find a solution have taken some time to come to fruition, and I will say more about that in a moment.
I do not think that the number of meetings should be seen as a reflection of progress. I have met the Moderator and representatives of the PMS and I have had discussions with officials. As the hon. Gentleman will be aware, the working group is chaired by the Chief Secretary to the Treasury. I sit on the group, and other members include the Secretary of State for Northern Ireland, the Northern Ireland Minister of Finance and Personnel, the Northern Ireland Minister of Enterprise, Trade and Investment and the right hon. Member for Belfast, East (Mr. Robinson).
As the First Minister said in his helpful contribution to the debate, and as he has said on other occasions, a range of options are under consideration. One is a commercial solution, which would see another financial institution involved in the PMS’s portfolio of assets and liabilities. While I recognise that that is the preferred solution for people in Northern Ireland, the fact that a commercial organisation has not so far come forward leads me to conclude that this option is starting to look more unlikely, although it is still being discussed. Clearly, as hon. Members will understand, discussions with commercial institutions must remain confidential.
The Northern Ireland Executive have taken the lead in exploring the possible options, commercial and otherwise, and it is right for them to do so, because the legislation governing IPSs in Northern Ireland is a devolved matter. We need properly to take into account all the issues when working with the Northern Ireland Executive, to see whether we can come up with a solution.
The right hon. Member for Belfast, East mentioned the other options that need to be considered, and there have been discussions about a Northern Ireland solution. A hardship fund for the hardest hit is also being actively looked at. We have reached a stage where, within a short period, the working group can, I hope, produce a report to go to the Prime Minister. There is a basis on which a solution can be found.
On a commercial solution, and going back to the circumstances of the collapse, does the Minister recognise that there is evidence of predatory moves by some of the banks in Northern Ireland, which told people, “Move your money out of the PMS because it’s not covered by guarantee and give it to us”? People are rightly questioning why some of those banks cannot come forward now, not least when some of them have been covered by intervention by the British or Irish Governments.
I do not want to get into the detail in responding to that point. We have had a helpful debate and we have said that, rather than getting involved in a blame game, we want to find a solution that works for those who put money into the PMS, particularly those savers—whether they are savers or investors is a point that we can debate—who put in less than £20,000. We need to continue to focus on what that solution may be.
The right hon. Member for Lagan Valley (Mr. Donaldson) mentioned people with tax liabilities who may have most of their money in the PMS, where they cannot access it. As in the case of any taxpayer in temporary financial difficulties, I would expect HMRC to be sympathetic, and it will be up to individuals to contact the tax authorities to explain their difficulties. As I say, HMRC should treat such cases sympathetically.
To conclude, there is a basis for a solution that we and the Northern Ireland Executive can take forward. I hope to be able to play my part as a member of the working group by ensuring that we bring matters to a satisfactory conclusion, and I can assure hon. Members that I want to do so with all possible urgency.
I am sure that everyone in the House will be grateful to the Minister for that sensitive and factual response, and, if I may say so, for the expectation of hope that the matter can be resolved. I congratulate all the hon. Members who took part. The next debate concerns the splendid constituency of Tunbridge Wells.