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Building Societies Bill

Volume 478: debated on Friday 18 July 1986

The text on this page has been created from Hansard archive content, it may contain typographical errors.

11.56 a.m.

Report received.

Clause 1 [ The Building Societies Commission]:

Page 1, line 11, leave out (", subject to subsection (3) below,")

Page 1, line 16, leave out subsections (3) and (4).

The noble Lord said: My Lords, I beg to move Amendment No. 1 and, with the leave of the House, I shall also move Amendment No. 2. These amendments fulfil an undertaking that was given to the noble Lord, Lord Houghton of Sowerby, in Committee to remove the Treasury's power to increase the maximum number of members of the commission. I commend these amendments to your Lordships and I beg to move.

My Lords, we are grateful to the noble Lord for this concession. In the context of these amendments, can he tell us whether any progress has been made in appointments to the commission of a member who has experience in the securities industry, which is a matter that was touched on in Committee?

My Lords, I am very grateful to the noble Lord, although this swallow did not make a summer. I am grateful for the slight change that was made in the Bill.

My Lords, I am grateful to the noble Lord, Lord Houghton. With the leave of the House, I should like to say that I have no knowledge yet of whether such a person has been found. Certainly he has not yet been appointed. Three of the four part-time appointments have been made. I shall certainly do my best to keep the noble Lord informed and I take on board the point with which I know he is concerned, as to whether we can appoint somebody along those lines.

On Question, amendments agreed to.

After Clause 4, insert the following new clause:

( "Conveyancing services.

PART 1A

CONVEYANCING SERVICES

. Rules made by the Lord Chancellor by virtue of Schedule 21 shall prescribe such conditions as appear to him to be appropriate for the purpose of securing that the rights, remedies, protections and safeguards afforded to persons for whom conveyancing services are provided by recognised institutions are reasonably equivalent to those afforded to the clients of solicitors and licensed conveyancers.").

The noble Lord said: My Lords, as the noble and learned Lord the Lord Chancellor will know, he and I are in considerable difficulty over this amendment but, because he has been good enough to tell me that he must be away from the Chamber at a particular hour, which is rapidly approaching, I propose to scrap what I intended to say, which would have been rather more lengthy, and try to keep my remarks within a very small span. However, I should say that I understand that it is agreeable to the noble and learned Lord the Lord Chancellor that Amendment No. 73 in the name of the noble Lord, Lord Coleraine, might be taken for discussion with the debate on my amendment, if of course time allows.

I ought first to say that this amendment is concerned only with what is now Clause 124 of the Bill and what is and was Schedule 21. That is something quite separate from the rest of the Bill. There is indeed only a most tenuous connection between the two. In a sentence, the schedule and the clause taken together provide that the Lord Chancellor of the day shall be empowered and enabled to set up a scheme whereby conveyancing services such as those that have been performed for a long period of time by solicitors, which is my own profession, and the opportunity to provide conveyancing services under the powers given recently to the licensed conveyancers, shall be extended to what are called "recognised institutions". For this purpose an "institution" really means almost anybody at all.

The schedule goes on to provide that the Lord Chancellor, by statutory instrument—the whole thing will be effected by statutory instrument—may make rules, first of all, for the recognition of institutions which are regarded as suitable to give conveyancing services, and, secondly, as to the conditions under which anybody who practises as a recognised institu-tion shall carry on his business. When I say that, I am speaking about the consultations that I had with the Law Society.

It seemed to me that two things were evident. One was that on any showing the setting up of this new institutional conveyancing, if I may call it that, is a matter of considerable importance not only to solicitors and licensed conveyancers, but also to the public. The second is that the whole proposal is wrapped in doubt, because there is no indication whatever of what the rules will say about who recognises an institution and how it is recognised as suitable. The schedule is almost entirely silent on what qualifications will be required from institutions in order for them to be eligible, and it is also almost entirely silent as to the conditions under which the institutions shall be expected to operate.

In view of all that, I put down 18 amendments at the Committee stage. They were prepared with great care, with the assistance and advice of the Law Society and its officials. Briefly, the purpose was to try to clothe the bones of the schedule and to spell out some of the safeguards that we thought should be built into it.

I ran into a great deal of trouble. Only one day was given originally for the Committee stage of the Bill. It had been hoped that it would be disposed of in one night. But as it turned out, at the end of the first day we were nowhere near reaching my amendments. Indeed, we were only about half-way through the Bill. As a result, when the matter was adjourned another day had to be found in order to deal with the remainder of the Committee stage. That involved a major rearrangement of the business of the House, because I understand that it was of central importance that the Bill should get through before the Recess.

Bearing that in mind, on the second day again, unfortunately, my amendments were not reached until after 10 o'clock and we were under an obligation to adjourn no later than 11 o'clock. On that occasion I had so severely to truncate what I had intended to say that I did not even have the time to read out to the Committee the text of the 18 amendments that I was proposing to put forward. I am not complaining, but that is how it went. Unfortunately, I find myself on this occasion in almost precisely the same difficulty.

Why I think that this is of such consequence is this. The noble and learned Lord the Lord Chancellor, when he kindly replied to my amendment on that occasion, was good enough to say this:

"… the sort of matters which the recognition rules may need to cover will of course be the subject of long and detailed consultations over the next few months. They clearly must make provision for the proper supervision of conveyancing work. They clearly must ensure an adequate level of service. There will be a number of purely mechanical matters such as the form of application for recognition",

and the like. [ Official Report; 10/7/86; col. 570.] I particularly emphasise the words:

"the … matters which the recognition rules may need to cover will of course be the subject of long and detailed consultations".

I regard it as quite deporable that in such a matter the only places where there will certainly not be long and detailed consultations are the House of Commons and the House of Lords. There will be no detailed consideration of those important matters, because in the end the Lord Chancellor (whoever it may be at the time) will issue a statutory instrument which is subject to annulment in pursuance of a Motion of either House, which means, as I understand it, that we have to accept the whole thing in toto and that it is not susceptible of amendment.

I am extremely grateful to the Lord Chancellor for the charitable and favourable way in which he received what I had to say on that occasion. But at the very end he said this (col 571):

"as at present advised, I do not believe that the amendments"—

that is the 18 amendments—

"are necessary. I believe that any Lord Chancellor would give effect to their spirit".

I took leave to seize upon that suggestion in order to try to reduce into one single amendment what the noble and learned Lord called the spirit of my 18 amendments. That is the amendment which is now before the House.

I shall take the single course of doing what I was completely prevented from doing before, and that is reading the text of the amendment to the House.

"Rules made by the Lord Chancellor by virtue of Schedule 21 shall prescribe such conditions as appear to him to be appropriate for the purpose of securing that the rights, remedies, protections and safeguards afforded to persons for whom conveyancing services are provided by recognised institutions are reasonably equivalent to those afforded to the clients of solicitors and licensed conveyancers".

That encapsulates all the matters that have been of such grave concern to the Law Society and indeed to the whole of my profession.

I am encouraged to believe that this time we have it more or less right. When I came into the House this morning I was able to take up the comments of the Building Societies Association. With regard to my amendment, it says this:

"The amendment in the name of Lord Foot seeks to impose on the Lord Chancellor a requirement that recognition rules should, broadly speaking, provide the same protection for clients of recognised institutions as are reasonably equivalent to those afforded to the clients of solicitors and licensed conveyancers. The association supports the intent of this amendment, although it must be a matter of debate as to whether it is necessary to write this into primary legislation. In any event, the association would expect the recognition rules to contain such provisions".

In view of that, and in view of the fact that on this matter at any rate the Building Societies Association and the Law Society are at one in agreeing on the desirability of these things, would any harm be done if we were to write the amendment into the Bill? I beg to move.

My Lords, I wholeheartedly support the amendment, but in view of the circumstances that the noble Lord has outlined, I propose, with your Lordships' leave, to speak to my amendment, No. 73, perhaps fairly quickly and, when the time comes, I shall not be moving it.

My amendment covers approximately the ground covered by the noble Lord's amendment. It provides:
"recognition rules may make provision for the imposition of disciplinary sanctions on any recognised institution or recognised practitioner for breach of conditions",
including, first:
"power to order payment of a penalty not exceeding £750,"
secondly:
"power to order that the recognised institutions … shall not, for a period not exceeding two years,"
employ the officer or employee concerned in the breach in connection with conveyancing services and, thirdly:
"power to order payment of compensation to any person who may have been aggrieved by the breach."
My provisions are outside the scope of Clause 124 and Schedule 21. If my noble and learned friend agrees that recognition rules, as envisaged, cannot extend to the type of disciplinary sanctions which I suggest, I ask that he will nevertheless agree that the possibility of such sanctions being available should be considered.

On the other hand, if my noble and learned friend tells the House that I am mistaken and that the powers exist already, I shall be happy. As I understand it, my noble and learned friend's argument in Committee was that big business need not be subject to the same disciplinary sanctions as are solicitors. He said:
"we cannot treat the building societies and the banks as quite the same sort of animal as a firm of solicitors that has four or five partners and a number of clerks."—[Official Report, 10/7/86; col. 571.]
I wonder why not. May not conveyancing institutions be individuals and small partnerships? What is the argument against the Lord Chancellor being able to provide disciplinary sanctions at least for them?

In Committee, the noble Lord, Lord Foot, spoke to an amendment designed to give the Lord Chancellor power to impose further recognition rules on a recognised institution when the need arose. The amendment was designed to provide an intermediate sanction, as is my amendment, but at a much higher level than mine. It was aimed at institutions which might persist in unacceptable practices and was designed to cover the possibility that those practices might go unchecked because the existing remedy provided in the schedule for revocation of recognition might be too draconian to be applied.

My noble and learned friend said that his advice was that a Lord Chancellor already had those powers under the schedule, and in relation to the powers he said:
"A word in time and a warning given at the appropriate moment would probably be more effective."—[Official Report, 10/7/86; col. 571.]
I see a need at the lower level for an individual member of the public to feel that he has, and indeed should have, some right of satisfaction against a conveyancing institution for unsatisfactory conduct, shoddy work and so on. It will not be easy for the member of the public to find someone to have a word in the ear of the chief general manager of a building society. The Government, in aid of the individual, should take powers to impose sanctions in respect of individual transgressions.

I have tabled my amendment in the hope that my noble and learned friend will take the matter away and, even at this late hour, will bring back an enabling clause on Third Reading. I do not propose to discuss the detail of my amendment. It is designed to illuminate and illustrate. It speaks for itself, warts and all.

12.15 p.m.

My Lords, I should like to support the amendment proposed by my noble friend Lord Foot. For the reasons that he gave, I was unable to be present in Committee. Schedule 21 contains a few of the protections which make the institutions equivalent, such as legal professional privilege. The client's privilege is to be preserved, according to Schedule 21. Liability for negligence is to be preserved. That there should be no conflict of interest is also to be preserved. Some of the matters are already contained in Schedule 21, but they can be omitted. As my noble friend Lord Coleraine has just said, the disciplinary powers are not in Schedule 21.

One cannot remember all the various matters which are necessary to make the protection equivalent, as the amendment says, so that:
"the rights, remedies, protections and safeguards afforded to persons for whom conveyancing services are provided … are reasonably equivalent to those afforded to the clients of solicitors and licensed conveyancers."
That is the general principle. When we consider the particular a number of reasonable and sensible provisions may be omitted.

It is far better to have the general principles stated in the Bill and accepted by the House. In that way I hope that all the amendments tabled by my noble friend Lord Foot will indirectly find their way into the Bill. I wholeheartedly support the amendment proposed by my noble friend.

My Lords, I rise briefly to testify my support for the amendment moved with character-istic clarity and cogency by the noble Lord, Lord Foot. I do so because it implements what, in Committee, I referred to as the sauce-for-the-goose and sauce-for-the-gander principle.

The amendment would establish parity of treatment by applying to recognised institutions the proper safeguards already practised and accepted by solicitors. In Committee, when discussing his 18 amendments, to which the noble Lord referred, I ventured to identify five relevant considerations in that context, the first and most important of which was consumer protection. It is by those criteria that the matter should be judged. It is to meet those criteria that the noble Lord's amendment would impose the safeguards to bind the recognised institutions, newcomers in the field, which already obtain in the case of established practitioners.

As I followed the Committee stage of the debate, the only material objection which the noble and learned Lord the Lord Chancellor put was:
"I must be and any successor of mine ought to be allowed to apply to the larger institutions which are envisaged in this Bill the sanctions, constraints and rules which are appropriate to that sort of animal, and not necessarily those which are appropriate to the rather smaller solicitors' organisation which has hitherto been providing these services."—[Official Report, 10/7/86; col 571.]
I do not recall that the sauce-for-the-goose principle differentiated with regard to size. My noble friend Lord Coleraine dealt effectively with that point in his observations. That of itself is not a sufficient ground for rejecting the noble Lord's amendment.

The amendment would in no way derogate from the Bill's main purposes. It accepts the removal of the solicitors' conveyancing monopoly and therefore meets the basic purpose to which the noble and learned Lord the Lord Chancellor referred in Committee.

The amendment would make an important contribution to consumer protection and therefore its purpose deserves support. That purpose, as one would expect of the Law Society, is to be implemented in drafting which I should think is impeccable. I hope therefore that the amendment will be accepted.

My Lords, I am very grateful for the concise and friendly way in which the noble Lord, Lord Foot, moved the amendment and also for the following speeches. I must, however, point out one fundamental fact that all speakers have failed to understand. Of course, it is true that the object of the clauses to which reference has been made is to increase the vires of building societies, banks and other institu-tions to provide services that they would not otherwise be able to provide, either under the statutes that create them or under Section 22, I think it is—if I my recollection has betrayed me, I apologise—of the Solicitors Act. That is perfectly true. What all four speakers have failed to understand is that the people who actually do the work under Clause 124 and Schedule 21 will, in fact, be solicitors or, when they get going, licensed conveyancers. In other words, they will themselves be subject to precisely the disciplines that are already, or will then become, under the solicitors' rules or the licensed conveyancers' rules, the discipline of their professions. They will be professional people.

The Bill enables banks and building societies to employ those people to do conveyancing work. Although such solicitors are in fact employed by building societies and others to work on behalf of their employers, that service cannot at the moment be provided to members of the public. That is the fallacy underlying the amendment. There is already built into the system the precise thing that the amendment would write into the Bill. The amendment is therefore not only unnecessary but the arguments for it are based on a misunderstanding of what is going to happen. Lest there should be any doubt about it at all, the purpose of Schedule 21 is to ensure that members of the public—the consumer, if one chooses to use that word—should be properly protected in respect not of the employee who will do the work and who is already a solicitor or a licensed conveyancer but as regards the employer—the building society or the bank, to give two prominent examples—against conflicts of interest, fraud, negligence and anti-competitive practices. That is the purpose of Schedule 21. The protection against unprofessional work is already there because the people, as employees, who will do the work are precisely members of the professions upon whom these duties are imposed.

As I stated in the rather brief discussion that we had before, the ultimate sanction provided under the principal clauses of the Bill is a refusal by the Lord Chancellor of the day to recognise the institution, the employer—that is to say the bank, the building society or whatever—so that he cannot do it at all. The purpose of the Bill is to give power to building societies to provide through their employees, who will be professionals, services of this kind. The sanction behind it is the withdrawal of recognition from the employer. When my noble friend Lord Coleraine says that there will be intermediate sanctions, one of his sanctions is a maximum fine of £750. That appears under (a) of his amendment. What will be a fine of £750 to deter a building society which is worth rather more than that, or a bank, say Lloyds Bank? The sum of £750 is neither here nor there.

As to what is proposed under (c) of the amendment of my noble friend Lord Coleraine, no institution—I say this, at any rate so far as I am concerned, and I speak, I believe, for any possible successor of mine—will get recognition at all unless it can provide proper arrangements for compensation to the satisfaction of the licensing authority. As regards (c), that is built into the scheme. As regards (b), that is provided for in the manner that I have already indicated. If the licensed conveyancer or solicitor, employed by the society, loses his practising certificate or whatever, he will not be able to be employed in that capacity any more. All that is proposed in that part of the amendment is implicit in the scheme.

I turn now to what my noble friend Lord Broxbourne and my noble and learned friend Lord Denning have, I believe, failed to understand about the amendment. It runs into what I might call a rather serious constitutional difficulty. It provides, in effect, that the Lord Chancellor of the day would have to follow, as regards banks, building societies and other institutions which come within the purview of the Bill, the equivalent protection practices of the solicitor's profession or of the licensed conveyancing profession. No Lord Chancellor could do that, or ought to try, as I endeavoured to indicate in Committee. Let us suppose, for instance, that the Law Society imposed a particular restriction on its members. The amendment, if passed, would compel the Lord Chancellor of the day to impose the same restriction on a bank—Lloyds Bank, shall we say? The effect of the new resolution by the Law Society would bind the employee of the building society as it would any other solicitor. The restriction of the licensed conveyancer would bind any licensed conveyancer employed by a bank or building society as it would any other licensed conveyancer. But the building society and the bank, as I have tried to point out, is a totally different kind of animal.

Let us suppose, for instance, that restrictions were re-imposed on advertising. This can be justified and has been justified all my life until recently. Am I to be told that the Lord Chancellor thereby will protect the consumer by stopping a bank or a building society advertising? Or let us suppose that the licensed conveyancing council, when it imposes disciplinary rules on licensed conveyancers, brings in a different and inconsistent restriction on its practitioners to that applied by the Law Society. How is a future Lord Chancellor, under the terms of the amendment, to choose between them?

I view the amendment with the utmost friendliness in the sense that I am determined that the Bill, when it becomes an Act of Parliament, will provide full protection for members of the public, for the payment of compensation and against negligence, fraud or dishonesty. But that is already built into the system of the Bill. I am also determined that any solicitor employed by the building societies or the banks, and licensed conveyancers, when there are any, will be subject to the ordinary rules binding solicitors and licensed conveyancers. There are therefore constitutional objections to the way in which this is framed. There is also complete protection built into the system. I would therefore suggest that not only is this amendment unnecessary but that a prominent parliamentary draftsman and—since we are not talking in party political terms—a wise Administration have already provided the protection which is required.

12.30 p.m.

My Lords, before the noble and learned Lord the Lord Chancellor sits down, can he deal with this point? He suggested that my noble and learned friend Lord Denning and I had overlooked certain constitutional implications. Has he taken into account and given full effect to the words in the amendment,

"such conditions as appear to him to be appropriate"
which give him a discretion to that effect; and the further words at the end of the amendment which say,
"are reasonably equivalent to those afforded"?
He is not therefore so tightly bound as, with respect, he seemed to suggest. I do not think that my noble and learned friend Lord Denning and I altogether deserve the agreeable strictures which he passed upon us.

My Lords, I did not intend to pass strictures on either my political friend on the Conservative Benches or my noble and learned friend on the Cross-Benches. Certainly no strictures were intended. Yes, I have paid full attention to that. But I was pointing out that the object and structure of the scheme was such as to render the policy proposed by the amendment inappropriate. I think that this point has been taken by the House. I was pointing out that the employees who will do the work are already bound, and the employers being multi-million corporations in many cases (although some of them, as my noble friend Lord Coleraine said, need not be in theory) are subject to a different discipline and the public requires against them a different kind of protection from that which is contemplated by the amendment.

I am sorry to have spoken at a little greater length than I intended. Perhaps I may conclude what I have to say by recalling another debate which we had in Committee, sponsored on that occasion by the Labour Benches, about the possibility of conflict of interest. The real purpose of the consumer protection provisions in the Bill is to protect the consumer—although this is perhaps only one example of other conceivable examples—against, in particular, conflict of interest between the multi-million pound lender and a possibly insufficiently advised borrower. That is the kind of protection which the Government are seeking to impose on the employer. The disciplinary protections are already adequately provided by the disciplines of the two professions who will do the work.

I hope that I have now explained this. It is not that I oppose the spirit of this amendment at all. I am far from wanting to place strictures upon anybody. Perhaps instead of "constitutional" I should have used the word "logical" fallacy in the three speeches to which I referred. However, it is a logical fallacy and I should be doing less than my duty to the House if, in spite of the respect in which I hold all three Members, I did not try to point it out.

My Lords, I do not want to delay the noble and learned Lord the Lord Chancellor. I am sure that I shall not. He has infinitely more enjoyable and important things to do, not least to listen to himself.

I must point out that he chose to ignore a critically important point, namely, that a solicitor or licensed conveyer employed by a large institution cannot inherently offer the same degree of independent advice as an employee. The employee is not an independent professional. I think that that point has to be taken up. In the real world people stand back from having the effrontery to disagree with the people who pay their salary cheques. He has often referred to the fact that the building societies and the large institutions, including the banks, are a different kind of animal. My goodness me, the noble and learned Lord is absolutely right there! What worries me is that they are big animals, and big animals have a tendency to eat people.

My Lords, my noble friend could hardly have put better the point that I have already made to the Labour Front Bench on the Labour amendment. I absolutely agree with him but I hope that the Bill will meet his point. I said at greater length, but less well, what he has said, when I was answering the noble Lord, Lord Jacques, and one of the proponents of the Labour amendment.

My Lords, we have overshot the noble and learned Lord the Lord Chancellor's time mark. I therefore think we ought to bring this debate to an immediate conclusion.

I was agreeably surprised to note that when the noble and learned Lord the Lord Chancellor was reproving us all for not having understood what it was all about he expressed some surprise that the noble and learned Lord, Lord Denning, and the noble Lord, Lord Broxboume, should get it wrong but expressed no surprise that I should get it wrong, on the basis, no doubt, that I am a mere solicitor and obliged to get things wrong from time to time.

While he was explaining to us why these provisions were quite unnecessary this point occurred to me. When we were discussing my 18 amendments on the last occasion why did he not make the same point then? Why did he not point out to ignorant people such as myself that all these amendments to which I was then speaking were quite unnecessary? That would have killed me off right away. I cannot help thinking that he has thought this one up since the last occasion when we were discussing the matter.

I am utterly unqualified at the moment to answer the argument of the noble and learned Lord. I shall consult with my advisers in the Law Society, look at the 18 amendments—or the substantial ones that we put down on the last occasion—and see whether it is correct that all of them are entirely unnecessary, as the noble and learned Lord the Lord Chancellor has said. If I find that we do not entirely agree with him, I shall seek leave at the even later stage to come back on the matter. With that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 2 [ Establishment, incorporation and constitution of building societies]:

Page 193, line 16, after ("he") insert ("was, at the end of that year, and is, on the voting date,");

The noble Baroness said: My Lords, in moving Amendment No. 4 and speaking also to Amendment No. 5, I should like first to explain to the House that there are quite a number of starred amendments down in my name. I would not normally table amendments at such a late stage. However, these amendments have been under considerable discussion with the Government and have, I believe, reached a point where they may receive favourable attention from the Government. That is the reason they have been so delayed in being submitted.

Amendments Nos. 4 and 5 put borrowing members of the society on the same footing as investing members in terms of their entitlement to vote at general meetings. The criterion in both cases will be that their entitlement is fixed at the end of the previous year. I beg to move.

My Lords, these amendments appear to the Government to be entirely sensible and make the Bill clearer. I therefore have much pleasure in accepting them.

On Question, amendment agreed to.

Page 193, line 17, leave out ("on the voting date").

On Question, amendment agreed to.

Page 193, line 19, at end insert—

("( ) No person may vote twice in person or by proxy as a qualifying shareholder and also as a borrowing member at any meeting or in any postal ballot.").

The noble Lord said: My Lords, perhaps I should give notice that I have a speech of considerable dimensions to deliver to your Lordships on this Bill, but in the half-morning available to us on Fridays, when the lights go low and our spirits even lower, I do not think that this is the day to inflict it upon the House! I shall reserve it for the supper-break on Wednesday when the only noble Lords present will be those with an interest to declare, because it is to them that I shall want to address my remarks.

In moving Amendment No. 6, I shall content myself with a brief explanation of what all my amendments are trying to do , however imperfectly or inadequately they may do it. I have no interest to declare except that I am an investor. With great respect, the more I read our debates on this Bill the more I regret the number of vice-presidents of the Building Societies Association that there are in both Houses. I was one for probably longer than anyone else; but I did not regard myself as necessarily a supporter of what the Building Societies Association wanted to do. I was greatly honoured, but I did not sacrifice my freedom merely to have the honour of being a vice-president.

My aim is to strengthen the voting base of societies—to make it more responsive to the real interests of the investor who is a shareholder with a stake in the society and who is not using the society merely as a deposit financial institution. I want to take care of the rights of those shareholders who feel that they have an investment worth keeping, defending and enhancing. I do not believe in giving the vote to all and sundry who may use an institution like a building society as a repository for their holiday money. When I read of building societies having suffered a serious drop in their "new" money in a particular month, they have tried to explain it by saying that it is a holiday month and people are drawing their money out for their holidays. Such people are not shareholders, and to call them investors is ridiculous. However, they are given that title throughout the Bill. They are convenience depositors in the same way as depositors in a bank. It was not for them that the status of shareholder was created.

However, I want to protect the shareholding base of societies and to strengthen it. I also want to promote harmony and co-operation between emerging staff interests and management interests. I want to combine those two aims to make for a stable and responsible membership and a happy workforce. That is the aim.

I now come to Amendment No. 6. On the face of it, this amendment is an attempt to remove from the provisions of the Bill what looks like plural voting. Ballots are now in the news more than ever before because the unions have been holding them. Indeed, some strange results, both one way and another, are coming out of those ballots. People are wondering whether ballots are clean and properly conducted, and we have seen quite a lot in the press about that in the past few days.

Therefore, if there is anything in the ballots which take place in building societies that could be regarded as a blemish upon their complete integrity, it should be removed. I add this comment: building societies will have more ballots after this Bill is passed than they have ever had hitherto. Some societies have not held a ballot for at least 30 years. I have been a member of a building society for longer than 30 years and I do not remember a ballot ever having taken place. Therefore, there will be some novices in this ballot business before long and it is just as well that they should be properly guided in their practices regarding the conduct of ballots.

I have also tabled Amendment No. 13 which is not on the same point as Amendment No. 6, but which is linked to my concern about ballots. I want to reflect in the ballots held by building societies the interest and, where it exists, the concern about the way in which ballots are being held in other sensitive areas.

Amendment No. 6 raises this question: is there plural voting? On the assumption that the Minister's brief is the same as that of the Building Societies Association, to whom I am indebted for an explanation of what is wrong with the amendment, I should like to anticipate something of what the Minister may say. I am told that there are two colleges here. I understand that on a transfer the borrowers will have a resolution of their own to pass and that the shareholders will have another one. Two ballots will be held as regards two different classes of voting members and they will have different conditions attached to them.

The question is: should any one person who is both a borrower and an investor use two votes, one as a borrower and one as an investor? The Building Societies Association say that if a person under the existing arrangements has two votes, which would he choose if he had to choose between them? He may decide to choose to vote where his major interest lay. It seems to me that only silly people—and there are plenty around—would vote both ways and cancel themselves out. However, they would not be cancelled out in the same ballot because they are in two separate colleges. They are both voting on the same resolution, which is to transfer—to go in the same direction, and therefore their interests must coincide somewhere. It may be that to overcome this difficulty a person who is a borrower and an investor should choose for himself which channel he should go into. On the whole, I should imagine that he would choose to vote as an investor because in that respect there is the condition necessitating a 20 per cent. poll for a resolution to be passed on a ballot.

I freely admit that there is a dilemma here. It may well be that the consideration given to this little problem led to the conclusion that there is only one satisfactory and easy way, and that is to give the borrower-investor two votes and let him use them in each channel wherever he may think his interests lie. I do not think that that is completely satisfactory. I do not think that any person can have two capacities when exercising his attitude towards the same proposi-tion, but other people may take a different view.

I can only ask the Minister to let me know the result of his further consideration of this matter. There is an undesirable element to the situation as it exists. It may, however, be regarded as a dilemma that can be resolved only by giving one person two votes, one in each channel, and he can use them both in order to satisfy the qualifying conditions, if he is so minded, in each channel. I beg to move Amendment No. 6.

My Lords, may I first say to the noble Lord, Lord Houghton, that I have not seen the Building Societies Association brief on his amendment, and so I hope that when I now give the Government's view on it I shall not be repeating merely what has been written down in that.

The noble Lord raises an interesting point with his amendment. The existing provisions of the Bill seek to deal with the complications inherent in testing the opinion of both investors and borrowers on a particular proposition. The method used in the Bill is certainly not the only way in which it could have been done. But the Government think that it is the best and fairest method.

The Government would not accept that any member is given two votes in any poll. In each test of opinion, those members voting have one vote, and one vote only. The complication arises, however, where, at certain points, like the approval of mergers or of conversions, the opinion of both investors and borrowers separately is sought. In such circumstances, the view of the member who is both shareholder and borrower needs to be brought to account in both capacities.

Let us consider, for example, what would happen if such people were counted as shareholders only. That would mean that the borrowing members' resolution would be a resolution only of those borrowers who were not also eligible to vote as shareholders. They might be quite a small minority and quite unrepresentative of borrowers as a whole. Conversely, if they were given the right to vote only as borrowers, then the special resolution of investing members would not cover an important minority. And if they were given the choice as to whether they wanted their vote brought to account as a borrower or as an investor, the effect might, to say the least, turn out to be capricious. Those who opposed the merger or conversion might, for example, calculate that a "no" vote would be most effective on the borrower's resolution, while those who favoured it might go for the special resolution, in order to help the votes in favour to get up to 75 per cent. This could well distort the result so that it was not an accurate test of the opinion of the membership.

Those who are both shareholders and borrowers are an important group. They are people who are clearly closely committed to their society. In the Government's view, it is right that their opinion should be taken in both capacities. But, as I have explained, we do not consider that this amounts to giving them two votes. Obviously, this is a difficult problem but we believe that we have found the best way out of it, and, with that explanation, I hope that the noble Lord will be able to agree to withdraw this amendment.

My Lords, before my noble friend replies, I should like to ask quite directly: are we talking about a large number of people? I am trying to imagine myself as somebody who wanted to buy a house. I cannot follow why I would borrow at—I do not know the rate of interest—something like 11 per cent., and at the same time invest some money in the same society for a much lower return.

I should have thought that the sensible thing would have been to use the money so that you did not have to borrow so much in the first place. I cannot follow the logic of this at all. I suppose, as the noble Lord said, there are silly people, but. sitting down and working it out, we must be talking about a small number of people.

My Lords, with the leave of the House, may I say that I have not got the answer to the noble Baroness's question. I do not know how many people there are involved as both borrowing and investing members. However, of course there are reasons why it is practical to be both.

Suppose that over a period of time the income rose of the person who took out a mortgage and had a certain commitment to repay each month, and rather than renegotiate the terms of the mortgage, or whatever it might be possible to do, the person had some savings to put aside each month into the building society as an investor. It could be that he was doing this to save against a forthcoming holiday, or Christmas, or something or other. I do not know how many people are involved in this, but they account for some of the reasons why it might perhaps happen.

My Lords. I think I am persuaded that we ought to relieve the borrower/investor of the dilemma of deciding in which channel he votes. I see this difficulty. It may look like backing two horses in the same race, but of course those two horses must win. Each resolution must be carried: in the case of the investor by the stipulated 20 per cent. poll, and in the case of the borrowing members by a poll that may take place on the special borrowing members' resolution.

In the circumstances, I shall withdraw this amendment and consider it further. It ma\ be that there is no other solution to this dilemma. It would be difficult to ask a member to decide where the risk in the ballot lay; whether it is in the channel of the investor or in the channel of the borrowing member He might make a mistake by putting his vote where it was not needed and failing to vote in the channel in which it was needed. That is the dilemma. In the circumstances, I shall withdraw the amendment and consider it further. Some of these matters are so complex that it is difficult to see one's way through them all at the same time.

Amendment, by leave, withdrawn.

moved Amendment No. 7:

Page 198. line 15, leave out ("at any time").

The noble Lord said: My Lords, here I may be in a bit of a muddle. It may also be that the Bill is in a bit of a muddle. I refer now to sub-paragraph (3) on page 198. Where I probably went wrong was in overlooking the fact that this paragraph deals with a member's right to propose and circulate resolutions. That will arise in the next amendment.

This amendment relates to the terms of sub-paragraph (3) where it says:

"Any provision contained in the rules of a building society shall be void to the extent that it would have the effect of requiring a qualified member, for the purposes of sub-paragraph (1) above,—
(a) to hold or have at any time held shares in the society …".

I am perplexed about "to hold or have at any time held shares". I was proposing to delete the words "at any time". It seemed to me that the requirement should be that the shareholder had the shares at the time, and not at any previous time. That is the first point that arises on Amendment No. 7.

This amendment is linked with Amendment No. 8 which follows, and also Amendment No. 9. There was a mistake in the original printing of Amendment No. 8, which had the period as five years. It was not my intention to have a period of five years. What I was intending to do was to insert two years as the period before a shareholder could vote. But the brief I received from the Building Societies Association, for which I am always grateful, pointed out that there is a provision in this clause already for a two-year holding of shares for the purpose of circulating resolutions. So what I am proposing to put is already there. Clearly that must come out.

I can only ask the Minister, in terms of line 15 in this connection, whether there is anything that needs tidying up. My condition of two years is not relevant at this point in the Bill. I may have to look elsewhere to find how I can introduce a stipulation that for a person to have any vote at any time he must have held his shares for the prescribed period of two years. This would be part of my aim to stabilise and strengthen the voting base of the society. I beg to move.

1 p.m.

My Lords, perhaps I may briefly explain the provisions of this paragraph. As at present drafted, the Bill allows societies to impose restrictions as to the length of membership and minimum shareholding for a member before he may propose a resolution. Sub-paragraph (a) of paragraph 31(3) provides that the monetary limit on the shareholding specified must not exceed the prescribed amount—which paragraph 36 provides as £100. Sub-paragraph (b) provides that a restriction on length of membership cannot go back beyond two years prior to the moving of the resolution. Taking these two provisions together, the maximum restriction that a society could impose is that a member should have had a shareholding of £100 during the period of two years before the moving of the resolution.

I think that explanation, though what appeared in the Bill may be slightly complicating, illustrates the result of these paragraphs. That is what we aim to achieve with them.

My Lords, I am grateful for that and I beg to withdraw Amendment No. 7.

Amendment, by leave, withdrawn.

[ Amendments Nos. 8 to 10 not moved.]

Page 199, line 14, at end insert ("; and any statement to be sent to members under paragraph 31 (1)(b) above must also be notified to the society not later than that day").

The noble Baroness said: My Lords, this amendment simply makes it clear that when a building society member is proposing his own resolution at a general meeting the 100-word statement which he is entitled to have circulated with the resolution must be delivered to his society at the same time as the resolution itself. That is my comment on the amendment.

I should also like briefly to comment that I have not declared an interest as I have no financial interest other than as an investor. The noble Lord, Lord Houghton, mentioned honorary vice-presidents, and I declared at an earlier stage that I am an honorary vice-president of the Building Societies Association. I beg to move.

My Lords, again, I am grateful to my noble friend Lady Gardner of Parkes for having drawn the Government's attention to a possible difficulty in the Bill as it was worded. I am happy to accept this amendment.

On Question, amendment agreed to.

Page 199, line 43, leave out sub-paragraph (1) and insert—

("(1) The rules of a building society may provide for the voting in an election of directors or on any resolution of the society to be conducted in all, or in any particular, circumstances by postal ballot; and in this Act "ballot" or "postal ballot", in relation to an election or a resolution of the society, means the postal ballot, if any, taking place by virtue of those rules in the case of the election or the resolution in question.

(1A) Where, under the rules of a society, a postal ballot is to take place, the following provisions of this paragraph have effect.").

The noble Lord said: My Lords, this amendment is essentially for drafting and for clarification. It does not make any substantive change to the policy of the Bill, but it removes possible areas of doubt in the present drafting.

In the course of quite extensive amendments to Schedule 2 during the passage of this Bill through another place, it became clear that the provisions governing postal ballots in different areas of the Bill contained a number of inconsistencies. They could have been corrected piecemeal, but that would have involved a considerable number of amendments. The amendment here cuts through that and makes the postal ballot provisions apply uniformly throughout the Bill, notwithstanding any differences in detailed wording. It removes a potential source of litigation, and I commend it to your Lordships.

I should point out that the reason it has a star against it is that it differs from the original wording merely in the last line, where after the word "place" we have put in the word "the", which was missed out originally. I beg to move.

My Lords, I am grateful to the noble Lord, Lord Brabazon, for moving this amendment. The Opposition have no difficulty with this; merely a sense of regret that things of this sort were not clarified at an earlier stage of the Bill. We shall not oppose it.

On Question, amendment agreed to.

Page 201, line 16, at end insert—

("( ) No voting paper used in a postal ballot shall contain any matter other than the terms of the resolution to be voted upon, nor in elections for directors shall anything appear on the ballot paper relating to the candidates other than the full name and address of each candidate; any additional information, mark, or indication to distinguish one candidate from another shall invalidate the ballot.")

The noble Lord said: My Lords, this amendment refers to what shall not appear on the ballot paper. Again, the Building Societies Association says that the directors are free and indeed have an obligation to explain at the time of a ballot their views on candidates and generally offer what advice they care to give. After all, that is in the nature of an election address. But having seen a ballot paper with a distinguishing mark against certain names to indicate that they are serving directors, it seemed to me that that ought to be proscribed. I am now considering the ballot papers for municipal and parliamentary elections. While certain descriptions are permitted now on the ballot paper for parliamentary elections, what may appear on the ballot paper is strictly controlled. Any ballot paper that puts certain names in bigger lettering than others or indicates by some mark or entry those for whom they would like the electors to vote should be barred.

Of course, the directors will be free to send out what advice they wish at the time of a ballot, but the important thing is that it should not appear on the ballot paper, otherwise we should permit election addresses to be pinned on to ballot papers for parliamentary elections. At the time of registering a vote the idea is that the mind of the elector shall already have been made up and he does not need to have a pointer on the ballot paper to show him for whom to vote. It is in this connection that some of the dangers of this Bill will arise in elections. Therefore, I shall not enlarge at the moment on what I think are the dangers, but they are considerable. It is likely that the boards of building societies will find that the side-effects of ballots will be very troublesome and tiresome and that they will have some anxieties about their own position. However, for the moment I am seeking to keep the ballot paper absolutely clean, whatever else is sent to the electors.

Let me add that in certain circumstances a good deal else will be sent to the electors because this Bill provides for something that building societies in many cases have long resisted: that is, access to the share register and the requests for election matters to be circulated to electors. That is all provided for in the Bill. This is new. It is going to be used; there is not the slightest doubt about that. Moreover, there is no limitation on election expenses on either side and I should imagine there will be quite a barrage one of these fine days on the elections of directors, and there will be a good deal of literature which will come from more than one source. In those circumstances, again, I think we have to be very careful what we do about the postal ballot and make sure it is absolutely beyond any criticism whatsoever. That is why I beg to move Amendment No. 13.

My Lords, I should like to support my noble friend Lord Houghton of Sowerby in respect of this amendment. We expressed our concern at the Committee stage on the whole question of the election of directors in building societies, and a number of my noble friends made the point that to date the record of building societies in having full, fair and free elections, although maintained in most reputable societies, in some societies was open to criticism. We would like to see the vote take place in an absolutely clean manner.

What may happen if this amendment is not accepted is that on the voting paper there could be a star saying, "This candidate is recommended to you by the existing board of the society" or "This candidate is not known to the board of the society". Indeed, there are many occasions—not in building societies but in other institutions—where that sort of thing happens. I believe my noble friend Lord Houghton has made a fair and valid point, the general principle being that the election should be absolutely clean and fair, particularly so far as the voting paper used in the ballot is concerned.

1.15 p.m.

My Lords, I am grateful to the noble Lord, Lord Houghton, for raising this question. The procedures by which building societies elect directors have given rise to much comment and controversy in the past and the noble Lord, Lord Williams of Elvel, has just touched on that point. It is important that the boards of building societies should be properly accountable to the membership. This is not only to give ordinary members the chance of a say in the running of their society. It is an important discipline on the management of any organisation to know that it must explain its actions to those to whom it is accountable.

I should like to remind the House that the Bill contains a good many new provisions designed to ensure that boards are properly accountable to the membership. A number of those concern the rights of members to move resolutions at annual general meetings. For example, for the first time members are given a statutory right to move ordinary as well as special resolutions. And they can have a statement of up to 100 words circulated in support of resolutions that they move. As to elections to the board, the Bill introduces for the first time statutory requirements that all directors shall be elected by the members and that they must retire or submit themselves to re-election after three years.

While co-option is allowed to fill vacancies as they arise, co-opted directors must submit to election by the members as soon as possible thereafter. The right to stand for election is an absolute one and is not limited by qualifying requirements, for example, on shareholding. Candidates may have an election address of up to 200 words circulated on their behalf. Limits are introduced on the extent to which societies can require electoral deposits to be put up and circumstances stipulated in which they must be returned. Finally, new safeguards are introduced into proxy voting procedures where abuses have taken place in the past.

This is an impressive catalogue of reforms which the Government believe will greatly improve the opportunities for building society members to call their boards to account. Nevertheless, the Government would hesitate about accepting this amendment of the noble Lord, Lord Houghton. Its fundamental premise is that there is something unfair about highlighting the affiliations of candidates or, for example, whether they are recommended by the outgoing board. Certainly I am not sure that I could accept that.

As the noble Lord reminded us, the principle of noting affiliations on ballot papers has for some years now been accepted in parliamentary and local government elections. It is a reasonable aid to voters; and I do not think it is necessarily a bad thing for ballot papers to indicate which candidates are nominated by the board. That may be useful information for some of those voting. Some members may have full confidence in their board and would be anxious to support those whom the other directors believe should serve with them. Others, on the other hand—and perhaps the noble Lord, Lord Houghton, would be one of them—may take that as an indication of precisely which candidates not to support. So I do not think the practice is an unreasonable one.

The Government have done a great deal and are going a long way in this Bill to promote and improve the rights of members to call their boards to account. I do not think that the noble Lord's amendment would be helpful in that context and therefore I ask him to agree to withdraw it.

My Lords, no, I am afraid I cannot withdraw this amendment. I believe it is very important that in the conduct of ballots there should be a firm principle that the ballot paper should be free of extraneous information or persuasive indications of any sort. I said earlier that I thought all the propaganda about elections, election addresses and who to vote for, meetings and anything you like, should take place in the conventional way but that the ballot paper should be clear of such extra details as are undoubtedly put there with a view to persuading the voter at the last minute, as they put their cross, where to put it. That I think is undesirable. Otherwise, we would permit that to be done on ballot papers for parliamentary, municipal and trade union elections, and so forth. I think we must have a national standard for the ballot paper to be free of all these additions that may be put there as inducements to the elector to vote in a particular way.

I really cannot see what is the Government's difficulty. They have indeed made an imposing array of additional powers that are now in the hands of shareholders, borrowers and investors, which, even if they were there in theory before, in practice could not be exercised. There have been all sorts of irregularities, as I see them, in the conduct of meetings and elections in building societies, because, as I said on a previous occasion, the boards of building societies have employed all sorts of stratagems, (some of them extremely dubious) to frustrate the activities of those who have sought to get their noses into the inner circle of a building society's management and control.

When I come to deal with qualifications for voting, I may have to refer to the fact that I know that on some occasions when a board have been anticipating trouble at a meeting they have flooded the meeting with members of staff who are members of the society. For the board to say, "You must take half a day off and go to the AGM and use your votes in the interests of the board"—because that is what that particular activity implies—is an undesirable practice.

If the proceedings had been absolutely free of criticism up until now, one might have felt more comfortable about leaving things alone so far as the ballot paper is concerned, but what the Minister has said is really that not only are the Government hesitant in accepting this amendment but they are not even adhering to the principle that the ballot paper should be clean. He is suggesting that, in the light of all the circumstances, there is nothing objectionable in the directors saying, "We favour Snoggins. He is on the board and we should like you to vote for him". In fact, there will be a supplement to each ballot paper to say, "Read this before you vote in case you have forgotten what we said to you last week". There is no restraint on what boards may do to get the people to vote in a particular direction.

I think the Minister is being unnecessarily difficult about this matter, and I do not think I am being unnecessarily fastidious because this is really what we want. I have already said what I think the conditions should be in an election, and I need not repeat myself. In the circumstances, it is sad. However, I see no reason why I should withdraw from a position which I regard as of considerable importance to keep this matter beyond any suspicion and any doubt. I think it is to the advantage of the building societies that they should have a provision of this kind written into the Bill.

On Question, amendment negatived.

Page 201, line 28, after first ("to") insert ("in paragraph 14 above")

The noble Lord said: My Lords, this is a purely drafting amendment to insert a missing reference. I beg to move.

On Question, amendment agreed to.

Page 202, line 2, leave out ("£100") and insert ("£1000").

The noble Lord said: My Lords, with this amendment we can look also at Amendment No. 16. This amendment deals with the question of what shall be the minimum value of a shareholding in a society to confer on an investor or shareholder the right to vote. The Bill provides for a minimum holding of the value of £100. That is 100 times greater than the minimum qualification at the present time.

Various classifications of shares in a building society carry different minima as qualifications for holding. For instance, in a circular from one of my own building societies there are high interest bonds—a minimum of £500; six-month shares- a minimum of £500; monthly savings shares for regular saving—£1 to £200 a month; supershares—a minimum of £500; special shares—£500; shares—a minimum of £1. There are different rights of access to these several classifications of bonds and shares. I inquired whether they were all shareholders, no matter what they were called—whether they were bonds, monthly savings, shares of supershares. "Yes,", they said, "The only people who are disqualified from being regarded as shareholders are depositors, and there are very few of them". The idea of a minimum holding, not for voting purposes but to have the benefit of the additional inducements to invest given to them, is not entirely foreign to the system.

A shareholder who is in the immediate access classification usually gets a lower rate of interest than anybody else. Any shareholder who thinks that by having ordinary shares he has some stake in the equity or some advantage over other shareholders who are getting higher benefits is mistaken. Nobody has a share in the equity. Some shareholders should have a stake in the equity, but we are not dealing with that question at the moment.

What then should be the minimum money investment in a society to give one the title to vote? I certainly think we need a minimum qualification, and that has been acknowledged from the start. I was very much in favour of it when the matter was first under consideration and I thought that it ought to be considerably higher than £100. One hundred pounds is only 40 per cent. of the average industrial weekly wage at the present time and is relatively very small indeed. I think also that we want to put the right to vote beyond the reach of the casual entrant into the affairs of the society which I think could take place at the minimum of £100.

It is really astonishing to find how much money goes into a building society and how high a proportion of that money is withdrawn in the course of a year. That seems to suggest that money goes in and comes out again very freely. I have in my hand the accounts of a medium sized building society. I see that more than £100 million comes in and about £80 million to £90 million goes out. The net gain to the society in new money is very much smaller than one would suppose. It is this kind of use of a society for purposes of financial transactions that I am keen to keep out of the management of a society. I do not think people are entitled to be in it for the purposes for which they use the society. That is why I think the amount should be more than £100. Indeed, I believe that the Building Societies Association felt that it could well be more than £100.

The average individual investment is just under £1,000. I have suggested that £1,000 would be quite a reasonable amount to require a person to have as a stake in a society; one which is enduring, one which you could encourage the investor to keep there and one which attracts a degree of responsibility which can be bought relatively cheaply if the amount is lower. Here I anticipate Amendment No. 16 by referring to the value given to the vote in a building society. I believe that it is quite wrong to treat the shareholders of a building society as a kind of financial proletariat where all men are equal and one man, one vote, is the principle on which one should work. In very few cases where finance and little else is involved is the voting principle related to the individual without any reference to the stake that he or she may have in the enterprise.

The weakness of this condition in the building societies—and it is a weakness—is largely being taken care of by the appointment of the Building Societies Commission. The whole fabric of the societies' organisation and management is so weak, and so dangerously exposed, that the Building Societies Commission has to come into it as a kind of nanny over the whole building society movement, to prevent the societies straying too far from their mother's apron strings. This is due to the fact that everything is made so cheap, so easy, in the building society, which is largely an inheritance from the Victorian period and quite inappropriate for the conditions of today.

The value that I propose shall attach to shares is of a very modest scale indeed. I would reckon from the first £100—not at the prescribed amount, but from the beginning—and each complete £100 after that would count for one vote. But to avoid the feeling that some individuals or others might have a predominant share of voting power, I have suggested restricting the total number of votes to the equivalent of an investment of £20,000. That seems to me to be a very reasonable overriding condition.

Here, again, I can only stress that so long as building societies are exposed to the dangers which arc lurking now and coming into view, they will have reason to regret that they have not made their shareholding more secure, more responsible, and, in other respects, forestalled unrest, manoeuvring and stratagems that they will find very tiresome as time goes by. This proposal that I am making is an attempt to meet that situation on a very modest basis indeed.

It does not matter tuppence to me either way. I am doing this only because I think it is in the interests of the societies and their healthy development under the new conditions provided under this Bill. It is their funeral, not mine, and if they like to attend their own funeral they can go to it. But a warning has to be given that there are implications and possibilities about this Bill which are extremely disquieting, and this would be a safeguard. It would stop utilising influence inside the staff, and so on, of building societies, because £1.000 is not too high, but it is high enough to prevent people being in a building society merely for the sort of mischief that they might want to make.

Therefore, I hope that your Lordships will not regard this as an unnecessary or undesirable development. I know that it might go to the root of what is called mutuality, but the mutuality of building societies is an absolute sham and how people can possibly cling on to it in this day and age, I really do not know. The mutuality did not begin on this basis at all. The mutuality began in the 1870s, when the investor and the borrower came together and shared the profits. Indeed, the Halifax society declared a bonus on its profits. That was mutuality.

But there is no such mutuality today in building societies. The mutuality is that the investor finds the money, the borrower gets it and invests in an appreciating asset and is set up for life. He has a fortune to leave in due course. But the investor is still plodding on with his investment, which he takes out with an appreciation for a share in the equity, and in many cases in the past a stately share-out without any hedge whatsoever against inflation. The investor has had no mutuality at all in this outfit

So I hope that the Minister will take a more favourable view of this proposal than he has taken of the previous one, though I fear—and this is my concluding comment—that this Bill is a fix between the Government and the Building Societies Association. It is a management Bill. When I come later to some other amendments, I will draw attention to the fact that some features of this situation have never received any mention whatsoever in either House during the passage of this Bill. One is the staff interest, but I shall not develop that point now. I am coming on later to employee involvement and the possibility of employee directors.

But this is all part of my plan, and it is very difficult to talk about any one bit of it without emphasising the ultimate aim of all that I am doing. It is not an unfriendly aim. It is an aim built on my concern. I have probably been in building societies as long as any Member of this House, and I have stayed in a number of building societies more for sentiment than for profit. In those circumstances, I claim to have something to say which is worth listening to on this and other aspects of this Bill. My Lords, I beg to move.

My Lords, I think that the noble Lord, Lord Houghton, has put forward an argument which has a lot of logic and reasoning in it; and I again declare my interest as a director of one of the large building societies. But I think that the figure of £100 which is in the Bill is a great improvement on the present situation and it is arguable whether it should be more than that. But I suggest that his figure of £1,000 is, in present circumstances, very high. It would cut out a very large number of investors in the building societies. So I do not think one could go along with that.

I also noted that the noble Lord seemed to dismiss those members of the public who use building society branches a good deal for putting in money and taking it out, not necessarily in large amounts. I would only say that I believe that the building societies will in future be even more engaged in providing financial services of various kinds, and that those members of the public now who are members of societies, and who visit their local branch in the high street once or twice a week or even more, to put money in or take it out, will also be asking the branches to carry out other services for them in the future. I suggest that they, also, are people who should have some say in the running of the society, if they qualify for the amount which makes them eligible, because if they are continually using the building societies' facilities they may well have views on how things might be improved.

My Lords, I have, of course, listened with great interest to what the noble Lord, Lord Houghton, has said, but I am bound to tell him at the start that the Government cannot accept these amendments. As with all the provisions governing the rights of members to participate in the affairs of their society, there is a fine balance to be struck between the legitimate democratic aspirations of members on the one hand, and the imposition of unreasonable burdens on the societies on the other. In this particular case, the question is: what is the minimum shareholding a member should have in order to be able automatically to exercise full membership rights?

The present position is, as the noble Lord reminded us, somewhat confused. This Bill harmonises these different rights in a minimum qualifying shareholding of £100, although it is open to societies to prescribe a lower amount. The figure takes account of inflation since the present thresholds were set. It would also mean that full membership rights would automatically be available to about 65 per cent. of share account holders. In the Government's view, that is a sufficiently low proportion to enable building societies to make reasonable administrative economies, but without setting the figures so high as to disenfranchise members with a legitimate claim to a say in the affairs of their society.

The noble Lords's amendment as it stands at £1,000 would reduce the number of members having full voting rights to approximately one-third of the total number of members. It would cut out several million people with shareholdings of a few hundred pounds (which is not an insignificant sum of money for most people), and they might, with some justice, feel entitled to say that they have been excluded from the running of the society. There is room for debate about the exact level, but the Government feel £100 is the right balance.

The noble Lord expressed concern about people moving in and out of building societies quickly. A higher threshold would not deal with that problem. Large deposits are just as volatile as small ones, if not more so in certain cases. The way to deal with people moving in and out quickly is to impose a minimum requirement as to the length of time one has to be a member, and this Bill does that in certain areas, such as the right to nominate a candidate for the board and the moving of resolutions, as was discussed on one of the previous amendments.

Turning to the second amendment to which the noble Lord spoke, which aims to give voting rights in proportion to shareholding rather than on the present "one member one vote" basis, I fully understand the arguments here but the noble Lord is really proposing a fundamental constitutional change in the way that building societies operate. That sort of change should be considered only if a general consensus develops in the movement at large and among building society members generally. I have no doubt that the noble Lord's arguments will set off an interesting debate which may go well beyond your Lordships' House, but at this stage it is premature to suggest a complete change.

The mutual principle of "one member one vote" has been a feature of the constitution of building societies ever since they first grew up. It is also a fundamental tenet of legislation governing friendly societies and industrial provident societies. Such a basic principle should be changed only after the most fundamental and wide-ranging debate in Parliament and outside. The noble Lord has raised an interesting point, but I cannot accept that proposal any more than I can accept the proposal in Amendment No. 15.

My Lords, I am grateful to the noble Lord, Lord Campbell of Croy, for his comments. I am surprised that nobody has drawn attention to paragraph 36(2) on page 202. I was ready to reply to that. Apparently the commission, with the consent of the Treasury, could change the qualifying amount from £100 to some other amount because the value of money might fall or for some other reason, but my comment was that I believe it would be very difficult for the commission and the Treasury to come to Parliament in order to raise the qualifying amount if that action did result in disenfranchising a fair proportion of those previously having the vote.

It seems to me that we ought to try to get the figure right now and not leave it in the expectation that it can be easily adjusted. I do not believe that that would be the case when once the figure had been fixed, unless the value of money were to change much more drastically than we all think and hope that it will.

I shall leave that point and look now at the amendment involving the question of £100 or £1,000. I am surprised to learn that the amount of £1,000 would reduce the qualified electorate to one-third. If that was the outcome then I should think that my proposal had gone too far, but there are other figures and a smaller sum than £1,000 has been mentioned to me as being a better balance than £100. I know that £100 is a nice, round figure and that one tends to think of that sum in different contexts. However, what I will do is to beg leave to withdraw the amendment and I shall then consider whether I should, at a later stage, think of a different figure.

I am still very keen on this amendment because I believe that building societies are more exposed than they might realise to the power game, which I think will develop in the organisation and management of their affairs. The potential risk that I foresee and would point out to the building societies would be that they must take some steps to forestall developments taking place elsewhere with quite dramatic results. Since I do not want to appear mysterious, I shall point out that developments in some friendly societies and co-operative societies are a plain indication of what can happen when staff interests get to work in gaining control of such societies. I myself am a member of a friendly society which is wholly employee-controlled and that state of affairs was not brought about by any positive action on the part of the members. It was brought about by those who were engaged in the business of that society being in a position to influence the votes of others. That situation has to be watched very carefully indeed. However, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[ Amendment No. 16 not moved.]

1.45 p.m.

Clause 12 [ Class 1 and class 2 advances: supplementary provisions]:

Page 19, line 33, at end insert—

("and any order under this section shall stipulate that a Class 1 advance shall be retained as an asset by the Building Society that originally made it for the full life of the advance.").

The noble Lord said: My Lords, this amendment seeks to do two things. The first is to prevent class 1 advances becoming class 2 advances; in other words, where security on an advance is diminished, the building societies should take appropriate action rather than reducing that into a second category. However, more importantly, it seeks to ensure that class 1 advances remain with the building society as an asset during the lifetime of the advance. I have spoken about this at Second Reading and we had a short discussion concerning it at Committee stage. However, I do not think I have quite made my point sufficiently clearly to your Lordships and I would therefore like to spend a short period of time explaining exactly what I mean.

In the United States of America, the practice has grown up of selling mortgages from one institution to another. What happens is that Mr. X takes out a mortgage with a savings and loan or any other institu-tion. That mortgage is then an asset of the savings and loan or other financial institution and it is phrased and framed in such a way that it can be sold on in a secondary market. This means that Mr. X, who originally took out his mortgage with a specified and recognised savings and loan or financial institution, suddenly finds that the mortgage has been sold by that institution to another institution or even in some cases to a private individual. He does not know who his eventual lender is at that point. That can happen not only once but two or three or four or five times in the lifetime of the mortgage.

I must make clear to the Government that we on this side of the House are fundamentally opposed to that practice happening in this country, and the only way I can do that is to put down an amendment. It may be imperfectly framed and, I accept, technically wrong, but I can only protest in this way that we have had insufficient assurances from the Government that this practice will not occur over here. All that we have been told in Committee is that discussions are going on with unnamed parties on an unspecified timescale. Therefore, I make the point in the strongest possible terms that before the Bill leaves this House we should at least have some commitment from the Government on this matter. I beg to move.

My Lords, I think that the request made by the noble Lord, Lord Williams, represents the very least that the Government could provide; namely, an assurance that this cannot happen. The noble Lord is, of course, right. The practice in the United States, which I know quite well, is something we do not want visited upon this country. There is no question about that.

My only concern about this amendment is that it is too restrictive. Building societies should be allowed the freedom to assign their mortgage assets, but I do not mean all of them. For example, if they find themselves in a position of lending long and borrowing short and the whole thing gets out of kilter, they must be allowed—a point made, incidentally, by the noble Lord, Lord Williams, on Second Reading—the freedom of assignation of their mortgage assets should the need occur. That would be a fail-safe. Subject to that, I entirely agree with his argument.

My Lords, I am grateful to the noble Lord, Lord Williams, for raising this issue again today. It is a matter of considerable importance both to individual borrowers and to the future development of the mortgage market. It is quite right, therefore, that we should debate it again today.

Up until now, the assignment of mortgages from one lender to another has been a fairly academic legal question. In law, a mortgage may in general be assigned without the consent of the borrower, subject to the provisions of the mortgage deed. The position is, however, more complicated for building societies because borrowers have not only a contractual relationship with the society but are also members of it. The effect is that a building society mortgage may be assigned only if there is specific provision in the mortgage deed allowing this. The deeds of some large societies do allow transfer, while some do not. Others allow transfer, but only in exceptional circumstances. In practice, however, building societies have transferred mortgages to others without consent only in the most exceptional circumstances. Most will have had only a handful of cases over a period of decades.

The noble Lord, Lord Williams, is right to point out that in the past few years the mortgage market has began to change. New institutions have expressed interest in lending money on mortgage, using techniques which, though tried and tested in other countries, are unfamiliar in the UK. Some of these involve the transfer of mortgages from one lender to another, and a number of banks have already been involved in sales of mortgages.

It is the Government's view that such market developments should not be resisted. The entry of new lenders may well provide a more stable supply of finance for housing, and new financing techniques may have helpful economic and monetary consequences. But these innovations need to be accompanied by appropriate measures to protect the interests of consumers. It is for this reason that the study group announced by my honourable friend the Housing Minister has started work. This group, which is chaired by the Treasury and the Department of the Environment, involves a wide range of mortgage lenders. Its task is to assess the current developments in the mortgage market and to advise Ministers on what measures need to be taken to protect borrowers. The group is making good progress and hopes to reach conclusions by the autumn.

Among the possibilities it is considering is the introduction of a code of conduct for mortgage lenders dealing with the assignment of mortgages. A central issue for such a code would be when a mortgage could be transferred without seeking the specific consent of the borrower, and when such consent would be needed. Clearly, for example, if a mortgage has been explicitly set up on the basis that it was likely to be assigned to another lender, and if the borrower was well aware of this, there should be no need to seek his specific permission.

On the other hand, somebody who has taken out a conventional building society home loan might with some justice feel aggrieved if he received a letter telling him that the loan had been transferred to another lender, and that he would be having no further dealing with the society. But other types of cases might be less clear-cut. For example, if a loan is transferred, but with its administration—including decisions about changes in interest rates or procedure in cases of default—remained with the originator of the loan, then individual consent to the transfer might not be necessary. But the issues are complicated and need to be looked at carefully. The Government's initiative is seeking to do just that.

In the meantime, I would suggest to the noble Lord that this Bill is not the appropriate place to deal with the matter. First, it is not clear that further legislation is needed in this area, particularly if a satisfactory code of conduct can be drawn up and made to stick. Secondly, as the mortgage market becomes more and more diverse, it would be quite wrong to apply statutory restrictions of this sort to building societies and not to other lenders. The effect of that might be seriously to hamper building societies in competing over the coming years.

I know that this is a matter of concern to the noble Lord, Lord Williams, and also to others, but I do not feel that we can accept this amendment for the reasons I have given. I must ask the noble Lord to allow us to continue with our present work, on which, as I said, we hope to reach conclusions in the autumn. We could perhaps then return to the issue in that timescale and see what conclusions the study group has reached.

My Lords, I am somewhat disappointed at the noble Lord's reply, as I am sure he understands. It seems to us to be fundamental that this market should not develop in the way that it has done in other countries. I accept that there may be a case for a code of conduct and that there may be a case for specifying which mortgages can be transferable and which cannot be transferable. I accept that this is a complex issue. Therefore, since it is a Friday afternoon, I do not intend to seek the opinion of the House on this matter.

The noble Lord said that the Government's deliber-ations will be completed and a conclusion reached by the autumn, but by then this Bill will have been enacted. Nevertheless, we have in front of us the Financial Services Bill, with which I shall be dealing from this side, and I give the noble Lord an absolutely categorical assurance that if the autumn does not bring with it a sensible initiative from the Government on this issue we on this side of the House will make sure that at the Report stage of the Financial Services Bill, which will take place in the overspill, we introduce the appropriate measure into that Bill. With that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 4 [ Advances: supplementary provisions]:

Page 210, line 8, leave out ("that Act") and insert ("the Land Registration Act 1925").

The noble Baroness said: My Lords, this is a simple amendment to correct the title "that Act" to "the Land Registration Act 1925". This is for reasons of clarity. I beg to move.

On Question, amendment agreed to.

Clause 15 [ Loans for mobile homes]:

Page 24, line 27, leave out from second ("loan") to ("such") in line 30 and insert ("made for the purchase of a mobile home and secured by").

The noble Baroness said: My Lords, I intend to group together Amendments Nos. 19, 20 and 21 if that is agreeable to the House, as the three amendments are connected.

The amendments are designed simply to put mobile home loans in England and Wales in exactly the same position as they are in Scotland: that is, that the mechanism for operating them will have to be prescribed by an order made by the commission. There are two reasons for these alterations. First, there is the fact that the only method under the present wording—a chattel mortgage registered at the High Court as a bill of sale—is unacceptably cumbersome and expensive to operate; secondly, that as announced by the Department of Trade and Industry on 9th July, the law on the security of chattels is now under review. Therefore the effect of the amendments is to give flexibility in anticipation of the likely changes in the law. I beg to move.

My Lords, we accept that there may be an advantage in the added flexibility these amendments will give on the security for mobile home loans in England and Wales. Therefore, we are pleased to accept the amendments. I am grateful to my noble friend and to the Building Societies Association for suggesting these changes.

On Question, amendment agreed to.

2 p.m.

Page 25, line 1, leave out from ("other") to ("above") in line 3 and insert ("security prescribed under subsection (2)");

Page 26, line 6, leave out ("subsections (2)(b)") and insert ("subsection (2)").

On Question, amendments agreed to.

Clause 17 [ Power to hold and develop land as commercial asset]:

Page 28, line 36, leave out ("by way of lease").

The noble Baroness said: My Lords, the phrase deleted by this amendment is felt to be confusing and redundant in a subsection which is very much concerned with the purpose of residential development by building societies. Surely, if there were a need for a reference to a particular method of disposal, this should have been inserted in subsection (4) of Clause 17. This is a rather complex matter but it is important that building societies are in no doubt as to their rights and obligations in this vital new area of residential development. It is for that reason that I have put down this amendment, though I do not intend to press it. I beg to move.

My Lords, my noble friend suggests that the phrase, "by way of lease" is redundant. I am sorry to say that I cannot agree with her on this occasion. A society needs power to sell land whatever its description. For example, if it acquires a plot of land which it develops primarily for a residen-tial use, it sells the parcels of residential land and will be left with a parcel of land for other use. It must be able to sell that also. This amendment will stop it doing so. As it stands, the clause enables it to sell that non-residential parcel of land but not to lease it. That is the desired effect of it. The clause enables it to sell or to lease the primarily residential parcels of land. I hope with that explanation my noble friend will agree to withdraw this amendment.

My Lords, I thank the noble Lord for his comments and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 18 [ Power to invest in subsidiaries and other associated bodies]:

Page 31, line 14, leave out from ("providing") to end of line 15 and insert ("a service for the time being specified in Part I of Schedule 8 to this Act:").

The noble Lord said: My Lords, I beg to move Amendment No. 23. This amendment deals with a point which came to the Government's attention while drafting the amendments giving building societies the power to offer personal equity plan schemes to which we shall come in a moment. Some variants of those schemes could involve the taking of deposits, so that the exception in Clause 18(4)( b) for estate agency needed to be extended further. But it is not inconceivable that powers might be added to Part I of Schedule 8 in the future—for example, to offer other forms of investment business—which might themselves involve the taking of deposits by subsidiaries. This is envisaged in the Financial Services Bill, which provides a general exemption from the Banking Act for such deposit-taking. It would obviously therefore be appropriate to have a similar exception here.

We have accordingly concluded that the simplest course is to provide a general exception, as in the amendment, for any deposit-taking involved in offering a Schedule 8 service. By making it consequential on offering the service, the general principle that building societies should raise the bulk of their funds from members on their own balance sheets and not through subsidiaries will be preserved. I beg to move.

On Question, amendment agreed to.

Page 33, line 21, leave out ("either") and insert ("any")

The noble Lord said: My Lords, I beg to move Amendment No. 24, and with the leave of the House I shall also speak to Amendment No. 25. Clause 119 applies the definition of "associated body" given in Clause 18(17) to the whole of the Bill. The second amendment therefore also remedies defects in the. scope of other provisions in the Bill such as the liquid assets provision in Clause 21(4) and the aggregation rules under Clauses 7, 8 and 20. I beg to move.

On Question, amendment agreed to.

Page 33, line 26, at end insert (", or

(iii) the body is one in which, by virtue of subsection (8)(b) above, shares or corresponding membership rights are held by a body which falls within (i) or (ii) above;").

On Question, amendment agreed to.

Clause 20 [ Commercial asset structure requirements for building societies]:

Page 35, line 42, after ("correct") insert ("or, as the case requires, appropriate").

The noble Baroness said: My Lords, I should like to speak to Amendments Nos. 26 and 27 together. As drafted, Clause 20(8) provides that the amount or value of the assets of any class of a society is the amount as shown in the balance-sheet unless the commission determines another amount to be correct. The amendments are designed simply to remove the assumption that the original figures might in some way be wrong. I beg to move.

On Question, amendment agreed to.

Page 35, line 44, leave out ("corrections") and insert ("alterations").

On Question, amendment agreed to.

Clause 22 [ Obligation to meet liabilities of associated bodies]:

Page 38, line 17, leave out from ("is") to ("is") in line 20 and insert ("linked by resolution with a building society or").

The noble Baroness said: My Lords, this amendment is designed not to change the meaning of Clause 22 but merely to make it more clear that the types of bodies which a society must stand behind are, first, a body to which a society is linked by resolution—an example might be a housing association—and secondly, a body which is a subsidiary of the society. The amendment makes the understanding of Clause 22 more straightforward. I beg to move.

On Question, amendment agreed to.

Schedule 6 [ Insolvency payments; trusts and joint holdings]:

Page 214, line 22, after ("professional services") insert ("or the carrying on of investment business (within the meaning of the Financial Services Act 1986)").

The noble Lord said: I beg to move Amendment No. 29. This is a technical amendment to widen the treatment of client accounts under the investor protection scheme so that it covers those of investment businesses; but it is an important amendment to ensure that building societies will be able to compete on level terms with banks. Under rules to be made under the financial services legislation, investment businesses will have to hold client money in separate accounts, which could be with both building societies and banks. However remote the contingency, the proper protection should be available to such accounts, so that the minimum protection of 90 per cent. up to £10,000 should be available to each client separately, as well as to the account as a whole. I beg to move.

On Question, amendment agreed to.

Clause 34 [ Powers to provide financial services or services relating to land]:

Page 52, line 3, leave out from ("society") to ("may") in line 4.

The noble Lord said: My Lords, with the leave of the House, with this I shall speak also to Amendments Nos. 32, 37, 38 and 40.

These are complex amendments technically, but I can give your Lordships the assurance that they are needed. Without them, an extrra layer of secondary legislation would have to be introduced in order to give proper legal effect to what is the clear policy intention of the Bill. I beg to move.

On Question, amendment agreed to.

Page 52, line 22, leave out ("or other associated body").

The noble Baroness said: My Lords, Clause 34 refers to Schedule 8, which in turn contains the details of the various new powers given to building societies in connection with financial services and services relating to land. In several cases in Schedule 8 reference is made to a service (for example, an estate agency) being able to be carried out only through a subsidiary. By the use of the wider phrase "associated body" the amendment is designed to make it clear that it is not necessary for a majority shareholding to be held by the society. I beg to move.

My Lords, I am grateful to my noble friend for raising this point, although the amendment would not, I am advised, achieve the effect that she desires. If it was desired to make the Schedule 8 powers available to "other associated bodies", amendments would be needed to Part III of Schedule 8, where the current restrictions to subsidiaries occur, rather than to Clause 34.

Having said that, let me say that the Government have by no means a closed mind and are open to persuasion on the point of substance that my noble friend raises. I can give an assurance that the Government will consult the building societies on the question. Clause 34 gives the commission order-making power to vary the restrictions in Part III of Schedule 8. Given the stage of the parliamentary progress reached on the Bill, the Government's view is that it would be preferable to use that order-making power if change is desirable after considering the question, rather than seeking to amend the Bill in a hurry now. I hope that with that assurance my noble friend will be able to withdraw the amendment.

My Lords, I thank my noble friend for his reply and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Page 52, line 23, leave out from ("is") to end of line 26 and insert ("to be treated as a power of the society for the purposes of section 18 only").

The noble Lord said: My Lords, I spoke to this with Amendment No. 30. I beg to move.

On Question, amendment agreed to.

Schedule 8 [ Powers to provide services]:

Page 216, line 12, at end insert—

(".Establishment and management of personal equity plans.").

The noble Lord said: My Lords, with this amendment I shall speak also to Amendments Nos. 36 and 39. As noble Lords will be aware, the Government have always attached great importance to encouraging the wider individual ownership of shares. I hope that I am right in thinking that that is an aim which is shared on all sides of your Lordships' House. In his Budget this year, my right honourable friend the Chancellor of the Exchequer announced the personal equity plan scheme, which is a radical new scheme to encourage direct investment in United Kingdom equities. Its aim is to encourage ordinary people to take a stake in British companies. Building societies are perhaps the institutions that ordinary people know and trust best of all. They are therefore ideally placed to help people to take advantage of the new scheme. The building societies are keen to play their part in that initiative and these amendments will allow them to do so. I beg to move.

My Lords, I have three comments on the new amendments that the Government propose, and I recognise that they are being laid before your Lordships to honour a commitment that the Government have made. I shall leave aside the question of personal equity plans and whether they are worth a row of beans. My view is consistent with that of the chairman of the Stock Exchange, who believes that they will not encourage anything at all; they are not radical enough. But I shall not comment on that.

The points that I want to make are these. Am I right in thinking that if a building society wishes to promote and manage a personal equity plan, it will thereby fall under the provisions of the Financial Services Bill and will have to be authorised in some way, either by joining a self-regulating organisation or by direct authorisation from the designated agency? That is my first point.

My second point is again for clarification. What are the levels of responsibility that building societies are going to accept in marketing and managing such plans? The noble Lord rightly referred to the network of building societies as being possibly the best equipped to sell and manage those plans, for what they are worth. If the idea takes off at all, many people, because of the trust they place in and the relationship they have with their building society on grounds other than as substitute stockbroker, will be persuaded or induced to buy or join those plans. What will the role of the building society be when those plans go wrong? As we know from any advertisement for any unit trust, shares can go down as well as up. What will the relationship be between the society and the member of the society who subscribes to one of the plans and the shares go down? What trust will he maintain with the building society? Will the building society feel any obligation to help him under those circumstances?

My third point is again a point of clarification. Although the Minister did not mention it, I understand from the announcement made by the Economic Secretary to the Treasury on 3rd July that the power to manage, supervise and carry on in-house those personal equity plans will be available to those building societies with commercial assets of £100 million or more and that the smaller building societies will be free to market plans on behalf of another manager. Is that still the case? Is that what the Government intend, or will there be something different? Did the noble Lord merely omit to tell us? I shall be grateful for clarification.

In general, I am not sympathetic to personal equity plans, but if that is what the Government want to do, the only problem that the Opposition would have—I refer to some of the cogent points made by my noble friend Lord Houghton of Sowerby—is how far that will affect the relationship of trust that hitherto has been established between members of a building society and the building society.

2.15 p.m.

My Lords, the noble Lord, Lord Williams, will of course have an opportunity next Friday, when we discuss the Finance Bill, to go into the more general aspects of personal equity plans and whether they are a good thing. In answer to his three questions, yes, the building society or subsidiary involved in this matter will have to be authorised by an SRO or receive direct authorisation from the SIB, according to the terms of the financial services legislation which is currently before us. The life assurance and unit trust regulatory organisation will more than likely be the one to apply.

The noble Lord's second question was rather surprising. It related to how the relationship between the building society and its members would develop if a member invested and the shares went down instead of up. We all know that they can go down as well as up. The relationship would be exactly the same as that which any stockbroker has with his client at the moment. It must be made clear, as unit trusts make clear, that it is not a guaranteed way of making money. The whole point is that there is an element of risk otherwise there is no opportunity for reward.

The noble Lord's third question was about whether smaller societies would be able to market plans on behalf of plan managers. The answer to that is, yes, they would. I trust that I have answered the noble Lord's questions.

My Lords, am I right in assuming that all societies will have to take their own decisions as to whether they embrace the opportunities—this being one—to extend their activities under the Bill? Presumably they will have to alter their rules. Each society will have to take positive steps to decide whether it will undertake these functions. I hope that I am right about that. These provisions give societies the right to do so should they choose. They are not having these activities imposed on them by statute. They are being given an opportunity to assume them without a society being under any obligation to take advantage of them if it decides not to.

My Lords, I wonder whether the noble Lord can answer a related question. The noble Lord did not say a great deal in reply to the noble Lord, Lord Williams, as to whether the Government thought that it was worthwhile to encourage wider share ownership and this particular scheme in this way at the expense, possibly, of building societies losing the confidence of their shareholders and depositors. I understand full well that these are not compulsions put upon the building societies to undertake this kind of work. But they are opportunities, and the Government will no doubt have a policy as to whether they should or should not encourage building societies to take advantage of them. There is advantage to the building society. There is disadvantage to the building society, as explained. Have the Government a policy in answer to any question put to them by a building society as to whether the Government want them to participate further in this kind of work?

My Lords, with the leave of the House, I believe that I can answer both noble Lords at once. The answer to the noble Lord, Lord Diamond, is, surely, yes; otherwise, there would be no point in providing building societies with this power. In answer to the noble Lord, Lord Houghton of Sowerby, we are not, of course, forcing any building society to take this power or any other power in Schedule 8. It will be a matter for them. We are merely giving them the power to do so if they wish.

On Question, amendment agreed to.

Page 218, line 6, leave out from ("which") to ("; and") in line 8 and insert ("the principal business of the society is, at any time in that year, being conducted")

The noble Baroness said: My Lords, as drafted, sub-paragraph ( b) of paragraph 11 would effectively prevent the estabishment of an estate agent's subsidiary outside the United Kingdom unless and until the society itself is, by order under Clause 14, given the power to lend direct to the country in question. The amendment broadens the scope of the criteria to take in the wider definition of "principal business," already referred to in sub-paragraph ( a) and defined in paragraph 6, and also enables the business to be carried out by, for example, a corresponding European body under Clause 18(2)( b) as indeed the business can be under sub-paragraph ( a). I beg to move.

My Lords, I have listened carefully to what my noble friend has said. These are quite complex provisions of the schedule. It may well be that my noble friend and the Building Societies Association have a point here. But, because the provisions are complex, there is a need to tread carefully with any proposed changes, particularly at this late stage of the Bill's progress. As with an earlier amendment moved by my noble friend, the Government would like to look further at the point in consultation with the Building Societies Association. The mechanism exists in the Bill for this provision to be amended by order if it proved a problem. I hope therefore that my noble friend will be prepared to allow the Government to pursue the matter in this way and will withdraw her amendment. I am grateful to her for having raised the point.

My Lords, I thank the Minister for his remarks, and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Page 216, leave out line 27.

The noble Lord said: My Lords, my intention at this late stage in moving the amendment, which is in precisely the same form as it was at an earlier stage, is not so much to provoke Her Majesty's Government into a response but rather more to encourage them in the light of the deliberations at an earlier stage. I should like also to point out that the reason for the star against the amendment is that I cannot count. I got the line wrong. This was pointed out to me and has subsequently been corrected.

Not for the first time, I must confess that I was not a little shocked by my noble and learned friend the Lord Chancellor suggesting, in one of his more endearing hyperboles, that this amendment (and, indeed, another) was a wrecking amendment. Nothing could be further from the truth. The suggested exclusion from the Bill of the power of a building society to provide a conveyancing service is de minimis when one considers the extent of the Bill as a whole. With respect, that is absolute nonsense. However, if by "wrecking amendment" he meant that it was wrecking a declared undertaking of policy by Her Majesty's Government to Mr. Mitchell I would submit, as my noble friend Lord Brabazon of Tara argued, that this undertaking was clearly a conditional undertaking.

It is worth reading again what this undertaking was, because it is important. It came in the form of a Written Answer to Mr. Mitchell on 1 st February 1984, at col. 1077 of Hansard. The answer of Her Majesty's Government was:

"We will shortly issue a Consultation Paper on how best to ensure that conflicts of interest and anti-competitive practices do not arise when solicitors employed by banks, building societies and other organisations are permitted to undertake conveyancing for their employers' customers. We hope to bring forward legislation permitting building societies to offer this service next Session".

It is quite clear that Her Majesty's Government are far from satisfied that that condition has been met.

My noble and learned friend has said that the Government do not at present intend to allow lending institutions to offer conveyancing services to borrowers. At another stage, my noble and learned friend said, at col. 558 of Hansard:

"There is an inherent"—

and I stress the word "inherent"—

"difficulty about the relationship between the lender and the borrower".

He would not have used that word lightly. There is a suggestion there that the conveyancer as an employee of the borrower is looking after the interests of two bosses. One is the person who pays his salary. He is also offering the service to the public; namely, the borrower. It is quite impossible, in my view, however well-intentioned the codes of practices are, for this conflict of interest to be got rid of. This has been my major concern throughout the Bill. I cannot see how Her Majesty's Government can get past this point.

There is another point that is worth considering. I make these points at this late stage to give Her Majesty's Government an opportunity to consider them. The conveyancing service is not a financial service. The nature of the whole Bill is that of a financial Bill. The conveyancing services are a legal service. I ask Her Majesty's Government to consider the last time strictly legal services were handed out to the big boys—the banks. This happened years ago for precisely the same reason historically; namely, everyone thought that their lovely, friendly little bank on the corner was a far better organisation to offer services in the probate and administration of wills than these terrible lawyers who will rip them off.

I ask Her Majesty's Government to consider recent history with regard to probate services by banks. I humbly suggest that the independent sole practitioner or partnership who specialises in probate is a far better animal, because he is independent, to offer these services than the banks. The banks have been ripping off the public extortionately in this department for many years. For those services they charge as high as the market can take.

I beseech my noble friend on behalf of the Government not to place this temptation with regard to conveyancing services in the hands of the building societies, who, quite rightly in my view, grow ever bigger and ever stronger as true competitors to banks. There is a great danger that those whom Her Majesty's Government have on numerous occasions said they are seeking to protect—namely, the customers—in the long run will lose out, as has happened in the United States of America. I argued that at great length and incredibly boringly at Committee stage. I shall not go through that argument again.

I wish to raise one other important matter. I should be very much obliged if my noble and learned friend the Lord Chancellor—if he cannot answer now—would consider this matter and if necessary write to me. If no acceptable formula can be found to eradicate the inherent conflict of interest, what steps will Her Majesty's Government then take in the light of this Bill? The other question which I wish to raise is this. Do Her Majesty's Government envisage any threat to the avowed success of the Administration of Justice Act in the setting up of the whole scheme for licensed conveyancers, when in the future those young men who wish to act as licensed conveyancers see that scheme only as a route whereby they become employees of banks and building societies?

In my experience, members of learned professions like to act as sole practitioners or in partnership with colleagues in order to exercise their profession. Their independence as a profession is impaired the moment they become employees. I cannot believe that the Council of Licensed Conveyancers set up under that Act has much of a future unless Her Majesty's Government think very carefully about the slight conflict between this Bill and the Administration of Justice Act.

2.30 p.m.

My Lords, with respect to my noble friend, most of the questions that he has asked and the points that he has made would have been better put to my noble and learned friend the Lord Chancellor at the beginning of this Report stage. My noble and learned friend gave an extremely full and clear explanation, as he did in Committee, about exactly in what circumstances building societies and other institutions such as banks would be allowed to do conveyancing for their own customers. Therefore, to answer my noble friend's first question, let me point out that I think that my noble and learned friend made it quite clear, that, unless an acceptable formula could be found, no progress could be made along these lines.

I am not quite sure that I am qualified to answer my noble friend's second question about the possible conflict with the Administration of Justice Act and how that would apply to licensed conveyancers. However, I shall draw my noble friend's remarks to the attention of my noble and learned friend.

I should like to restrict myself to the precise effect of this amendment. The amendment would mean that building societies, even if some agreement was reached with my noble and learned friend, would not be allowed to do conveyancing, whereas banks and other institutions would be allowed to do so. I am afraid that I can see no justification for that. If the other institu-tions with whom they are in competition— particularly the banks—were allowed to take advantage of Schedule 21, I do not see why the building societies also should not be allowed to take advantage of it.

Having said that in answer to the particular point raised by the amendment, I do not think that I have anything further to add to what my noble and learned friend said earlier this afternoon to the noble Lord, Lord Foot, because what he said on that occasion really answered all the other points which my noble friend has raised. I ask my noble friend to withdraw his amendment on the grounds that I have just described, purely as it affects the building societies.

My Lords, I am most grateful to my noble friend. However, I ask him to consider the first question which I raised, and if he cannot give me an answer now perhaps he will ensure that I am given an answer at some stage in writing. I asked: what steps will Her Majesty's Government take if they cannot find an acceptable and workable code of practice in order to effect this? I thought I had made it quite clear at the beginning that I had no intention of pressing the amendment and that I only wanted to probe.

My Lords, with the leave of the House, I think that I answered my noble friend's first question when I said that no progress could be made. If no acceptable rules could be agreed between my noble and learned friend and those likely to be affected by the powers in Schedule 21, it would be a sticking point—nothing more could happen.

My Lords, that means that these powers would be left floating around in an Act which any future Lord Chancellor could change with a totally different standard. However, I do not want an answer to that question. I take my noble friend's point. 1 beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Page 217, line 11 at end insert—

( "Personal equity plan management

  • .—(1) The power to establish and manage personal equity plans is available only to a subsidiary of the society.
  • (2) The power to establish and manage personal equity plans is available only while the society has a qualifying asset holding.")
  • The noble Lord said: My Lords, I spoke to this amendment with Amendment No. 33. I beg to move.

    On Question, amendment agreed to.

    Page 219, line 30, leave out ("or their subsidiaries").

    The noble Lord said: My Lords, I spoke to this amendment with Amendment No. 30. I beg to move.

    On Question, amendment agreed to.

    Page 219, line 31, at end insert (", whether of a building society or a subsidiary or other associated body of a building society,").

    The noble Lord said: My Lords, I spoke to this amendment also with Amendment No. 30. I beg to move.

    On Question, amendment agreed to.

    Page 220, line 8, at end insert—

    (" "personal equity plan" Means a personal equity plan for the purposes of Schedule 8 to the Finance Act 1986; ")

    The noble Lord said: My Lords, I spoke to this amendment with Amendment No. 33. I beg to move.

    On Question, amendment agreed to.

    Clause 35 [ Prohibition on linking services]:

    Page 53, line 24, leave out ("under section 34") and insert ("specified in Part I of Schedule 8 to this Act").

    The noble Lord said: My Lords, I spoke to this amendment with Amendment No. 30. I beg to move.

    On Question, amendment agreed to.

    Page 53, line 38, leave out subsection (3).

    The noble Lord said: My Lords, at a previous stage of the Bill I moved precisely the same amendment on substantive grounds. Although the amendment is precisely the same, my reasons for moving it at this stage are purely on drafting grounds. I do this in order to assist my noble friend Lord Brabazon of Tara, because he said (and I quote from Hansard, col 461, on 10th July) in arguing against the removal of this subsection:

    "leaving out subsection (3) would not prevent building societies from offering these services free".

    I agree with that.

    "It is purely a declaratory subsection".

    That is correct.

    "Secondly, even if they did not offer them free, they could offer them for [a peppercorn] or something like that".

    In other words, under the admission of my noble friend Lord Brabazon of Tara this subsection is nothing other than a statutory statement of the obvious. I do not think that there is any room in an English statute for declaratory law, and I beg to move.

    My Lords, what I said in Committee was that this subsection is declaratory. That is not quite the same as saying that it serves no purpose. If it were removed it might be arguable that the reference in subsection (2) to the consideration payable for each service implied that some consideration must be paid for each service, and that none could be offered free of charge.

    It is not an argument that the Government would accept, but an element of doubt could be inevitable. Subsection (3) removes any doubt on this score and ensures that the legislation is unambiguous. Whatever my noble friend's views on policy, I know that clarity in legal drafting is something that my noble friend applauds, and in this particular case I think that the parliamentary draftsmen have it right and my noble friend has it wrong.

    My Lords, it is not the first time that that has happened. With that, I beg leave to withdraw the amendment.

    Amendment, by leave, withdrawn.

    Clause 38 [ Power to determine building society's powers]:

    Page 58, line 3, after ("society") insert ("or its subsidiary").

    The noble Lord said: My Lords, I beg to move Amendment No. 42, and with the leave of the House speak to Amendments Nos. 43 and 44 at the same time. The purpose of the amendments is to bring societies' subsidiaries within the scope of the commission's powers to make determinations as to whether the particular activity (or proposed activity) is within or beyond a society's powers.

    The effect of the amendment to Clause 45 is to ensure that an activity of a subsidiary which is outside the society's powers is to be taken as a failure to comply with the criteria of prudent management in the same way as an ultra vires activity by a society would be. I beg to move.

    On Question, amendment agreed to.

    Page 58, line 35. after ("society") insert ("or its subsidiary").

    On Question, amendment agreed to.

    Clause 45 Supplementary: the criteria for prudent management]:

    Page 71, line 43, after ("society") insert ("or its subsidiary").

    On Question, amendment agreed to.

    Page 72, line 17, at end insert ("and references to ths business of the society include, where other bodies are associated with it, references to the business of those associated bodies").

    The noble Lord said: My Lords, the effect of this amendment is to provide that a society must maintain adequate reserves and other designated capital resources for the range and scale of its business, including that of its subsidiaries and associates. The conduct of the business, both of the society and its subsidiaries and associates, should be with adequate professional skills. Failure in either respect may be considered by the commission to be grounds for imposing conditions on or invoking the society's authorisation under Clauses 42 and 43 respectively. Under the Bill as drafted subsidiaries and associates are already covered by the other criteria which are appropriate to them: for example, criterion 3, the maintenance of adequate liquid assets, which applies to associated bodies by virtue of Clause 21 (3) and (4). I beg to move.

    On Question, amendment agreed to.

    Clause 60 [ Directors: elections and retirement]:

    2.45 p.m.

    Page 98, line 30, after ("age") insert ("or

    (aa) is a full-time employee of the society nominated by a recognised staff association or other trade union or unions recognised as representing employees,").

    The noble Lord said: My Lords, I should draw the attention of the House to the omission of the word "and" at the end of the last line of the amendment, so that the proviso in Clause 60(13)( b) comes into play. That is to say, if the rules of a building society so provide then they may do certain things; and after paragraph ( a) I propose to insert another paragraph saying:

    "is a full-time employee of the society nominated by a recognised staff association or other trade union or unions recognised as representing employees, and … appears to them to be fit and proper to be a director".

    It seems to me that a board cannot get employee directorship representation on easier terms than this. It is important that the boards of building societies should now give attention to the emerging awareness of their own employees of what this Bill will offer for the future of societies, in the scope of their activities and the importance of the work they do.

    The Building Societies Association said in its brief that this is unnecessary; they can do it already. The question is: do they do it already? I should like to know how many boards of building societies contain a member who has been nominated under these terms and is there at the positive inspiration of the staff association or the union. We have gone throughout all the debates on this Bill without mentioning the staff at all; nor did they receive any attention in another place. This is a very serious omission, because there is an emerging awareness among white collar workers in new industries and activities of the power of trade union combination.

    The building societies are going through the phase that the banks and insurance companies went through at one time, when the staff associations were regarded as some kind of primitive form of collective activity, well within the paternalistic outlook of the board of directors. In many cases they had a local standing and a sense of community and belonging. But this can rapidly change. I say quite categorically that in the power game the staff have everything to play for. What is more, I believe they can play to win. Because the safeguard which companies have against what may happen to the building societies is not there (and that is the larger, and particularly the institutional, shareholder) there is no stop in the process of gaining power if the trade unions in the building societies set about it, especially if they begin to belong to national unions.

    I am not for a single moment saying that anybody has told me they are going to do this. I am working on my experience and my knowledge; and I will say again quite definitely that there will be an emerging militant tendency in the building society staff movement. It is bound to come. It comes everywhere. At the present time the white collar workers are much more powerful, as unions, than many of the industrial unions. Because they belong to the service industries and in many cases they are so much better paid, they are in a position to say to their employers that "Bob is as good as his master". I have not the slightest doubt that some staff representatives on the boards of building societies are better qualified to be there than some of the people on the boards. So I just utter a warning, especially as this is a Friday and we are talking a little more intimately than we would be during the week. There is no "Today in Parliament", I think—but anyway, whether there is or not I am saying it!

    The important thing is that if this is not necessary there is probably all the more reason why it should be in the Bill. If people say to me, "This is not necessary but, since you have mentioned it, it is a jolly good thing and we are going to support putting it in the Bill", I would say that is the right spirit. But if people say that it is not necessary and say no more—it can be done if we want and a building society is free to do this if they wish—then I know they do not want it or at least they are not keen about it. That is not the right sort of spirit.

    This is to forestall what might otherwise happen when vacancies occur on boards of directors and there is a challenge in some cases to sitting members, when a ballot may be necessary to settle a contested election and when influences can be brought to bear or some influence can be mobilised, which not many building societies have yet experienced. To some extent this may be expressing my own instincts, but I do not apologise for that.

    All those of us who have been in the trade union movement are after power: we want to get power on behalf of the employees and the workers. We want to see that the staff and the workforce have their full place in the scheme of things and that they shed their feeling of subordination. With much higher levels of education all round now, there is not the slightest reason why this ambition should be frustrated.

    So I think that a new era is going to dawn in the building society movement. I would say there is not a building society director whose seat is safe from now on and, if they think that this is a scaremongering speech, all I can say is that they ought to look round and see what has already happened in at least one big building society. So again I am the Building Societies Association's best friend—but they do not know it. They think they can get on very well without me. But I am very serious about this: there is time in hand, but there will not be for very much longer. There is a very wide field open to militant activity. I do not use that word in any derogatory sense. I use it in the sense that it expresses the normal ambitions of trade unionists and militancy is usually the only way to do it.

    This is a restatement of much that building societies can already do, but it is put in a new context so that you can read the Bill as a whole and see how the thing runs through. To say that it is already there does not satisfy me. I sincerely hope that the Minister will look at this favourably. There is not the slightest reason why this wording should not go into this Bill. This is not a mandatory matter, it is an expression of authority, if it is in their rules. It is an encouragement to think about it and put it in their rules if they think fit. It is an opportunity to take a nomination from a recognised source of advice and influence, and it still leaves the board with the right to decide whether a certain person who is nominated is suitable for appointment.

    I emphasise, in conclusion, that the acceptance of the nomination is only on the filling of the vacancy. The co-option, when the period of co-option ends, means that the person so nominated for appointment has to stand for election in the normal way. His nomination does not carry him forward beyond the initial period. But the initial period is important, because those who are nominated to serve on boards stand favourably for re-election and this would give such a nominee that favourable position. But it would not guarantee that he would keep it and he would have to deserve it in the eyes of those who are the electorate at the time.

    You can be sure that any such director standing for election in those circumstances would attract a good deal of attention from the staff, because he would be there at the express desire of the staff association or union concerned. I am bound to say that it is no good asking me to withdraw the amendment. I do not withdraw on first principles like this, and if the House does not put it in I shall not take the responsibility of its not being there. My Lords, I beg to move.

    My Lords, I wish to support my noble friend Lord Houghton of Sowerby on this amendment. It is, in my view, the mildest amendment that he could possibly have put down. After all, it only specifies nomination and it does not specify that the individual concerned, the full-time employee, should be representing employees, because in our discussions on previous Bills we have had a number of problems about employee directors; that is, directors who are seen to represent employees and not fulfill their duties under other parts of either the company's legislation or, in this case, this Bill. So the amendment that my noble friend has put down seems to me to avoid any of those problems. It seems to me extremely mild, extremely sensible and I hope that the Government will be able to accept it.

    My Lords, I have listened with interest to the speeches of the noble Lord, Lord Houghton, and the noble Lord, Lord Williams. However, I hope that I shall be able to persuade them that the existing provisions in the Bill are sufficiently flexible to allow for the sort of situation described, although the noble Lord, Lord Houghton, has already said that whatever I say will not satisfy him, unless I say that I accept the amendment outright. As I understand the amendment it is intended to allow the board of a society to co-opt an employee representa-tive to fill a vacancy. As drafted, however, it could be read as requiring any vacancy filled by co-option to be filled by an employee representative, and I am not sure whether that is entirely what the noble Lord has in mind.

    As I explained on an earlier amendment tabled by the noble Lord, there are no restrictions on who may stand for election. This applies to candidates for the board putting themselves forward as representatives of the employees just as much as to anybody else. Indeed, there is the recent example of this year's annual general meeting of the Abbey National Building Society, when a former chairman of the Abbey National Staff Association was elected to the board ahead of a retiring director seeking re-election.

    The Government think that it would be wrong to go beyond that and to make special provision for employee representatives. As noble Lords will realise, the question of industrial democracy goes very much wider than building societies. It would be quite wrong to make special provision for building societies above and beyond that which applies to companies. While the Government are not at all opposed to greater employee involvement in the running of their organisations, we believe that progress is best made voluntarily rather than by legislation.

    I am not sure that I understand anyway how the noble Lord's amendment would help avoid the kind of situation that he himself described. If his object is to stop the unions taking over, something requiring vacancies to be filled by staff representatives is a rather funny way of going about it. For those reasons, while I appreciate that I have probably not been able to persuade the noble Lord, Lord Houghton of Sowerby, of the Government's views on this matter, I really cannot accept the amendment and, if the noble Lord wishes to test the opinion of the House, I must urge my noble friends to reject it.

    My Lords, I am obliged to the noble Lord for his reply but I cannot accept it. He thinks that this is a funny way of going about it if I am trying to stop take-over bids by the staff for the control of the society. I did not say that this was going to stop anything. I suggested that it would forestall the emerging ambitions of staff to participate more fully in the affairs of the building society. I want this Bill to go some way towards the staff point of view. This is a management Bill contrived by managers. The interests of the societies as expressed in this Bill have been wholly concerned with the expansion of the opportunities of the building societies into more profitable and varied fields of financial services and have said nothing at all about the consequences on the staff.

    The building societies have not come forward with any indication that they have satisfactory relationships with their staffs. Another amendment a little later will deal with that. Sometimes the Minister said that there is no need to do more in building societies than is done in companies; and another time the Government say that building societies are not companies. They are therefore an animal in their own right, of unique shape, size and smell. In those circumstances, we are free to do what we think is desirable to put this strange being in the world of finance and usury, financial services and so forth into the kind of form that seems to be satisfactory to us.

    There is nothing mandatory about it. It is indicative. But the Government do not want to have any indication given of worker participation. That is their position. They think that it should all be done voluntarily. They wanted to hand the trade unions back to their members, but they have not done anything to facilitate the fulfilment of the ambitions of workers in relation to company management.

    I am sorry that we have had this disappointing reply. I do not pretend to know what discussions the Government may have had with representatives of the staff of building societies. I do not pretend to know what consultations the building societies have had with their own staffs. All I want to do is something which I think it is desirable to do in the interests of the building societies and which anybody with knowledge and experience in this field will feel should be done. I regretfully decline to withdraw the amendment and I must press it to a Division.

    3 p.m.

    On Question, Whether the said amendment (No. 46) shall be agreed to?

    Their Lordships divided: Contents, 18; Not-Contents, 42.

    DIVISION NO.1

    CONTENTS

    Brockway, L.Jeger, B.
    Bruce of Donington, L.Jenkins of Putney, L.
    Diamond, L.Kilmarnock, L.
    Ewart-Biggs, B.Pitt of Hampstead, L.
    Fitt, L.Strabolgi, L.
    Graham of Edmonton, L.Tordoff, L.
    [Teller.]Underhill, L.
    Hacking L.Williams of Elvel, L.
    Hanworth, V.Ypres, E.
    Houghton of Sowerby L
    [Teller.]

    NOT-CONTENTS

    Airey of Abingdon, B.Lawrence, L.
    Ampthill, L.Long, V.
    Belhaven and Stenton, L.Mancroft, L.
    Belstead, L.Merrivale, L.
    Bessborough, E.Mersey, V.
    Brabazon of Tara, L.Milverton, L.
    Caithness, E.Morris, L.
    Carnock, L.Norfolk, D.
    Craigmyle, L.Plummer of St. Marylebone,
    Denham, L. [Teller.]L.
    Effingham, E.Rankeillour, L.
    Elles, B.Reigate, L.
    Faithfull, B.Russell of Liverpool, L.
    Fraser of Kilmorack, L.Selkirk, E.
    Gardner of Parkes, B.Sempill, Ly.
    Glanusk, L.Skelmersdale, L.
    Hailsham of SaintSwinton, E. [Teller.].
    Marylebone, L.Trefgarne, L.
    Hooper, B.Trumpington, B.
    Killearn, L.Vaux of Harrowden, L.
    Kinnaird, L.Vickers, B.
    Lane-Fox, B.Vivian, L.

    Resolved in the negative, and amendment disagreed to accordingly.

    3.8 p.m.

    Clause 63 [ Directors to disclose interests in contracts and other transactions]:

    moved Amendment No. 47:

    Page 103, line 2, at end insert—
    ("and details of any such declaration shall be included in the annual report.").

    The noble Lord said: My Lords, I beg to move Amendment No. 47 standing in the names of my noble friend Lord Barnett and myself. This amendment comes back to the point made in our discussions in Committee on the responsibility of directors of building societies to disclose interests in contracts and other transactions.

    In the Bill as drafted, directors of societies must disclose details of such transactions to a meeting of directors. We believe that any such declaration that is made by a director should be included in the annual report so that members have an opportunity to assess what has happened. This provision would take building society legislation slightly further than the present companies legislation and bring it nearer into line with banking legislation. Since building societies are more financial institutions than they are straight-forward trading companies, we feel that that is only appropriate because large sums of money may be at stake and directors of financial institutions have a special responsibility to make sure that their dealings with their own companies, and their dealings with other companies which may themselves have dealings with the society, should be seen to be whiter than white. I beg to move.

    My Lords, the Government entirely accept that the other interests of directors, where they are of posssible relevance to the business of the society, should not be swept under the carpet That is why we have introduced a number of clauses, of which this is one, based on provisions in the Companies Act 1985. Indeed, where we have thought it appropriate in the special circumstances of building societies, we have gone further than the Companies Act; for example, the provision of Clause 69 and Schedule 10 in respect of the disclosure and record of income of related businesses of directors. I can therefore confirm at the outset that there is nothing between the Government and the noble Lord opposite—as indicated by adaptation of Companies Act provisions—on the need for interests of directors to be adequately brought out.

    But I am not convinced that the statutory requirement suggested by the noble Lord's amendment is the appropriate way forward in the field of interests in contracts. There are a number of difficulties in accepting such a provision which I shall endeavour to explain. First, it would include all declarations, whether a contract was eventually let or not, and would include general notices of the kind envisaged by Clause 63(4) where there may in fact be no contract at all or even in contemplation at the time of the declaration but the director is to be regarded as interested in any which may be made in the future. The result would be that the annual report would include a possibly substantial piece, from which it would be very difficult for the members to see which were of particu- lar interest and which were not. For the sake of argument, if one were to go down this route, real problems regarding what was material would arise—that is, whether there should be a cut-off and if so, how it should be defined.

    In addition, I should point out to the noble Lord that there is already another, and I suggest more satisfactory, means of achieving what I think is the objective underlying this amendment. Clause 74(4) makes it clear that the commission has power by regulation to ensure that the annual business statement can include:
    "prescribed information about directors and past directors and persons connected with them and other officers and past officers and persons connected with them and their financial interests".
    This power is supported by an obligation in Clause 74(8) on directors etc.

    "to give notice … of such matters relating to himself or his financial interests as may be necessary".
    The annual business statement is on public record and is available on demand to members.

    I hope that the noble Lord will accept that this is yet another provision going wider than the Companies Act which manifests the Government's intention that directors' material interests should be disclosed. But this is an area where the blunderbuss effect—if I may call it that—of the noble Lord's amendment would be ineffective and counter-productive. The Bill goes out of its way to enable the commission to deal with the point, and I hope that the noble Lord will accept that it should be allowed to do the job. The commission will be much closer to what is going on in the societies and will be able to fine tune the disclosure provisions. I hope that with that explanation, I have been able to give the noble Lord, Lord Williams, some encouragement that basically we see matters in the same way as he does, and I hope that he will be able to agree to withdraw this amendment.

    My Lords, I am grateful to the noble Lord. I accept his view that we are on the same side of the fence, as it were, on this issue. It is essential that interests of directors in these important societies with substantially important funds that may be in play should be truly and properly known both to members and to the outside world.

    Picking up two of the points made by the noble Lord, I do not find his argument about materiality a very convincing one. There are many occasions on which one has to fix what is material and what is immaterial and all of us have done this many times in our lives. I respect the views he has put forward on Clause 74, and the powers of the commission to make regulations requiring the annual business statements of building societies to include certain information about directors and past directors, and so on. This is a power of the commission, and unless we adopt the view of the noble and learned Lord, Lord Scarman, that "may" means "shall" and "shall" means "may", it is only a power which it may use rather than a power which it shall use. On another occasion I asked the noble Lord whether he would give me an assurance that "may" shall mean "shall". If he can give me such an assurance, I am happy to withdraw the amendment.

    My Lords, I think that I can give the noble Lord the assurance that in this case "may" means "shall", though I must admit that I would not want to go into the argument about "may" and "shall" any deeper than that.

    Amendment, by leave, withdrawn.

    Schedule 10 [ Requisite particulars of income of related businesses]:

    3.15 p.m.

    moved Amendment No. 48:

    Page 225, line 25, leave out ("in") and insert ("is").

    The noble Lord said: My Lords, at this point I have no doubt that noble Lords will have observed that there are eight new starred government amendments down on the Marshalled List. I should like to apologise, first, for the fact that they are starred, and, secondly, for the absence of notes on them because of their late tabling. As noble Lords know, notes on the other government amendments have been provided.

    These amendments arise from a further scrutiny of the new print of the Bill, as amended in Committee. They correct errors and nonsenses which have crept in during the Bill's passage through Parliament and which have not been picked up before. The Government are, however, advised that their corrections are essential if the Bill is to stand as a correct, self-contained piece of legislation. I assure noble Lords that the list has been weeded out most carefully and contains only those points with which it would be most awkward to have to live.

    The first amendment is purely grammatical. I beg to move.

    On Question, amendment agreed to.

    Clause 75 [ Directors' report]:

    Page 123, line 8, at end insert—

    ("(d) in the case of a relevant society a statement complying with the requirements of section 1(2) of the Employment Act 1982 in respect of employee involvement and a society is a relevant society if it falls within the provisions of section 1 (3) of the Employment Act 1982.").

    The noble Lord said: My Lords, I hope that this amendment will have a smoother passage. In 1982, the noble Lord, Lord Rochester, myself and other noble Lords joined together to seek an addition to the Employment Bill of that year regarding employee involvement. We succeeded in persuading the House to adopt our new clause, notwithstanding the demurrer, if nothing stronger, of the Government at the time. They did not like it then.

    However, it is now Section 1 of the Employment Act 1982 and it prescribes an additional item to be included in the reports of the directors of public companies over a certain size. It is all set out in the Act and it has been in operation now for four years. I have looked carefully at many reports of directors of public companies. Some have been conscientious in their reports about relations with employees, the opportunities that they have been given to inform themselves about the company's affairs, and so on.

    That condition, which is now embodied in the Companies Acts, does not apply to building societies or other such institutions so far as I know, and it is certainly not in statute law. We are proposing in the amendment that included in the reports of directors of building societies shall be what the Act requires to be included in the reports of company directors. I do not want to read all the details of the section in the Act. Broadly, it asks for a report on the maintenance and development of relations with staff, the provision of information systematically on matters of concern to employees, and consultations with them or their representatives on a regular basis so that their views can be taken into account, and so on.

    One might say that this is employee involvement for tiny tots. It is just about as primitive as it can be. It is necessary to deal with employee involvement and participation in elementary terms. The Government and many employers do not like it. The Bullock Report attempted, and various other attempts have been made, to secure a degree of worker participation; but that has failed to materialise.

    In many cases, what is being done is being done voluntarily. In public companies there is a statutory requirement that the matter be included in the directors' reports. As building societies are in many respects analogous with companies and a good deal of company law is embodied in the Bill, we thought it necessary to include this provision.

    I received a brief on this, like everything else, at Report stage. The Building Societies Association has been splendid in keeping us up to date with its view about what we have down on the Marshalled List. It is a tribute to its efficiency that with all the amendments put down by the noble Baroness, Lady Gardner of Parkes, on the Marshalled List this morning I received a brief from the Building Societies Association about them all. I thought that that was splendid. It is up to date and right on the ball. Someone must have got up early this morning to do all that.

    I am not being sarcastic. I am merely expressing a note of appreciation. I think that I have said enough. I do not want to read out everything. The relevant societies would be those which fall within the provisions of Section 1 of the Employment Act 1982. That relates to a company which has more than 250 employees. That would make it a relevant society. I hope that the Minister will not say that they can or should do it, or anything else. Let us have no more excuses, for goodness sake. Let us stick something into the Bill, where this Bill is so signally lacking, that means something.

    It has been said that the Building Societies Commission may make some directive. Surely we are not going to wait for the Building Societies Commission to do everything for us; that great nanny which will oversee all the building societies and all that they are doing. It should not be left to do it when statute law is being made under our very eyes. We can put the provision in the Bill. Why not do so?

    I am sure that the reports of directors of building societies will be more interesting to those who receive them when they can read about what they are doing to establish and maintain satisfactory relationships and communications with their staffs. I beg the Minister to be forthcoming on this proposal. Let us put it in the Bill. It was put into the Employment Act. It applies to public companies above a certain size. We ask that it should be written into the law which deals with building societies above a certain size. What argument can there be against doing that? I beg to move.

    My Lords, I hope very much that on this occasion I may be able to satisfy the noble Lord, Lord Houghton of Sowerby, even if I do not go as far as accepting the amendment. The Government informed the Federation of Building Society Staff Associations in mid-May that they accept the appropriateness of extending to building societies requirements corresponding to those in Section 1 of the Employment Act 1982—which provisions I should perhaps record are now consolidated into Schedule 7 to the Companies Act 1985. These require companies with more than 250 employees to report annually on the development of their arrangements for providing regular information to employees, for consulting them and for involving them in the company's affairs.

    An amendment to this Bill itself is not necessary. Clause 75(1)(b) powers are wide enough to make regulations covering the point in question. Of course, the commission is not yet in being but when it comes to consider the regulations to be made under these powers the chief registrar will be proposing that they should include paralleled provision to those for companies. The Federation of Building Society Staff Associations has expressed itself content with this assurance.

    The amendment is therefore unnecessary. Schedule 7 to the Companies Act contains several other require-ments for inclusion in annual reports—for example, health and safety at work and employment of the disabled and charitable contributions—which might also be appropriately included in the regulations. It would be wrong to single out a particular area for inclusion on the face of the statute. It is more sensible to rely on the powers in Clause 75(1) to deal with the employee participation point. A firm assurance has been given in that respect. I hope that the noble Lord will be happy and will feel able to withdraw the amendment.

    My Lords, I am grateful for the Minister's statement. However, may I say, with great respect to him, that he should not keep on saying "it would be wrong" when it would not be wrong. It might be undesirable; it might be unnecessary; but it would not be wrong. It is irritating to hear the Minister say that it would be wrong to do something when, obviously, it would be right to do it. Anyhow, I am not going to quarrel with the noble Lord at this time of the day. I thank him for what he says, and I beg leave to withdraw the amendment.

    Amendment, by leave, withdrawn.

    Schedule 11 [ Auditors: appointment, tenure, qualfications]:

    Page 231, line 40, leave out ("subsection (3) because") and insert ("sub-paragraph (3) because it was").

    The noble Baroness said: My Lords, this is a purely technical amendment to rectify two ambiguities in line 40. I beg to move.

    On Question, amendment agreed to.

    Clause 81 [ Laying and furnishing accounts, etc. to members, Commission and central office]:

    Page 130, line 11, after ("is") insert ("also").

    The noble Lord said: My Lords, this is a drafting amendment.

    On Question, amendment agreed to.

    Clause 82 [ Auditors' duties to Commission and related rights]:

    Page 132, line 4, leave out ("Commission, with the consent of the").

    Page 132, line 13, leave out from ("instrument") to end of line 15 and insert ("but no such instrument shall be made unless a draft of it has been laid before and approved by a resolution of each House of Parliament.").

    The noble Lord said: My Lords, we had a substan-tive discussion on this point when it was introduced by the Government as an amendment at the Committee stage. I do not intend to go over all the points made at that time. The major point, however, I must reiterate. It is the question of how far an auditor's responsibility is to his client and how far that responsibility can be diverted by the supervisory authority. Until now, it has always been considered essential in the auditing profession that the major relationship should be with the client. It is only in fairly recent months, I believe, and particularly since the Johnson Matthey affair, that the idea of an auditor being a policeman has suddenly started entering into Government thinking and, indeed, entering into proposed legislation. It is entering into this legislation. I understand that it will enter into the Financial Services Bill and also, I understand, into the banking supervision Bill that we are promised in the next Session.

    It is therefore extremely important that we try in this Bill to get the formula right. We on this side of the House do not believe that auditors should be required to give information about their clients to the supervisory authority by order without those clients knowing what is going on, knowing the order has been made and knowing what the auditor is saying. Nevertheless we divided on that matter in Committee. Your Lordships decided that our opinion shall not prevail. We are therefore now coming back with an amendment which would take a less restrictive view than we took in Committee, but nevertheless would give Parliament and the public—and indeed the accountancy profession—the assurance that if this relationship between auditor and client is to be broken it will be broken in a very public manner. This is why in the amendment to which I am speaking we have suggested that the affirmative procedure should be adopted rather than the negative procedure which is at present in the Bill as drafted. I believe that this would give some degree of comfort to the accountancy profession, and to those of us who feel that the relationship between an accountant auditor and his client is sacrosanct.

    I am very glad to see the noble and learned Lord, Lord Denning, walking into the Chamber and sitting in his place. I took the opportunity of raising the matter with him. I think he joined with me in feeling that the client relationship was important. Indeed, when I first approached him, he said that if such a regulation were to be made in respect of the legal profession there would be a mother and father of a row about it, and that if the accountants are prepared to take it lying down the lawyers certainly would not.

    By adopting the procedure that I have outlined in these amendments I believe we can secure the minimum possible protection for the accountants. I do not believe that it is perfect but, having been defeated in Committee on this matter, it is the best we can do in the circumstances. I beg to move.

    3.30 p.m.

    My Lords, I am just in time to say how much I support this proposal. This is a most important new provision recently introduced, which enables an order to be made on auditors to break the confidence which they owe to their client. Confidence is a matter of the first importance in all professions, in governments and with everyone. It is a very important principle to maintain confidence and should be broken only in the most exceptional circumstances. If one knows that there is a fraud going on, one can disclose that, even breaking one's confidence. Otherwise confidence must be retained intact.

    My unease about this clause as it stands is that the commission can,
    "by order impose on the auditors… an obligation… in such circumstances as may be prescribed in the order".
    Noble Lords can see the width of that provision. They can be required to break their confidence in circumstances prescribed by the order. One ought to have those circumstances debated and considered in the Houses of Parliament before confidence can be ordered to be broken by these commissioners,
    "in such circumstances as may be prescribed in the order".
    The clause refers to,
    "relative information available to them of such descriptions as may be prescribed in the order".
    Can there be anything wider and vaguer given by order of the Treasury?

    I gather that similar provisions may apply to the financial services and banking in the future. We are coming to a most important provision: that of breaking confidence at the order of an authority, unknown and unprescribed by Parliament itself, prescribed by an order. Surely any order of such import should be brought before both Houses of Parliament. The people who push that order forward ought to get it approved by both Houses of Parliament before it is allowed to be part of our law. Otherwise, as it stands at present, we just have a negative instrument as regards which, as your Lordships know, the burden of proof is the other way round. A person calling for a nullity has to show that there is something wrong with the order. However, an affirmative resolution has to be brought before both Houses so that the people putting it forward have to justify it before both Houses. At present it is much too wide, but if these orders made by the Minister are to go through, the procedure adopted ought to be by affirmative resolution in both Houses. That is why I support the amendment.

    My Lords, I am grateful to the noble Lord, Lord Williams of Elvel, for having moved the amendment, and I was also most interested to hear the speech of the noble and learned Lord, Lord Denning. As the noble Lord, Lord Williams, mentioned, we had a debate on this subject in Committee and the noble Lord made his views clearly known on that occasion. I have no doubt that when we come to deal with the Financial Services Bill we shall again have an opportunity to air different views. I am absolutely willing to accept the amendments in the name of the noble Lord, Lord Williams of Elvel. He has made the very good point that it should be done by an affirmative resolution so that both Houses have the chance to debate such an order if it were brought forward. Therefore, I have much pleasure in accepting the amendments.

    On Question, amendments agreed to.

    Schedule 12 [ Schemes for investigation of complaints]:

    Page 236, line 24, leave out ("any") and insert ("the").

    The noble Lord said: My Lords, I beg to move Amendment No. 54. This amendment requires a recognised scheme to empower an adjudicator to advise, mediate or act as conciliator before proceeding further with an investigation.

    Under the Bill as drafted, a recognised scheme may contain a provision empowering an adjudicator to advise, mediate or act as conciliator at the initial stages of an investigation. This amendment transforms this optional provision into a compulsory one. The Government recognise that it is clearly sensible for an adjudicator to exhaust these avenues first before proceeding with a full investigation. I beg to move.

    On Question, amendment agreed to.

    Schedule 13 [ Schemes for investigation of complaints: recognition, accession, etc. ]:

    Page 239, line 9, leave out ("Part of this").

    The noble Lord said: My Lords, I beg to move Amendment No. 55. This is a purely drafting amendment. Schedule 13 is not divided into parts.

    On Question, amendment agreed to.

    Clause 84 [ Investigation of complaints: supplementary provisions]:

    moved Amendment No. 56:

    Page 134, line 43, after ("determination") insert ("but only in exceptional circumstances and so that the determination will not have any general application to other complaints").

    The noble Baroness said: My Lords, this amendment to the ombudsman provisions makes it clear that the power to insist on non-enforcement of contracts should only be used in very special circumstances—for example, where a society has acted very unfairly or unreasonably—and that a decision on non-enforcement cannot set a precedent for other cases. The amendment really does no more than reflect the stated views of the Government that such a power will be used very infrequently and that building societies should not be concerned that their mortgage and other contracts will be overturned as a matter of course. I move the amendment, but I do so really to hear the Government's reply on this matter. I do not intend to press the amendment. I beg to move.

    My Lords, this amendment seeks to do two things. Perhaps I may deal first with the second limb, which is the simpler. I am advised that it is unnecessary to provide explicitly for determinations not to have general application. The requirement in the Bill is only for each determination to relate to the particular case in question. In particu-lar, a direction not to enforce any particular term of contract will apply only to that case; it will not necessarily prohibit enforcement in other cases. It will be open to the ombudsman to comment in his annual report on general questions, such as the operation of particular provisions by particular societies, but he will have direct powers of intervention only in specific cases.

    The first part of the amendment would enable the ombudsman to exercise his power to direct non-enforcement of contracts only in exceptional circumstances. The Government would regard that as seriously undermining the ombudsman's effectiveness and hence it is unacceptable. The criterion for the ombudsman to apply is what is fair in all the circumstances of the case. It would restrict him too much if he had also to consider whether the circumstances were exceptional. Nevertheless, the Government understand the fears that have been expressed by building societies about these provisions. We do not believe that in practice those fears will be borne out. I am sure that the ombudsman will find it necessary to exercise this power only in exceptional circumstances. It is there only as a last resort.

    I would draw attention to the requirement in paragraph 3 of Part III of Schedule 12 that the ombudsman must have power to advise, mediate or conciliate. I am sure that the great majority of cases will be resolved in this way, whether before or during the process of investigation. Only a minority of cases will need to be resolved by means of a direction from the ombudsman. Moreover, in many of those cases what he considers to be fair will be in accordance with the strict interpretation of the contract. It will only be where he considers that that strict adherence to the contract would produce an unfair result that he will require the society to depart from it.

    So in that sense the power will be exercised only in the exceptional circumstances that the case cannot be resolved by any other means; but the Government believe that the ombudsman should have the power available as a last resort in all cases. I hope that I have said enough to allay the concern expressed by my noble friend and to persuade her to withdraw her amendment.

    My Lords, I thank the Minister for his comments, and beg leave to withdraw the amendment.

    Amendment, by leave, withdrawn.

    Schedule 14 [ Settlement of disputes]:

    Page 244, line 44, leave out ("5(1)") and insert ("4(1)").

    The noble Baroness said: My Lords, this is a simple amendment correcting a cross-reference to a previous sub-paragraph. I beg to move.

    On Question, amendment agreed to.

    Clause 92 [ Supplementary]:

    Page 141, line 13, leave out ("times") and insert ("time").

    The noble Lord said: My Lords, this is a drafting amendment. I beg to move.

    On Question, amendment agreed to.

    After Clause 94, insert the following new clause:

    ( "Mergers: Consultation with Independent Trade Unions and Continuity of Agreements.

  • .—(1) Any building society, either involved in an amalgam-ation with another building society or which intends to effect a transfer of engagements shall inform as early as possible, and in any case not less than 30 days before any binding agreements are entered into, any independent trade union with members in the building society.
  • (2) The building society shall provide the trade union in writing with—
  • (a) reasons for the proposed amalgamation or transfer of engagements
  • (b) a detailed statement of the building society's intentions as regards the size and job structure of the workforce; collective agreements covering terms and conditions of employment; pensions; and trade union recognition.
  • (3) The building society shall meet the trade union, within 14 days of a request to do so by the trade union, to discuss the statements provided under subsection (2) above.
  • (4) The employees of the building society involved in an amalgamation or transfer of engagements shall have continuity of employment under their new employer for the purposes of their contracts of employment as they relate to terms and conditions and pension rights.
  • (5) The new employer shall recognise, for the purpose of collective bargaining, independent unions that were previously recognised by the building societies involved in the amalgamation or transfer of engagements, and there shall be no worsening of terms and conditions or pension provisions within 12 months of the amalgamation or transfer of engagements in contravention of the statements provided under subsection (1) above, unless the recognised trade unions agree.").
  • The noble Lord said: My Lords, I beg to move Amendment No. 59 standing in the names of my noble friend Lord Barnett and myself. It is to insert the new clause as printed in the Marshalled List. The Bill currently contains provisions for consultation with directors of building societies and consumers. At present it makes no reference, as my noble friend Lord Houghton of Sowerby has pointed out, to those who work for the building societies, and makes no reference to their concerns at the potential impact on the nature of their work that this Bill might have.

    At present there are just over 61,000 people working as employees in building societies up and down the country in some 6,700 branches, and the livelihoods of this significant number of people are likely to be affected by what happens under the Bill. The main purpose of this amendment is that building society staff should be consulted in any undertakings to merger, or transfer arrangements; they should continue to enjoy collective representation if they are so represented now; and they should not be subjected to worsened terms and conditions as a result of a merger or amalgamation.

    Recent examples of attempted mergers of building societies suggest that most building societies act responsibly in this matter, and most building societies are, I think, aware, as is any well-managed company, that their success depends on the goodwill, co-operation and understanding of their staffs. There is, however—and I have to report this to your Lordships—a certain awareness among the staff of building societies that this may not always be the case for all building societies under the new dispensation. There is a fear that, in the new financial markets into which the societies are moving, their concerns as employees of societies will take a lower priority in the future management of the societies.

    It will be a testing time for management, I think we all agree, as management devise the means of competing with other financial institutions in the new markets into which they are going to enter, and it would be a poor management that did not consult its staff on the coming changes.

    On the other hand, the history of British industry has given us many examples of where that has not happened. Many good business plans have foundered on the neglect of good industrial relations. The employees of building societies are as much part of the building society movement as its investors and borrowers, as my noble friend Lord Houghton of Sowerby has pointed out. It is only right that they should be consulted on the changes which will take place in their movement and they should not suffer unduly from those changes.

    3.45 p.m.

    My Lords, building society staff are already protected under the Transfer of Undertakings (Protection of Employment) Regulations 1981 which will have become very familiar to your Lordships over the last week or so. These provide them with the same protection in the event of a transfer of undertakings as employees of other organisations. These regulations provide for employees to remain automatically in employment with the new organisation, and for contracts of employment to continue. They also provide for collective agreements with unions to continue. They impose a duty on the employer—in this case, the society—to inform and consult trade union represen-tatives. Trade unions must be informed long enough before a transfer to enable consultations to take place. The information must include the fact that the transfer is due to take place, its approximate date, the reasons for it, and the implications for employees. And consultation with trade unions is obligatory when measures are to be taken in relation to the employees. In those consultations, the employers must consider any representations by the trade unions and reply to them, giving their reasons. Failure to inform or consult is ground for reference to an industrial tribunal.

    So much of the noble Lord's intention with this amendment is I think already part of general employment law applicable to building societies. There is no point in duplicating it in the Bill. In addition, as I said in dealing with an earlier amendment, the chief registrar will be proposing to the commission that provisions for employee involvement paralleling those now consolidated in the Companies Act should be applied to building societies by regulations.

    The effect of this amendment would be to single out building societies for special treatment above and beyond that applied to companies and other organisations. Many of its provisions go well beyond general employment law: for example, the suggestion that consultation should not just be with recognised unions, but with any union which can claim a member among the society's staff. In the Government's view, there is no justification for this special treatment. I do not think it can be argued that societies as employers have a poor record; in fact, building societies' relations with their staff have been excellent. The noble Lord paid credit to them for that, and the representatives of those staff frequently acknowledged that fact.

    If the noble Lord, Lord Williams, does not feel that the regulations go far enough, that case should be argued with my noble friend the Secretary of State for Employment. It is not a matter for the Building Societies Bill. As I said, why put something in the Building Societies Bill that goes further than anything in respect of other companies? On those grounds, and on the grounds that most of what the noble Lord seeks is already covered. I hope that he will feel able to withdraw his amendment.

    My Lords, I am grateful to the noble Lord for his response. I recognise that this is a new clause introduced at a late stage. I shall have to read very carefully in Hansard what he has said. I shall consider it and, if necessary, come back at a later stage. In the meantime, I wish to withdraw the amendment.

    Amendment, by leave, withdrawn.

    Clause 95 [ Mergers: provisions supplementing ss. 93 and 94]:

    moved Amendment No. 60:

    Page 146, line 17, leave out ("a merger") and insert ("an amalgamation")

    The noble Lord said: My Lords, with leave of the House and if no noble Lord objects, I should like to speak also to Amendments Nos. 61 to 64. These are all drafting amendments. I beg to move.

    On Question, amendment agreed to.

    Clause 97 [ Transfer of business to commercial company]:

    Page 148, line 30, leave out ("a") and insert ("the")

    On Question, amendment agreed to.

    Clause 101 [ Protective provisions for specially formed successors]:

    Page 156, line 32, at end insert ("or that Order.")

    On Question, amendment agreed to.

    Clause 103 [ Cancellation of registration]:

    Page 157, line 18, leave out ("or 97(9)") and '(10)")

    On Question, amendment agreed to.

    Clause 107 [ Restriction of use of certain names and descriptions]:

    Page 162, line 18, leave out ("that") and insert ("than")

    On Question, amendment agreed to.

    Schedule 18 [ Amendments of enactments]:

    Page 260, line 23 at end insert—

    ("Bankers' Books Evidence Act 1879 (c.ll)

    In section 9(1) of the Bankers' Books Evidence Act 1879 (meaning of "bank" and "banker" for purposes of that Act), after paragraph (a) there shall be inserted the following—

    "(aa) a building society (within the meaning of the Building Societies Act 1986);").

    The noble Lord said: My Lords, I beg to move Amendment No. 65. This is a detailed amendment to align building societies with banks under the Bankers' Book Evidence Act of 1879. It has a consequential effect for the treatment of societies under the Consumer Credit Act and it is right to put societies here on to the same footing as banks. I beg to move.

    On Question, amendment agreed to.

    Page 262, line 44, at end insert—

    ( "Solicitors Act 1974. (c. 47)

  • .—(1) This paragraph amends the Solicitors Act 1974 as follows.
  • (2) In section 32 (accounts rules and trust accounts rules), in subsections (1) and (2), in paragraph (a), after "banks", there shall be inserted "or with building societies" and, in the words following paragraph (c), the word "banks'" shall be omitted.
  • (3) In section 33 (interest on clients' money) in subsections (1) and (3), after "bank", there shall be inserted "or with a building society".
  • (4) In section 85 (bank accounts)—
  • (a) after "account with a bank" there shall be inserted "or a building society", and
  • (b) in paragraphs (a) and (b) after "bank" there shall be inserted "or society".
  • (5) In section 87(1) (interpretation), after the definition of "bank" there shall be inserted—
  • " "building society" means a building society within the meaning of the Building Societies Act 1986; and a reference to an account with a building society is a reference to a deposit account.

    Home Purchase Assistance and Housing Corporation Guarantee Act 1978. (c. 27)

    . In section 3(1) (building society law) of the Home Purchase Assistance and Housing Corporation Guarantee Act 1978, after "determining" there shall be added the word "(a)" and at the end of that subsection there shall be added the words—

    "(b) the classification of the advance, or any such further advance, for the purposes of Part III of the Building Societies Act 1986." ").

    The noble Lord said: My Lords, I beg to move Amendment No. 66, and with the leave of the House I shall speak to Amendments No. 67 and 68 at the same time. Your Lordships will notice that there is a star against Amendment No. 66. I have circulated Notes on Amendments and I can assure your Lordships that the changes between the circulation of those notes and this printing are very small indeed. I shall describe what they are, if any of your Lordships wish me to do so. Amendment No. 68 is a rather technical one. I was asking whether any noble Lord would like an explanation of the difference in the print, but it appears that nobody does.

    One of the Government's aims in this Bill has been to extend, so far as possible, legislation applying to banks so that it covers building societies equally. Amendments Nos. 66 and 67 are part of that process. They would allow solicitors' client accounts to be placed in deposit accounts with building societies, in the same way as the Solicitors Act currently allows for banks. In the Government's view, such an account would be at least as secure as a corresponding one with a bank, and the new powers under the Bill will ensure that the building societies can offer the same money transmission facilities. This proposal has been discussed with the Law Society, and I understand that it is fully in agreement with it.

    The next paragraph of the amendment concerns the Home Purchase Assistance and Housing Corporation Guarantee Act of 1978. The Housing (Consequential Provisions) Act 1985 repealed the Home Purchase Assistance and Housing Corporation Guarantee Act 1978 with regard to England and Wales. However, as it remains in force for Scotland, the Scottish draftsman has advised that this amendment should be made to be consistent with the amendment made to Section 450 of the Housing Act 1985 during the Committee stage.

    Turning now to Amendment No. 68, this amendment was also recommended by the Scottish draftsman and it deletes references in the Home Purchase Assistance and Housing Corporation Guarantee Act 1978 to provisions of the Building Societies Act 1962. The Government amendment to Schedule 18 amends subsection (1) of Section 3 of the 1978 Act to take account of the Bill. I beg to move.

    On Question, amendment agreed to.

    Schedule 19 [ Repeals and revocations]:

    Page 268, line 36, at end insert—

    ("1974 c. 47. The Solicitors Act 1974. In section 32, in sub-sections (1) and (2), the word "banks'".").

    Page 268, line 39, at end insert—

    (" 1978 c. 27.The Home Purchase Assistance and Housing Corporation Guarantee Act 1978.In section 3, subsections (2) to (4).").

    On Question, amendments agree to.

    Schedule 20 [ Transitional and saving provisions]:

    Page 272, line 33, leave out ("alterations") and insert ("alteration").

    Page 273, line 15, leave out first ("rules") and insert ("rule").

    The noble Lord said: My Lords, I beg to move these two amendments together. They are drafting amendments. I beg to move.

    On Question, amendments agreed to.

    Page 280, line 25, leave out ("three members and").

    The noble Baroness said: My Lords, this simply makes clear that the procedure for registration of the rule alteration in paragraph 18 of Schedule 20 is in line with the other alterations. I beg to move.

    On Question, amendment agreed to.

    Clause 124 [ Recognition of building societies, other institutions and individuals as suitable to provide conveyancing services]:

    Page 175, line 26, leave out ("building societies, other").

    The noble Lord said: My Lords, this is nothing other than a modest little drafting amendment that worships at the altar of precision and brevity. Clause 124 refers to,

    "the provision by building societies, other institutions and individuals".

    If one turns to Schedule 21, one will see there the definition of "institutions". That embraces building societies; so the reference to building societies is quite unnecessary within this clause, in my view. No doubt I am quite wrong and I shall be glad to hear what my noble friend has to say on the matter.

    My Lords, the reference to building societies in this clause is deliberately included. It ties the provision into Schedule 8 which gives building societies power to offer conveyancing services which they would not otherwise enjoy. It is anticipated, moreover, that building societies, because of their particular interest and place in the housing market should be mentioned specifically as the kind of institution who wish to offer conveyancing services. The reference in this clause may not be strictly necessary, but it exists as a guide to the intention of the legislation. Tempting though it may be to try and show the parliamentary counsel have for once got it wrong, I think on this occasion my noble friend should bow to their endeavours. I therefore invite him to withdraw the amendment.

    My Lords, I shall of course be withdrawing the amendment, but that explanation lends credence to my rather cynical observation at Second Reading that the reason why building societies were unnecessarily included in this clause was because they were desperate to drag this part of the Bill screaming within the scope of the Bill; but there we are. I beg leave to withdraw the amendment.

    Amendment, by leave, withdrawn.

    [ Amendment No. 73 not moved.]

    Page 285, leave out lines 12 to 14.

    The noble Lord said: My Lords, this is a technical amendment to remove paragraph 9(2) of Schedule 21. Paragraph 9(2) excludes the applications of the Estate Agents Act 1979 to recognised institutions. As the paragraph stands and taken in conjunction with the definition of conveyancing services in paragraph 1(3) it disapplies the 1979 Act from institutions providing both estate agency and conveyancing services. The result of the amendment will be that recognised bodies will be subject both to the recognition rules and to the provisions of the Estate Agents Act where they offer both conveyancing and estate agency services. I beg to move.

    On Question, amendment agreed to.

    Clause 126 [ Commencement]:

    Page 176, line 2, after ("section") insert (", in Schedule 20, paragraph 7 (and section 120 (4) so far as it relates to that paragraph)").

    The noble Baroness said: My Lords, this apparently rather complicated amendment is simply designed to ensure that paragraph 7 of the Schedule 20 comes into force on Royal Assent. Paragraph 7 is a vital provision in the Bill which makes it clear that certain work may be done by building societies in preparation for the operation of their new powers in advance of the coming into force of the new main part of the new Act and of the ability actually to operate these new powers. I beg to move.

    My Lords, at this stage the House should be grateful to the noble Baroness, Lady Gardner of Parkes, for moving what appear to be so many government amendments, and so saving the face of the Government in moving an even larger proportion of government amendments at Report stage than they did at the Committee stage.

    My Lords, I can assure my noble friend that these are not government amendments which the noble Baroness has been moving. I understand they have been suggested to her by the Building Societies Association, although the noble Baroness speaks on her own behalf. Nevertheless, I have great pleasure in accepting this particular one.

    On Question, amendment agreed to.