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Co-operative and Community Benefit Societies and Credit Unions Bill [HL]

Volume 715: debated on Friday 11 December 2009

Second Reading

Moved By

My Lords, the Bill began as a Private Member’s Bill in another place, piloted through there by Mr Malcolm Wicks. It passed all stages in the House of Commons, but when it reached here, it was subjected to a critical report from both the Delegated Legislation Committee, and, perhaps more significantly, the Constitution Committee. Those criticisms were, quite properly, picked up by the noble Baroness, Lady Noakes, and formed the basis of certain amendments that she tabled.

It was impossible to make the necessary progress before prorogation, so, in essence, the Bill that I am introducing today has exactly the same purpose as the previous Bill, but the technical problems that were brought to our attention by the two committees and by the noble Baroness, Lady Noakes, have now, I hope, been ironed out. Certainly the Select Committees have given the Bill in its present form their blessing. I again express my gratitude to the committees and to the noble Baroness for their careful scrutiny of the Bill and for their constructive criticism, which has led to what I hope noble Lords will agree is an improved version of the Bill before the House today, and one which I hope that the House will be able to adopt in its present form.

I do not propose to go over all the background to the Bill or to sing the virtues of its subjects. Suffice it to say that, as far as I am concerned, it is axiomatic that co-operatives, community benefit societies and credit unions are good things. They are good of themselves, but they have been working in a very out-of-date legislative framework. The Bill, taken together with the legislative reform order which the Treasury will be introducing, makes the legal framework fit for the 21st century.

I mention the legislative reform order because the Bill arises from a wide public consultation on co-operatives, community benefit societies and credit unions. Everything that can be done by way of a legislative reform order will be introduced by the Treasury in that form, but essential parts of the outcome of the public consultation depend on primary legislation, and the Bill addresses that. As I said, the Bill forms part of a package to reform legislation affecting industrial and provident societies and credit unions. The Government will introduce their legislative reform order, but today I draw your Lordships’ attention to the framework changes set out in the Bill.

Clause 1 deals with a change of name. It provides that societies wishing to register under the Industrial and Provident Societies Act 1965 shall be registered as co-operative societies or community benefit societies. Clause 2 changes the name of the Industrial and Provident Societies Act 1965, and other Industrial and Provident Societies Acts, removing a term, “industrial and provident societies”, which I believe is somewhat outdated—much more a 19th and early 20th century term—from the statute book.

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

Clause 4 gives the Treasury power to apply to industrial and provident societies, with appropriate modifications, company law on the investigation of companies, company names and dissolution and restoration to the register. I shall give two or three examples. It gives the Treasury power to apply company law on striking off and dissolving defunct societies by the registrar of industrial and provident societies, which will become the Financial Services Authority, with appropriate modifications, which will include allowing the assets to be transferred to a society with similar objects. It also gives the Treasury power to apply company law on the investigation of companies and the requisition of documents to industrial and provident societies by giving the Financial Services Authority powers equivalent to those of the Secretary of State for Business, Enterprise and Regulatory Reform. Finally, it gives the Treasury power to apply company law provisions about company names, including general requirements on company names, indications of company type or legal form and power to direct a company to change its name if it is similar to other names, if the company provides misleading information in order to register by a particular name or if the name of a company gives a misleading indication of its activities.

Clause 5 enables provisions corresponding to building society law to be made for credit unions. The power will allow any provisions of building society legislation that are deemed appropriate to be mirrored for credit unions. Building society law has been tailored to deal with this use and is specific to institutions that accept deposits. It is therefore a suitable model to allow credit union law to keep pace with credit unions’ expanding membership and operations. Clauses 6, 7 and 8 deal with technical issues, such as the making of consequential amendments and regulations under the Bill, commencement and territorial extent.

I shall briefly address the major amendments to the original draft of the Bill. I again express my gratitude to all those who by their diligence in scrutiny led to the reconsideration. The Bill contains the same substantive changes to legislation that were set out in its predecessor, but the concerns that were raised about it form the basis of the amendments. The Delegated Powers Committee supports the amendments to the Bill and the Constitution Committee, in its first report for the Session 2009-10, which was published yesterday, also supported the changes. In essence, the concerns were in connection with powers granted to the Treasury to import measures from the Companies Act in relation to industrial and provident societies under Clause 4 and to apply building society law to credit unions under Clause 5. Specific concerns were expressed in respect of the powers granted to the Treasury to create criminal offences and of the fact that there was no express duty in the Bill to consult before making regulations under Clause 4. In addressing these concerns, I draw your Lordships’ attention to Clauses 4(7)b and 5(1), which ensure that the Government can create offences only in circumstances corresponding to the offence in the legislation being applied and subject to a maximum penalty no greater than is provided in the corresponding offence. Additionally, I refer your Lordships to Clause 4(8), which makes explicit the requirement to consult before assimilating company law measures into industrial and provident society legislation. Such a requirement to consult in relation to building society law and credit unions existed in the previous draft of the Bill and is contained in Clause 5(6).

The co-operative sector and credit unions fully support the changes in the Bill and the legislative reform order that has been laid in another place. I hope that your Lordships will agree that the Bill provides much-needed amendment to legislation that has grown sadly out of date and that they will support its passage as quickly as possible.

I am not going to repeat what I said in the previous Session about how strongly I support the co-operative sector, the community benefits sector and the role of credit unions, particularly in the present economic circumstances. That should be taken for granted. Today, I am dealing with the technical differences between this Bill and the previous Bill. I beg to move.

My Lords, it is a great pleasure to follow the noble Lord, Lord Tomlinson. I fully support everything he said. The House owes him a debt of gratitude for picking up this Bill and having the presence of mind to persuade the usual channels to give it a fair wind and an early start. It will need them if it is to reach the statute book in good order and due time. I hope it will, and I pledge myself to do everything I can to assist that progress.

I have two preliminary points. First, it is reassuring that the processes in this House have so acutely picked up any potential defects in the legislation. We should take some comfort from the fact that this place works so well. The committees that work behind the important considerations given to these issues in the Chamber do valuable work and we owe them a debt of gratitude.

Secondly—perhaps the Minister can help me understand this; I freely confess that I have stolen the point from my noble friend Lord Newby’s speech on a previous Second Reading—I do not understand why this important tranche of financial legislation is left merely to Private Members’ consideration. I do not mean to say that Private Members’ consideration is not important, but if we think that this element of the nation’s financial provision is as serious as some of us think it is, is it any longer safe to leave it to them? Members have difficulty in ensuring that they get all the provisions right. Perhaps it is just convention and practice. If so, perhaps I may simply make a plea that the Treasury should think about taking the matter in-house, looking after it and doing it as government business in future. I hope that this business will prosper and develop; and if it becomes much bigger, the legislative framework should be undertaken by the Government.

I declare an interest. I am a non-remunerated, non-executive director of the Wise Group, a social enterprise that provides intermediate labour markets in Glasgow. Part of that experience has reminded me of the issues that the noble Lord, Lord Tomlinson, referred to at the end of his excellent speech. These organisations are qualitatively different for a series of reasons. My Co-operative divvy number was 22919; I bet that the Minister cannot remember his. There are two types of person in this debate today: those who remember their divvy numbers and those who do not. Maybe he does not have one, or maybe memory loss affects us all as we advance. I used to use it as my computer password because it was the only number that I could ever remember. These are important matters.

As well as congratulating the noble Lord, Lord Tomlinson, I must say in passing that the excellent Mr Malcolm Wicks, who is a serious player, did the issue splendid service in the House of Commons. I enjoyed and learnt a lot from reading his speeches. He has had a deep interest in this matter for a long while.

There is a renaissance available to us. This is a technical Bill. The noble Lord, Lord Tomlinson, has explained exactly what it seeks to do. It is right that it should and important that it does, but it is not sufficient to leave it there. We need to understand, again as the noble Lord, Lord Tomlinson, said, that there is a timing issue here. It is apposite for this House to pass the Bill, but in passing it we must recognise what contribution we can make in the circumstances in which we will find ourselves in the future.

Mutuality is based on 19th century philosophy, which I will not go back to. It underpins local loyalties and enhances the idea of collectively owned assets. These organisations are basically run democratically. They meet mutual needs and have no requirement to make a return on capital. All these things make them special and apposite for the financial circumstances that we face as a country at the moment. In addition—I have learnt this from my experience in the Wise Group—they generally operate at lower cost because they can galvanise volunteer activity very positively, which helps, they serve specialist markets, but more than anything else they promote local loyalty.

My interest in this House is low-income families and low-income communities, and more than anything I think that promoting an attachment to people’s local circumstances is missing from the work that is being done to increase the amounts of money available to low-income households. Actually, you need to do more than that, which is what the mutuality of co-operative credit unions and other organisations of that kind does. There is an urgent and important need to promote and develop these organisations right now as we go into the three-year public sector spend period, which will be very difficult, during the next Comprehensive Spending Review.

I agree with the noble Lord, Lord Tomlinson, that one of the most important things that this Bill will promote is a new image, a refreshing of the brand, an intelligent encouragement of the thought that this is useful and compatible with the internet age, because it can be if it is promoted properly. It is also a very good fit with a lot of other government policy goals. The consultation was referred to earlier. I acknowledge that the Government have done a lot of work in this area, and I do not think that anyone can deny that, but it needs further promotion and development. An example of an important government policy fit is the important work that the FSA is doing on financial capability and the pilot projects on face-to-face financial advice.

Another thing that credit unions do is to enhance greatly people’s understanding of what financial arrangements they need to make for themselves in future. It is self-help in the very best sense and it is needed now more than ever. Credit unions are very important. They have developed very positively, but they need further attention and support. Importantly, as the recent Joseph Rowntree Foundation report said, credit unions are not just for poor communities. They are for communities across the board, and if they become organisations that are exclusively for the poor they will become poor organisations as a result. We need to bear that in mind. All sorts of communities throughout the length and breadth of the United Kingdom should consider promoting the interests of credit unions more generally.

The Government are in the very important position of being able to offer contracts to some of these new community-benefit organisations and mutuals. As an organisation and a service provider, the Government can offer service deals to a lot of these companies. I know this from the Wise Group, because we are applying for some of the Flexible New Deal contracts. These are very big contracts. These are not penny numbers, or street-by-street organisations competing for tiny amounts of money. It is now possible, with support and proper governance and advice, for social enterprise companies to compete with the biggest and the best in the private sector to offer their services for public-service delivery in the future, and the Government should promote that more actively.

Indeed, I would go further. Given that we are introducing programmes and pilot schemes such as those for the Flexible New Deal, we should encourage people who have been unemployed for long periods to consider setting up mutual organisations and becoming involved in that sort of activity, as well as considering important advice and suggestions about moving towards self-employment. There is a lot that the Government could do, and I hope that the government Front Benchers will think about that very carefully.

Finally, with all the work that is being done on the legislative reform order and the process that I know is ongoing, I hope that the momentum is being kept up. We have obviously lost a little time with the Bill, for the reasons that the noble Lord, Lord Tomlinson, has perfectly well explained, but I hope that the Minister can give us some assurance that, in addition to this Bill, there is activity downstream on the LRO, so that the other changes that can be made and that will fit behind the primary legislation that we are considering this morning are actively and urgently pursued.

I am very pleased to support this Bill. I hope that the Government understand the need to generate more interest around the whole subject, in addition to the valuable work that they have done in the past, and that the government Front Benchers will not only support the Bill but will champion the cause in future.

My Lords, I am very happy to reiterate the words of the noble Lord, Lord Kirkwood, in congratulating the noble Lord, Lord Tomlinson, on introducing this Bill for the second time in five months, in addition to initiating a debate some two months ago on this very subject. These efforts crown his apparently many decades of distinguished and conscientious service to the principle of mutuality and co-operation. I have no doubt that this Bill will have impact and considerable importance in a wide area, both socially and financially.

I will confine my remarks this morning to credit unions, which in one respect are the most classical form of mutuality possible. They were once described as people’s efforts on behalf of people. That is as good a definition of mutuality as one can ever have. I have no doubt that Clause 5 will greatly strengthen the legal and commercial position of credit unions. I appreciate also that the Treasury will make use of delegative framework powers, which are contemplated if they have not already been used, in this connection.

Credit unions have functioned now for well over 100 years. I understand that they started in Germany among agricultural workers, and spread to France, and throughout Europe, and to North America and the wider world. The effect is that in many countries they are massive institutions. The noble Lord, Lord Kirkwood, made the point that they should be something more than poor people’s institutions. In the Republic of Ireland 50 per cent of people belong to a credit union; in the USA and Canada the figure is over 30 per cent and in Australia it is over 20 per cent. That is the tragedy, if I may so describe it, of the situation in the United Kingdom. I have calculated that at most about 1.2 per cent of our population belong to credit unions.

Despite that, there are 450 to 500 credit unions in the United Kingdom. They have a membership of not far from 700,000, they have assets of about £500 million and last year their income was in excess of £30 million. That is not insignificant, but it is not in the same league as what has been achieved in so many other parts of the world.

The point that is obvious to us all is that there never was a situation more propitious for credit unions to flourish than exists at present. Infinitely more importantly, there was never a greater need for them. We were reminded in the debate a couple of months ago by the noble Baroness, Lady Noakes, that in Britain the average household debt is some £70,000 per family, of which about £9,000 is unsecured. She also reminded the House that one-third of the adults of this country have no savings whatever, and that among single parents the figure is in the order of two-thirds. These are chilling figures but they form the background to the real relevance of credit unions in this situation.

In this situation where the financial crisis is something that is very near to millions of families, all that is needed is one small factor to operate and people find themselves desperately in need of money—not huge sums very often, perhaps even as small as a few hundred pounds, but they face a critical situation unless that money can be found swiftly. Where can they turn to? Apart from credit unions, in theory they can turn to the high street banks, but those banks do not want to know them. These are small, finicky transactions, and the banks do not regard them as a seam of prosperity. Then there are the sub-prime lenders. Some such lenders are fairly decent but many charge monumental rates of interest, have punitive conditions in respect of default and act unconscionably when it comes to restructuring loans.

Lastly, there are the loan sharks. Their rates of interest are even higher. Someone once asked what the difference was between the worst of the sub-prime lenders and the loan sharks. The real difference is that the sub-prime lenders go to court and manage, usually by a default order, to have a judgment in their favour. The loan sharks use the heavy mob, Alsatian dogs, iron bars and all the other impedimenta of unlawfulness. Some of the cases that have appeared before the courts in the past few months have been utterly shocking. Thousands of people must be held in thrall by these thuggish and inhuman tactics.

That leaves credit unions. What can one do to strengthen the position? I have no doubt that Clause 5 will achieve that, and I have no doubt that the framework powers that I have referred to will bolster it as well. Over the past three years the Government have allocated about £100 million to credit unions, and apparently that has assisted above 160,000 people. I argue that with a stronger legal and commercial base, which this legislation will bring about, the Government should look to much more substantial assistance than that. Few people will have suffered the economic circumstances of the past few years as badly as these people now who are in need of that very assistance with regard to credit unions. Of course one can argue that these are difficult times and that the Government must look to every penny, but in view of the massive assistance that has been given to the banks—I do not cavil at that, because all the other alternatives would have been far worse—then it is only right and proper that a much more substantial subvention should be considered.

Local authorities have their parts to play, and often do so, in providing rent-free premises and giving advice and assistance to credit unions, as has the Assembly of Wales, which has shown a great pioneering spirit in this connection. It may be, though, that in practice the most relevant thing that could be considered at the moment is a partnership, though not a marriage, between the Post Office and credit unions. Credit unions have an important product—cheap and available credit for those who need it—but they have no distribution system. They are small, localised micro-units. The Post Office does not have a product but it has a distribution system. Put the two together and you have the possibility of considerable success. I wish the Bill godspeed in the limited road space that it has between now and the end of this Parliament.

My Lords, these Benches are also keen to support the general thrust of the Bill, Anything that can draw people together in what in our day-to-day prayers we call the building up of our common life with the trust and support of one for another is to be welcomed. It is the foundation of common life in this country that we have a mutuality of concern for one another, and unless that has some secure basis in the way that we legislate to live our life together, we will see increasing fragmentation.

In the diocese of Salisbury some seven credit unions have been set up in the past 10 years, all of which are working well, while one of my priests in Poole has been chairman of the national organisation of credit unions and is himself working to set up a credit union for the sake of the clergy, to assist them in facing those peaks of expenditure when their income is rather inclined to remain on a plateau. I welcome these initiatives and the detail of the legislative framework that lies behind them.

I want to speak about the importance of these credit unions and their social benefits. The positive benefits that credit union membership brings to communities are huge—especially to those on low incomes, of course, but also to everyone else who participates in them. I participate in a credit union, partly because I think it is important for people not just to use these institutions when it might be convenient to them. We all know that their origins are in the social management and help of one for another in the working years of the industrial revolution in the 19th century, but we all need to support these kinds of ventures because otherwise people will imagine that we are interested only in those banking organisations that exist primarily to make money for those who have shares in them. The reason why in many cases people do not get much out of a high street bank, as the noble Lord just now referred to, is just that: a high street bank will calculate what profit is in it for itself, rather than who needs cash now not to fall into serious debt or become the victims of a loan shark or worse.

The noble Lord referred, too, to the heavy mobs going in. I have seen the results of that in estates on the edge of Poole. Noble Lords may think that I have a leafy diocese but one-quarter of its population lives in Poole, a substantial area with its own estate cultures and one or two rather dangerous no-go areas. It has been just as he says in recent months and years, primarily as a result of the unavailability of credit of any kind when something happens that to you or me might be of very little significance, like a washing machine exploding. But, in that kind of context, the replacement for people on very low incomes and living in very small housing units, something in which they can wash their children’s clothes is of considerable importance and they have very little option. In normal ways, the banks would not lend them those kinds of sums because they would be considered to be a risk. I watch families fall into debt and for the first time, certainly since I have been in Salisbury, we have churches running substantial breakfast groups for children who are sent to school without anything to eat in the morning.

The reality is that there is a big gulf between those who have access to credit and those who do not. We need to support this timely Bill. With the mainstream banking sector in some disrepute, customers need a reliable and honest home for their money. Co-ops, mutuals and credit unions are already a significant part of the economy, with total assets of more than £400 billion and a combined membership, according to my information, of more than 30 million people. But that is not enough. We need to make this the mainstream of the way in which people bank and support each other. Because it works so well at the very local level this is really important. Often, those who have shares in the major high street banks seem to be at such a remove from those who need money immediately.

Seeing how the people next door are affected binds communities together. We talk a lot about the social glue that we need and here is a prime example of a way in which we can move to make it happen. I echo the call of my noble friend the most reverend Primate the Archbishop of Canterbury who last year called for the encouragement of locally based, entirely trustworthy, user-friendly, educationally sensitive and confidence-building methods of managing debt, such as those represented by the credit unions. I very much hope that this Bill will bring increased flexibility to the way in which these organisations can operate and will enable credit unions to work with corporate members, small family businesses, religious groups active in community work, local co-operative networks and so on, and will give the option to members of paying interest on continuing savings retained in the credit union, rather than receiving a dividend. That would be a very important sign to those who think that banking is primarily about what you can get out of it for yourself.

With this Bill being supported in all parts of the House—we will do our best to make sure that it gets through its stages on to the statute book, easily, completely and swiftly—we have a way in which to show people that our primary interest is to build local support and to get it right. I not only congratulate the noble Lord on bringing this Bill before the House again, but am pleased to note that the Government wish to support it. I look forward to what the Minister will say about how soon we can hope to see it on the statute book.

My Lords, it is a pleasure to have the opportunity to take part in this debate. I begin, as have all other speakers, in congratulating my noble friend Lord Tomlinson on bringing his baby here today after the fully understandable hiccup which took place. As the noble Lord, Lord Kirkwood, said, it proved that the procedures and safeguards in existence are for a proper purpose and that, provided there is good will, a way around a problem will be found. The noble Baroness, Lady Noakes, played a major part in causing the matter to be stopped and reconsidered, which I appreciate.

I cannot better the explanation of the Bill than that given by my noble friend Lord Tomlinson. It may be technical, but underlying its purposes are social objectives which we all enjoy. I enjoyed the reference made by the noble Lord, Lord Kirkwood, to his mother’s Co-op number. My mother’s Co-op number was 65539. In 1987, I was in the boardroom of Tesco when I was given the great honour of being the president of the Co-operative Congress, which is the biggest single honour that can be given. At that time, the headquarters of Tesco was in Cheshunt, near my patch of Enfield and Edmonton. The noble Lord, Lord MacLaurin, is a great friend of mine. He invited me to his boardroom, in a sense, to pay tribute to my contributions. He said, “Well, I think it’s not widely known but I owe a great deal to the Co-op and I can quote my Mum’s Co-op share number”, which he proceeded to do. He said, “Not many here can say that”, whereupon half the assembly of directors and chief officers recited their numbers.

I have another story about numbers. In 1948, I was paying out the dividend in the Newcastle Co-op when a book was pushed through the grille to receive the dividend. I looked up and there was Jackie Milburn. He was a hero. He said, “What can I get on this book?”. I looked at it and said, “I cannot pay you a penny”. He asked why not. I said, “Because it is in your wife’s name. Here is a form. Get her to sign it. Come back and I will pay you”. He came back the next day and asked, “How much can I get?”. I said, “There is seven pounds and 17 shillings in the book. I can pay you seven pounds and 14 shillings because you must leave three shillings”. He said, “Seven pounds and 14 shillings—that is a week’s wages”, which it was. A week’s wages for a footballer was eight pounds in the season and six pounds out of season. He said, “Thank you very much, bonny lad. If I can help you, I will”. As he walked away, I said, “Jackie, you and I know that one of these days Newcastle will get to the cup final”. He said, “Yes”. I said, “I would like to be able to write to you”. He said, “You do that bonny lad, I will get you a ticket”.

In 1951, Newcastle United got to the final. I wrote a letter: “Dear Mr Milburn, you will remember that I paid out your wife’s dividend and I would like a ticket”. I enclosed a postal order for three shillings, which was the price of a ticket to stand at Wembley. Three days later, I received an envelope with the Newcastle United logo on it. Inside was my ticket, my postal order and a compliments slip, which was simply signed, “From your Jackie”. I give that illustration to demonstrate the roots of the co-operative idea in credit unions, consumer co-ops and many others. The Co-op is going through something of a renaissance and is doing very well. That is borne out of not only the efficiency of the movement but also the conditions in which we are. It is a great credit.

This Bill will be known as the Tomlinson Bill. Malcolm Wicks is entitled to feel slightly aggrieved at the turn of events, but his Bill, which was produced by my noble friend Lord Tomlinson, was the product of consultation with the co-operative movement in all its forms. I pay tribute to the officers of the co-operative moment who were consulted and the officers of the Treasury who worked on this for a long time.

In 1997, I became the chairman of the United Kingdom Co-operative Council. I took over from Lord Carter who had produced an all-embracing co-operative Bill, to become an Act. Over the years, because of time, it turned out not to be quite the appropriate vehicle. In the past few years, every now and again, a co-operative initiative is taken. My noble friend Lord Tomlinson referred to the Industrial and Provident Societies Act. I studied 1852, 1893 and 1960s co-operative law and administration. Periodically, there is a need for the legislation to be reviewed, so I warmly endorse what my noble friend has done.

I will sit down soon in deference to the debate in the name of my noble friend Lord Morris, a matter on which a lot needs to be said and done. My noble friend, as we know, is not only a hero and champion of the disabled, he is indefatigable in pursuing his issues. His Bill is a matter of life of death.

For many in this country, the Bill before us is not a matter of life and death, but when I started out people would say, “Well, in the Co-op, we never made a millionaire and never made a pauper”. I do not think it has ever made a pauper, but in latter days it has made a few millionaires. I warmly congratulate the noble Lord, Lord Tomlinson, on the Bill and I wish it well.

My Lords, it is always a pleasure to follow the noble Lord, Lord Graham of Edmonton, when he speaks with such passion on this subject. If this sector is to flourish, it needs additional support beyond that provided by the Bill. I was therefore particularly pleased to see the noble Lord, Lord Triesman, enter the Chamber while his noble friend was speaking. He has since been taking assiduous notes from which I take it that it is only a matter of time before the FA will indeed be offering tickets at three shillings each to co-operative, credit union and benefit societies that perform well, to his great emporium in Wembley.

It is a great achievement for the noble Lord, Lord Tomlinson, to get his Bill back into the House so quickly after it was derailed at the last turn in the previous Session, so we are all pleased that he has done that. The problems that arose with this Bill previously demonstrated a more general issue that Parliament often has with legislation: the problem of what you put on the face of the Bill and what you leave to regulation. Now, as the Constitution Committee has made clear, the balance is right. Clearly it would be ludicrous to put into the Bill the 811 references to friendly societies in the existing legislation, but equally it is sensible to set out the other provisions that are now in place.

I do not intend to repeat the points I made in our earlier discussions on the Bill about the values of mutuality. Indeed, the speeches we have heard, particularly those of the right reverend Prelate the Bishop of Salisbury and my noble friend Lord Kirkwood about both the need for and the positive activities that are already taking in this sector have made the arguments very well. But as my noble friend Lord Kirkwood said, the Bill is not sufficient if we want to see this sector to grow as we would like. For it to do that, it may be necessary for a raft of other things to take place. We have to accept that in the current climate, much as we would like it, the sector will not grow as the result of additional government expenditure. Frankly, that is pie in the sky. I think it is fair to remember that the great expansion of the co-operative movement and the initial growth of the credit unions did not take place because the Government wanted it, but because people did. Unless people want these institutions and can see their relevance, they will not grow in any event.

However, that does not mean that the state in its various guises cannot help in various ways. The comments made by the noble Lord, Lord Elystan-Morgan, about the Post Office are relevant here. To many of us, the Post Office seems almost to have been scratching around looking for additional roles and not being very successful at finding them, not least because of the permanent crisis at the top of Royal Mail as a result of the industrial relations problems over many years. However, the Post Office is an infrastructure looking for a role and credit unions are a role looking for an infrastructure, so there is a potential marriage here. Bringing it about would require a considerable act of will by the Post Office rather than the credit unions because they are small and can do little unless the Post Office moves towards them. I hope very much that we will see such moves. I cannot say that I am completely optimistic given everything else that is happening in the Post Office, but I hope that we will see some movement.

Another area that has been touched on is that of the procurement rules and the need for local authorities and other public sector bodies procuring services to ensure that, as far as possible, those rules are compatible with the capacity of ordinary mortals to fill in the forms and bid successfully for business. At the moment, it is exceptionally difficult to secure public sector contracts unless you are a real expert in filling in the forms. Obviously a rigorous process is necessary, but I do not think that the state in all its guises has been good at providing a user-friendly process. Ministers talk a lot about small businesses bidding successfully for government contracts, but frankly, most small businesses would run a mile when they see the forms. Having grappled with them myself in the course of running my business, and as someone who is not bad at tackling forms, I know that I have fallen foul of them on a number of occasions. Sometimes I have just stopped because I felt that I did not have the will to complete them. I hope that further work is done by local government and others to see how to make the procedure more user-friendly.

The final challenge is one of ambition. Many co-operatives, community benefit societies, social enterprises and credit unions necessarily start small and then continue to think small. When you talk to them it is clear that they are very proud of what they do, and often they are delivering public services more cheaply and effectively than the bigger state bodies. However, they suffer from the same problem as many NGOs in the past: they are good at doing something small, but do not know how to do it big. The challenge is how to encourage greater ambition and management capacity in the sector. When we discussed credit unions a couple of months ago, again at the behest of the noble Lord, Lord Tomlinson, I suggested that there should be an industry-wide programme from the banking world and the financial sector more generally under which bankers would spend pro bono time working with credit unions in the same way as lawyers do a lot of pro bono work, particularly in education but in other sectors as well. The noble Lord, Lord Myners, kindly took up my suggestion and wrote to Angela Knight at the British Bankers’ Association suggesting that it might look at this. This happened only recently and I know that the BBA has had one or two other things to consider, but I wonder whether the Minister could let me know whether his noble friend had a reply to that letter.

More generally, just as my noble friend Lord Kirkwood is on the board of the Wise Group, many Members of your Lordships’ House already serve on the boards of community benefit societies or enterprises and play a valuable part in them, not least in explaining how the system works to people who, while extremely well-meaning, highly motivated and hard-working, feel outfaced when they encounter what they see as huge entities with which they need to contract if they are to be successful. Perhaps we should have a Peers’ mentoring or trustee initiative to get Members of your Lordships’ House, who between them have a great deal of relevant experience including on boards in the commercial sector, to do more in this area. We need a range of additional measures to supplement the very good provisions contained in the Bill.

My Lords, here we are again with the Co-operative and Community Benefit Societies and Credit Unions Bill. Let me remind the House that while this Bill has the appearance of a Private Member’s Bill, it is to all intents and purposes a government Bill. I understand that the Treasury drafted the first version which did not complete its passage during the previous Session, and to my knowledge it has certainly drafted the revised version before us today. That said, I join others in paying tribute to the noble Lord, Lord Tomlinson, for persevering with the Bill. Last summer, as we have heard, he introduced the first version after it managed to navigate the obstacles put in the way of Private Members’ Bills in another place. As the noble Lord, Lord Tomlinson, has said, that Bill was found wanting by both the Delegated Powers and Regulatory Reform Committee and the Constitution Committee of your Lordships’ House.

One of the most important tasks of your Lordships’ House is to prevent badly drafted legislation becoming law. However good the intentions behind a Bill—and, in its first version, the Bill was manifestly well intentioned and remains so—it is our duty not to pass into law substandard drafting. I am pleased that noble Lords around the House have supported the crucial role of your Lordships’ House in that today.

I tabled amendments to the previous Bill in order that the House could consider the points raised by the committees. Having done that, the Bill could only have completed its passage before prorogation in November if the Government had been prepared to co-operate in making the changes; in particular, that required them to modify their approach to the handling of Private Members’ Bills in another place. The Government chose not to pursue that course, even though it was a Private Member’s Bill in name only. We were disappointed with that.

However, the noble Lord, Lord Tomlinson, did not take this lack of support lying down. He has pursued the approach, which we on these Benches suggested to him, of tabling a perfected version of the Bill early in this Session as his own Private Member’s Bill. He has, of course, as I have noted, been assisted by the Treasury in doing so, but we should be clear that it is the noble Lord, Lord Tomlinson, who has pushed it forward.

I thank both the Delegated Powers and Regulatory Reform Committee and the Constitution Committee for considering this latest version of the Bill so promptly in this Session. Both committees raised points in relation to the order-making powers in Clauses 4 and 5 of the first Bill, and both committees, as the noble Lord, Lord Tomlinson, has said, are satisfied that their points have been addressed in the revised Bill.

The Constitution Committee also raised important points in connection with Clause 6, which was, and is, drafted in a wide and unspecific way. It felt that the Treasury should have identified the consequential provisions that it needed to alter in advance of drafting legislation. The Treasury said that this was the way that it usually did things. Reading between the lines of the Constitution Committee’s report, it has accepted, quite sensibly, that having 811 existing statutory references to cope with was an acceptable reason for not pursuing a more detailed drafting approach in this Bill. However, as a matter of principle, it does not accept the Treasury’s usual way of doing things, which is to draft a skeleton Bill and then flesh it out in largely unscrutinised secondary legislation. The Treasury is not the only department which likes to draft its Bills in a skeleton way and I hope that the whole of Whitehall has noted our Constitution Committee’s warning that it will remain vigilant over this kind of drafting.

The Bill is relatively modest in its scope as it brings co-operative and community benefit societies and credit unions within the architecture which exists to regulate ordinary companies. For example, the powers in relation to the disqualification of directors may not amount to much in practice because relatively few are likely to be disqualified, as we have found with the use of the powers in relation to companies. However, we hope that they will be a strong reminder to those who take governance positions that they must follow the highest standards in relation to the organisations that they lead. These are extremely good things.

Like other noble Lords, I am not going to repeat the speech that I made on Second Reading of the first version of the Bill other than to reiterate that my party supports diversity of provision of financial services and, hence, supports credit unions and other financial mutuals for their contribution to that. As the right reverend Prelate the Bishop of Salisbury and the noble Lord, Lord Elystan-Morgan, reminded us, they play a crucial role in reaching parts of society which conventional financial services organisations either cannot reach or do not want to reach.

I shall not pursue that further but I should like to pick up on one or two points that arose in our debates on Second Reading of the first version of the Bill and which are worth pursuing again today. At the first Second Reading I asked the Minister when the Government planned to introduce the secondary legislation that the Bill provides for. I did not get an answer in the debate in July but the noble Lord, Lord Myners, wrote to me subsequently to say that Clauses 1 to 3 would be dealt with as soon as practical—that time-worn phrase—but that Clauses 4 and 5 would be subject to further consultation with the sector in order to see what the sector would like the powers used for.

I have a couple of questions for the Minister about this. First, can he give the House an idea of the timing for the Bill overall, on the assumption that it can proceed through your Lordships’ House without substantial Committee or Report stages? When could it receive Royal Assent? Put simply, does it have a chance of becoming law if we have an election in, say, late March or early May? Would either of those timings allow the Government to introduce the relevant orders before likely dissolution? That is, does “as soon as practicable” mean that it will be in this Parliament? In relation to the more substantive powers of Clauses 4 and 5, can the Minister say a little more about the consultation? Will it take place in advance of the Bill receiving Royal Assent or must it be a sequential process?

I was intrigued by the reference of the noble Lord, Lord Myners, to consulting on what the sector wanted to do with these powers. The use of Clauses 4 and 5 should be a matter of public policy and the Treasury should have a clear idea of what it wants to achieve with those powers. Indeed, the Treasury should be consulting on what it believes should be achieved with the powers and not on what the sector wants to achieve. For example, implementing the powers for investigations, as allowed for by Clause 4(2)(a), should be a matter of policy whether or not the sector wants those powers. Can the Minister enlighten the House on that?

In another area, we know that the most important changes to credit unions will come not from this Bill but from the legislative reform order which has been consulted on. The noble Lord, Lord Myners, told the House in July that this reform order would be published in draft by the end of last July and would be laid before Parliament when the House returned from Recess in October. As I understand it, none of this happened in the previous Session of Parliament but a draft order was laid before the House in late November. I also understand that this will be dealt with by the super-affirmative procedure. What timetable are the Government working to in respect of this order? Furthermore, can he say whether the Government think it is appropriate to complete the processes in relation to the legislative reform order in advance of the Bill of the noble Lord, Lord Tomlinson, receiving Royal Assent; that is to say, are they connected together or are they entirely separate processes?

The Bill is, in part, about the governance of credit unions and other financial mutuals and I have one last question for the Minister relating to governance. In our Second Reading debate in July, the noble Lord, Lord Myners, told the House that the Treasury had asked Sir David Walker to extend to mutuals his review of corporate governance of financial institutions. This seemed to be a most interesting development and so I looked carefully through Sir David’s helpful report, which was issued late last month. As far as I can see, he has not addressed himself to financial mutuals. I searched the rather lengthy document with a search tool and could find no reference to building societies, none to credit unions and only a few references to the word “mutual”. The only organisation with the word “mutual” that comes up in the search is “Old Mutual plc” which, as I am sure noble Lords know, is not the kind of mutual that we have been talking about today.

I know that it is a slightly unfair question to the noble Lord, Lord Faulkner—who is the Minister today—because he is not the noble Lord, Lord Myners, but he will be able to help the House with whether Sir David Walker will produce anything about governance in financial mutuals. If that is not the case, what will the Government do to ensure that high standards of governance in financial mutuals, corresponding to those developed for banks and other financial institutions, exist?

I know that the noble Lord, Lord Tomlinson, is now interested only whether I shall table amendments to the Bill, so I shall conclude by offering my Christmas gift to him and say that I have no intention of tabling any amendments to the Bill.

My Lords, I think that the final words of the noble Baroness’s interesting and supportive speech will be a Christmas present for everybody in the House. It will come as no surprise to her and the rest of the House that the Government fully support this Private Member's Bill, so ably introduced by my noble friend Lord Tomlinson. We have noted that support for it has come many from parts of Great Britain represented in the Chamber today: from Scotland, from Wales, from the Church and, in a very spirited way, from the north-east of England. We learnt about the role of the co-operative movement in ensuring that my noble friend Lord Graham got to the 1951 cup final.

My Lords, the Government recognise the need to develop the legislation affecting co-operatives generally. This Bill makes a valuable contribution in improving governance and administrative arrangements, which are lacking in the current legislation.

A number of noble Lords, particularly the noble Lord, Lord Kirkwood of Kirkhope, and the noble Baroness, Lady Noakes, referred to the legislative reform order. I can answer their questions straightaway. The LRO process and the Bill process are quite separate, and one is not dependent on the other. With the LRO, there is a 60-day super-affirmative resolution procedure. My understanding is that the next committee scrutiny is on 13 January, followed by another on 19 January.

The noble Baroness asked whether the Bill has a chance of becoming law before an election either in late March or in May. It is hoped that it will receive Royal Assent in March, which will mean that there is a possibility that commencement on Clauses 1 to 3 will be undertaken before the election, but, as she pointed out, Clauses 4 and 5 will provide specifically for consultation with the sector, so their implementation will be after the election.

The noble Lord, Lord Kirkwood, made the fair point that this should perhaps be a government Bill rather than a Private Member's Bill. I agree with him about that, but given the pressure on the Government’s timetable, it seemed to make much better sense to proceed with a Private Member's Bill today and as rapidly as possible so that we could progress this legislative reform of industrial and provident societies immediately. There is obviously nothing to stop a future Parliament coming back to the subject.

As many noble Lords have said, a Bill similar to this one was introduced in the previous Session—it was passed unamended in the other place. I am delighted that so many speakers in today’s debate have drawn attention to this House’s role in exercising scrutiny on it. The Delegated Powers and Regulatory Reform Committee, the Constitution Committee and particularly the noble Baroness, Lady Noakes, all made proposals which have strengthened and improved the Bill considerably. That the two committees and the noble Baroness have exercised the opportunity to scrutinise in this way and propose changes and improvements is very much to the credit of this House. I endorse the comments of other speakers to that effect.

The Bill was criticised in a number of ways, particularly in terms of consultation on measures that would have been introduced via secondary legislation. It was criticised also because it created the risk that new criminal offences and higher penalties might be introduced when assimilating either company law into the industrial and provident society legislation, or building society law in relation to credit unions. The Bill in front of us today takes account of those concerns.

The Delegated Powers and Regulatory Reform Committee commented on the new Bill in its report published on 3 December. The committee expressed the view that issues to which it had drawn attention previously concerning offences and penalties are addressed satisfactorily in the new Bill. Likewise, in a report issued only yesterday, the Constitution Committee confirmed that it was satisfied with the safeguards added to the Bill in its present form. It welcomed the new provisions at Clauses 4(7)(b) and 5(1), which address the specific concerns raised in respect of those clauses. It also accepted the explanation provided by the Financial Services Secretary to the Treasury concerning the operation of a power conferred on the Treasury to make consequential amendments to legislation under Clause 6. Having originally expressed concern that provisions requiring amendment should be identified before the introduction of the Bill, the committee accepted that the number of consequential amendments required, particularly as a consequence of the renaming of industrial and provident societies as co-operative societies or community benefit societies, are such that this would be impractical and that the power in Clause 6 is in line with current practice. The committee is content for that clause to remain as originally drafted.

The noble Lord, Lord Newby, raised a question about the letter of my noble friend Lord Myners to the BBA. I am afraid that I am unable to give him an answer on that; I certainly have not seen a reply. If one has not been received, we shall chase it up, and if one has been received, we shall make sure that it is available to the House.

Across the United Kingdom, mutuals have a membership comprising more than 30 million individuals and provide a viable alternative to the proprietary company model. I certainly endorse all the good things that have been said about mutuals and credit unions in the debate today. The co-operative-and-community-benefit-society form of mutual, being self-help and community-focused—so well described by the right reverend Prelate the Bishop of Salisbury—are owned and run by their members for their members. Mutuals, in the form of credit unions, instil and encourage a savings culture among their members. They play an important role in supporting and promoting many government initiatives such as ISAs and child trust funds. I very much endorse the views of the noble Lord, Lord Kirkwood, about their value. I should at this stage declare a personal interest as an account holder at the Co-operative Bank who can remember his account number, but, I am afraid, not his dividend number.

The noble Lord, Lord Newby, referred to how the Post Office could play a bigger role. We would very much like to look at that. The Co-operative Bank already has a close working relationship with the Post Office, and post office branches accept credit payments made in Co-operative Bank envelopes. I am sure that that co-operation can be built on.

Mutuality is appealing to many people, but the market share that mutuals have earned has been restricted because the law governing their operation has not kept up with company and charity reforms of recent years. The Government recognise this and wish to modernise and update the legislative and regulatory framework to meet the current and future requirements of the mutuals sector. The LCO is a further example of how we are taking this forward.

The Bill seeks to update the legislation for co-operatives, community benefit societies and credit unions. The proposed changes are welcomed by the sector and come as a result of the Treasury consulting on these issues and listening to what the sector says that it would like. The sector is highly regarded by the Government, and we want to see mutuality thrive and grow. We want to see mutuals continue to offer greater choice and diversity in the financial sector and continue to make a valued and significant contribution to the nation’s economy.

I hope the House will agree that the changes that have been made to this Bill, compared to the one that we considered in the previous Session, are both necessary and proportionate and that they will help to further enhance confidence in the sector and engender good corporate governance. I feel that they make what was already a good Bill a great deal better.

I am conscious that I have not answered the very last of the noble Baroness’s questions and have a feeling that it may not be possible for me to do so this morning. However, I hope that she will allow me to write to her in the course of the next few days and give her the answer that she deserves. More than anybody else, she has helped to improve this Bill and the very least that she can expect is a sensible answer from me and the Government.

There has been cross-party support for the proposed measures. I hope that this will continue for the passage of this Bill. I and delighted to know that the noble Baroness will not be tabling any amendments in Committee. I repeat the Government’s gratitude to my noble friend Lord Tomlinson and commend this Bill to the House.

My Lords, I briefly thank everybody who has participated. When the noble Lord, Lord Kirkwood, spoke at the beginning, he made the sort of speech that I should have liked to make—the ideological case for co-operatives, mutuals and community benefit societies—but I had a fairly self-denying ordinance today, believing that my greater duty to the House was to make sure that I got the Bill through Second Reading with the support that, subsequently, we have seen. I am particularly grateful for the words of the noble Baroness, Lady Noakes, to whom I have already paid tribute, although I must stop making this look like a love-in. I was very grateful to hear from her that it is not her intention to table amendments so we can look forward to the Bill receiving a smooth reading.

I have one thing to say. There has been a lot of emphasis on credit unions from the right reverend Prelate, the noble Lord, Lord Elystan-Morgan, and my noble friend Lord Graham. There has been a lot of emphasis on the small-scale nature of co-operatives and credit unions. Let me just disabuse that slightly towards the end. Not all the business covered by the Bill is small scale. This morning I listened to Peter Marks, the chief executive of the Co-operative Group, on the radio. He was talking about the merger of the bank with the Britannia Building Society to form one of the biggest financial institutions in the country. He referred to the fact that the Co-operative Group is one of the United Kingdom’s largest farmers and the country’s fifth-largest supermarket. Although in the credit union sector a lot of the work is small scale, it is our ambition to see it grow and become greater. I am interested in the ideas put forward by noble Lords about the role that the Post Office could have in that development. But let us not think of co-operatives as being only small scale; they are very large-scale players in the economy, and the legislation is necessary for the stability of the large part of the sector as well as the potential for growth from the smaller parts.

I thank everybody who has participated. It is my pleasant duty to commend the Bill.

Bill read a second time and committed to a Committee of the Whole House.