Legislative Reform (Industrial and Provident Societies and Credit Unions) Order 2011
(Limited Text - Ministerial Extracts only)
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Lord Sassoon
That the draft Legislative Reform Order laid before the House on 19 July be approved.
Relevant document: 18th Report from the Regulatory Reform Committee
The Commercial Secretary to the Treasury (Lord Sassoon)
My Lords, industrial and provident societies—co-operatives as they are better known—and credit unions have made a long and invaluable contribution to our society. For centuries they have been a driving force for common endeavour and mutual support. From high street co-operatives to pubs and football clubs, from healthcare to agriculture and from education to local shops, co-operatives and credit unions are cornerstones of our communities.
The strength of the co-operative economy today, with more than £30 billion in turnover and more than 13 million members, is testimony to the trust and value that we place in them. Credit union membership continues to grow across Great Britain, enhancing the diversity of our financial services, with membership on track to exceed 1 million this year. Despite a difficult economic environment, credit unions continue to provide much needed finance and support to local people and communities. Co-operatives and credit unions are a key element of the coalition Government’s vision to empower local communities. Both will benefit from the changes introduced by the legislative reform order that we are debating today, which will reduce burdens and remove obstacles to enable them to grow and extend their services to new members.
The legislative reform order has been a long time in the making. Consultations with the mutual sector began in 2007, and co-operatives and credit unions took the lead in proposing measures designed to bring their regulatory and legislative frameworks into the 21st century. The proposals themselves fall into two parts: those applying to co-operatives and those applying to credit unions.
There are six proposals of benefit to co-operatives. The first abolishes the minimum age for membership and reduces it for those wishing to hold office. This will enable young people to engage more actively with their local co-op, and in some cases to become officers sitting on their local committees. The second removes the restriction on the maximum holding of non-withdrawable shares in a co-operative. This will enable co-operatives to raise capital more easily.
Lord Davies of Oldham
My Lords, the Minister greeted my arrival at the Front Bench with a slightly wintry smile earlier. Whether he thought I was late, though I assure him I was descending from the rarefied atmosphere of the Back Benches, which is why I was slightly delayed, or whether he anticipated that this debate had some hidden horrors, I am not sure. He will, however, by now have appreciated the fact, from the contributions both of my noble friend Lord Kennedy and of the noble Baroness, Lady Kramer, that this measure is most welcome and Her Majesty’s Opposition are delighted to see it being presented today.
As noble Lords have already spoken about the virtues and possibilities of the credit union and the Minister himself paid due tribute to their work, it would be otiose of me to expand on that matter and, as I am given to brevity, noble Lords will appreciate that I will take as read the reason why this order should commend itself to the House. However, I have some questions to ask, which I hope the Minister will be able to respond to. What does he expect the removal of the limit on non-withdrawal shares to be? Will this result in dominant members of a society emerging? What steps will the FSA be taking to ensure that societies do not become subject to such dominance whereby a small number of individuals might establish a very considerable influence with regard to these non-withdrawable share holdings?
On credit unions, could I ask about the removal of the common bond, which is the whole point of a credit union, because it provides the self-regulatory strength of mutual knowledge and understanding? What does this mean as far as the future of the credit union is concerned? Does it mean that credit unions will be just another form of financial organisation rather than the distinctive sort of organisation which is being commended in the speeches made so far today in this short debate?
Finally, what does the Minister expect to be the impact of bodies corporate joining credit unions? Will this not lead to small commercial enterprises exploiting the financial strength of the credit union to further the interests of their own businesses? In other words, would credit unions become tied to businesses instead of being independent? After all, one business which might supply 10 per cent of the assets of the credit union will undoubtedly be a powerful force within it.
We welcome this legislation, but I would be grateful if the Minister could give me some assurance on those limited anxieties.
Lord Sassoon
My Lords, I am grateful to the small but focused and committed group of noble Lords who have spoken with clear knowledge and some degree of passion about this, as it is important. It is clear from all sides that there is strong support for the work that co-operatives and credit unions undertake across Great Britain.