I have listened with interest to the views of the hon. Member for Bournemouth, West (Mr. Butterfill) and of my hon. Friend the Member for Normanton (Mr. O'Brien) about the five-year rule.

I have a great deal of sympathy with building societies such as the Alliance and Leicester and the Woolwich, which undertook conversion in the expectation of a five-year protection. Ten months after the Alliance and Leicester had made public its intention to convert, the Government suddenly announced in November for the first time that there would be a significant change to the five-year rule as a result of the consultation that had taken place. Naturally, the converting building societies were surprised and angry at that announcement, and I fully understand their surprise and anger. The question is whether the wording of the clause is an appropriate response.

The hon. Member for Bournemouth, West acknowledged that there might be technical problems with the amendment. I shall return to that, but let me say a word about the principle. Converted building societies want some protection to take over others in order to reach a critical mass during the five-year period, so that they will be less susceptible to takeover at the end of it. That is what the clause is about.

The hon. Gentleman advanced a sensible argument in support of his amendment. He argued that there is a public interest in maintaining a degree of diversity and choice in our financial institutions. He said that we would not want to see a mutual building society sector and a big banking sector, with very little in between, because building societies that had reached the end of their five-year protection period or had launched a takeover during that period and lost their protection had been the victims of takeovers.

There is an argument for retaining a degree of diversity and choice in the market, and for ensuring that some institutions, which are not big banks or mutual societies, are able to perform the same functions. I am not entirely sure that this is the right way to protect that area of the market. The Minister said—and we agree—that the Government should be neutral regarding whether conversion takes place in a particular building society. However, unamended, does not clause 41 impose an obstacle to conversion? Any converted building society will either already be at critical mass or seek to achieve that critical mass, to enable it to survive at the end of the five-year protection period. Many smaller unconverted societies know that, if they were to convert but failed to reach critical mass within five years, they would probably be taken over.

Clause 41 says, in effect, that building societies cannot convert and seek to achieve critical mass. Would not building societies that are contemplating converting look at that clause and cease to consider it, because it is unlikely that they would be able to survive a takeover after the cessation of the five-year protected period? Do the Government intend that clause 41 should deter mutuals from converting? That does not square with the Minister's comments. Perhaps she could clarify precisely how the clause would operate.