New clause 9 - Application of company accounts

Co-operatives and CommunityBenefit Societies Bill – in a Public Bill Committee am 3:45 pm ar 18 Mawrth 2003.

Danfonwch hysbysiad imi am ddadleuon fel hyn

'—.Part VII of the Companies Act 1985 as for the time being in force shall apply to any society registered under the Industrial and Provident Societies Act 1965 as if that society were a company.'.—[Mr. Love.]

Brought up, and read the First time.

Photo of Andrew Love Andrew Love Labour/Co-operative, Edmonton

I beg to move, That the clause be read a Second time.

From the Back Benches, I, too, welcome you to the chair, Mr. Stevenson. This, too, is a probing new clause. It concerns the application of company accounts and audit provisions to industrial and provident societies. It is similar to one that was proposed during the passage of the Industrial and Provident Societies Act 2002, which received sympathetic consideration from the Treasury. Its terms reflect a consultation that was carried out in 1998, when the Treasury circulated all industrial and provident societies about the issues that were of concern to them.

Among the issues raised in that consultation were the outdated legislation on which industrial and provident societies had to base their activities, and the desire for a more level playing field between industrial and provident societies and companies. That was not only because it is right that there should be a level playing field, but because it was believed that industrial and provident societies were disadvantaged in their competition with companies by the fact that legislation imposed considerable additional burdens on them that were not faced by companies.

There are a number of ways in which such issues could be addressed, including the use of the Regulatory Reform Committee. However, amendments to legislation would be required to address the major issues that were raised in the 1998 consultation. I therefore believe that private Member's Bills and the Treasury's own Bills are the right vehicle for such issues to be debated and decided on in Parliament.

Parliament has not examined the question of industrial and provident societies extensively. As has already been mentioned, most of the relevant Acts of Parliament were consolidated in 1965. The Industrial and Provident Societies Act 2002 was the first legislation on the subject to be enacted since 1965: this Bill, when enacted, will be the second. There is a great deal more that needs to be done.

The 1998 consultation exercise set out the main areas in which industrial and provident societies wanted to see changes. In this probing new clause, I have chosen one of the areas in which there is an obvious lack of a level playing field: the way in which companies and industrial and provident societies have to provide accounts, and the auditing requirements to which they are subject.

Company law is changed on a regular basis—in recent years there has been a very comprehensive review of company law that updated it and brought it into the 21st century. However, there have been no more than piecemeal changes to the law on industrial and provident societies.

The current auditing requirements for companies mean that they can produce unaudited accounts and provide them to the members at half-yearly or annual meetings. However, if an industrial and provident society wishes to keep its members informed in the same way, it must provide properly audited accounts, which is an expensive and time-consuming process to undertake, so they are at a severe disadvantage in keeping their members informed and up to date, despite the fact that they are required to do so.

I shall not go into the matter in great detail, as I am aware that we are short of time and that hon. Members want to conclude the Committee stage. However, the Treasury needs to examine the issue, because of the additional burdens and costs imposed on industrial and provident societies. The Minister was sympathetic last year, and I hope that the Treasury has had an opportunity to look at the areas in which industrial and provident societies are disadvantaged. Can she give us some hope or expectation that the Treasury is taking seriously the issues that arose from the 1998 consultation? If it is not possible to insert an appropriate new clause at this stage, will she assure us that the Treasury is seriously considering introducing legislation to address those issues?

Photo of Stephen O'Brien Stephen O'Brien Shadow Paymaster General

I am grateful to the hon. Member for Edmonton, who raised this important issue by tabling the new clause, which he helpfully described as probing. Given what we discussed on Second Reading and today, it would be a shame if this process, which has flagged up several serious issues, were to delay the progress of the legislation, which has cross-party support.

I thank you, Mr. Stevenson, for your chairmanship of the Committee, which has guided me through what has not always been a completely straightforward debate. We got there in the end. I also thank the Committee for such constructive consideration of the Bill, which is wholly worthy and deserves to be enacted.

Photo of Gareth Thomas Gareth Thomas Party Chair, Co-operative Party

I support my hon. Friend the Member for Edmonton. He is absolutely right to flag up the lack of a level playing field for co-ops and companies, and to highlight the significant additional costs that co-ops occasionally incur as a result of the differences. I understand that it can cost the largest of the co-ops—the Co-op group—£250,000 extra to meet the same provisions as companies. The matter needs urgent consideration, and suitable changes should be made through legislation or deregulatory provisions. I recognise that this is a probing new clause, but I hope that my hon. Friend the Minister will offer some assurance to those of us who are concerned about the difference between company and co-op provisions.

Photo of Ruth Kelly Ruth Kelly Financial Secretary, HM Treasury

I congratulate my hon. Friend the Member for Edmonton on the persuasive way in which he set out his concerns. He knows, as do other members of the Committee, that the Government are sympathetic to those concerns. We agree with the general principle that, as far as is appropriate, there should be a level playing field between companies and industrial and provident societies. It is, of course, important that societies can operate in a modern and appropriate regulatory context. Last year's strategy unit report, ''Private Action, Public Benefit'', examined the legal and regulatory framework for social enterprise. It made specific recommendations and proposals for industrial and provident society legislation. We have examined the responses received from the public consultation exercise on the report, but I am afraid that I cannot say today whether we will act further. However, I assure my hon. Friend that we will shortly set out how we hope to organise the work arising from the legislation and our priorities for reform.

I am sure that my hon. Friend is well aware that the proposals cannot instantly be translated into legislation. We take the issues seriously, and I hope shortly to be able to reassure him that we are

considering the priorities and will outline what those priorities will be.

Photo of Mark Todd Mark Todd Llafur, South Derbyshire 4:00, 18 Mawrth 2003

I commend the principle of the new clause. Reference was made in the original draft of the Bill to changes in this area. I am reassured by my hon. Friend the Minister's statement, although she may be chilled by the thought of the means by which those changes may be delivered—yet a further private Member's Bill on co-operative and community benefit societies.

May I say how grateful I am for your chairmanship of the Committee, Mr. Stevenson, and to hon. Members who gave their hard-pressed time in the House to consider the matter?

Photo of Andrew Love Andrew Love Labour/Co-operative, Edmonton

I thank my hon. Friend the Minister for her positive and sympathetic assurances about Treasury attitudes to new clauses of this sort. I also thank her for informing us about the outcome of the consultation exercise, which probably reflects the views of industrial and provident societies and of other organisations that took part in the Treasury consultation.

There is great anticipation among Members of Parliament and people in social enterprises, co-operatives and community benefit societies about the result of the consultation process being fulfilled in legislation and I hope that the Minister will be able to introduce the appropriate measures. On that basis, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New schedule 1 brought up, read the First and Second time, and added to the Bill.

Bill, as amended, to be reported.

Committee rose at one minute past Four o'clock.