New Clause 18 - Mutual societies

Part of Financial Services (Banking Reform) Bill – in a Public Bill Committee am 4:30 pm ar 16 Ebrill 2013.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Greg Clark Greg Clark The Financial Secretary to the Treasury 4:30, 16 Ebrill 2013

Of course, the problem we have to address is the shrinkage in the number of mutuals that happened because of the financial crisis which has left us with rather fewer than we would have liked. The hon. Gentleman is right to refer to the coalition agreement as committing us to making it easier for mutuals to establish themselves and flourish. We certainly retain that commitment and actively pursue it.

In this Bill alone—we have mentioned this in earlier sittings—we exempt the building societies movement from the definition of ring-fenced bodies and we use the existing building societies legislation to bring them in line with the ring-fencing provisions. That measure was supported enthusiastically by the Building Societies Association as being most likely to respect their particular arrangements, rather than to seek to co-opt them into unfamiliar arrangements.

The Financial Services Act 2012, on which the hon. Gentleman participated, introduced a new requirement into FSMA for regulators to analyse the impact of any of their proposed rules on mutuals, which was an important new insertion. It also ensured that the Financial Services Compensation Scheme protection was extended to credit unions in Northern Ireland. As we have discussed, that has helped to address a particular problem that was there, and hopefully that will encourage confidence in that particular mutual sector.

The Legislative Reform (Industrial and Provident Societies and Credit Unions) Order 2011 was an important measure to reduce the burdens on establishing mutuals, which came into effect in January 2012. It allows, for example, credit unions to admit corporate bodies, such as charities and small businesses, into their midst, and it allows them to offer interest on deposits for the first time. That is important to allow them to be competitive with banks; something that we all want to see.

The Law Commission is drafting a co-operatives consolidation Bill, which the Treasury will introduce by the end of 2013. It will rationalise a dozen pieces of legislation that add up to the burden of establishing and running mutual organisations. Ed Mayo, the secretary-general of Co-operatives UK, has said that the Bill would make it easier and cheaper to establish co-operatives in this country. In this year’s Budget, the Chancellor said that we will consult on proposals to make it easier for industrial and provident societies to raise capital.

Regarding the alacrity with which we are discharging our commitments in the coalition agreement, I do not think we can be faulted at all for pursuing our commitments with vigour. The only source of regret is that it has been necessary to recover from the situation that we inherited, in which we lost some valuable mutual organisations.