Co-operative and Community Benefit Societies and Credit Unions Act 2010 (Consequential Amendments) Regulations 2014
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Lord Newby
That the Grand Committee do consider the Co-operative and Community Benefit Societies and Credit Unions Act 2010 (Consequential Amendments) Regulations 2014.
Relevant document: 1st Report from the Joint Committee on Statutory Instruments
Lord Newby (LD)
My Lords, the regulations represent the latest step in the Government’s drive to deliver improved legislation for registered societies in Great Britain, by which I mean co-operatives and community benefit societies, hitherto known as industrial and provident societies, as well as credit unions. The regulations relate to how we refer to this group of businesses, and make the necessary changes in secondary legislation to enable new industrial and provident societies in Great Britain to register as either a co-operative society or a community benefit society.
Around 6,000 co-operatives and community benefit societies are registered across Great Britain. They come in all shapes and sizes and cover a diverse range of activities and industries. Their continued popularity is evidenced by growing numbers of members. Some of these mutually run businesses already refer to themselves as co-operatives or community benefit societies, and many industry stakeholders now regard the expression “industrial and provident society” as old fashioned.
The sector requested a formal change of description in legislation to modernise the language used to describe these businesses, which will enable them to become more relevant to members and the general public. I imagine that most people would have a sense of the terms “co-operative” and “community benefit society”, but many might struggle to describe quite what an “industrial and provident society” might be.
These regulations will make amendments to secondary legislation consequential upon the commencement of Section 1 of the Co-operative and Community Benefit Societies and Credit Unions Act 2010 as re-enacted in the Co-operative and Community Benefit Societies Act 2014, which lays down new registration requirements for societies in Great Britain, other than credit unions.
As well as requiring a new society to be registered as a co-operative society or a community benefit society, the 2014 Act refers to all societies registered under the 2014 Act or before 1 August 2014 under existing legislation—including credit unions—as “registered societies”. The consequential amendments reflect those changes for Great Britain, but will preserve references to industrial and provident societies in Northern Ireland legislation.
Any new societies registering under one of the new terms from 1 August will not face any additional costs. For existing societies, only those that choose to amend their description may incur minimal costs; for example, to replace stationery or to amend website information. In any case, the sector has indicated that any costs as a result of registering under a new description will be more than offset by the benefit of using language that is more transparent to the public and their members.
These regulations form a small part of the Government’s wider commitment to support mutuality. Beyond this, a number of changes to mutuals legislation have been progressed during this Parliament. Those included a package of measures that came into force in April, which included: increasing the amount of withdrawable share capital an individual can invest in a society from £20,000 to £100,000, making it easier and cheaper for societies to raise capital; giving the FCA additional powers to investigate a society if suspected of unlawful or improper behaviour; making insolvency rescue procedures available to societies that previously would have had no alternative but to be wound up; and simplifying electronic registration for new societies.
Linked to the regulations we are discussing today, the Government also brought forward the Co-operative and Community Benefit Societies Act 2014, which was announced by the Prime Minister in January 2012. The Act has now gained Royal Assent and is due to come into force in August this year. It is a consolidation Act, which brings together and modernises the existing legislation for co-operatives, and was requested by the sector.
Today’s regulations are a necessary step in the work under way to strengthen the legislation for the co-operatives and community benefit societies. They form part of the wider package of measures implemented during this Parliament to strengthen and support the mutuals sector. The changes included in these regulations have received wide support from the sector.
Lord Graham of Edmonton (Lab)
My Lords, it gives me great pleasure to welcome this stage of the legislation and the changes. In looking at my research, I am reminded of the efforts of John Roper—the noble Lord, Lord Roper—who played a large part in getting credit unions on to the agenda. Since then, Ed Balls in his ministerial capacity welcomed the issue and moved it forward. Of course, the present Minister, who I am delighted to see in his place, and his colleague the noble Lord, Lord Freud, have played a major part in keeping the issue alive.
I go back not to 1844 but to 1852 and the first industrial and provident societies Act. One of my studies has been co-operative law, and from 1852—certainly to 1863 and then into the 1890s and beyond—there have been genuine attempts to improve the raison d’être of co-operation as an economic form. There has been no objection. I am a Newcastle upon Tyne co-op society man, and one of my jobs for a period was to pay out the dividend accrued. That was the way in which many members of what I am still proud to call the working class saw an opportunity to save for the rainy day; it was marvellous. They would keep and take out of the dividend what they wanted, but they knew it was safe, secure, guaranteed and that it was their own.
We come to governance and changes, and of course this is not the place to go wider than the topic that we have here. That is why I was delighted to notice in a document from ABCUL, the association of British credit unions, that the ministry has already earmarked £38 million to be available for leadership training. It has been a great sadness to see something go catastrophically wrong for an organisation of this kind—there are thousands of credit unions and more than a million individual members—but one discovers that it was not the principle that was wrong, but the manner in which it was led or monitored. As a consequence, there have been blemishes in the credit union movement; I will not say more or less. However, I am delighted that one aspect of the legislation is to continue the good work that has already been done to ensure that those who have the temerity and courage to start a credit union will have the backing in due time of an organisation and of leadership. There must be nothing more catastrophic or devastating for a group of people, be it small or large, who have put their faith in a savings bank or whatever one likes to call it only to find that they have been let down by a lack of oversight and tightness. Having followed the development of legislation, I am certain that, in time, credit will be given to all three main parties in the House and many people will be rewarded by organisations which are sustainable and guaranteed.
I have nothing specific to talk about, because, being associated with the Co-operative movement even now, I am certain that if there were matters to be raised I would have been asked to raise them, and I have not been. I am not looking for trouble these days, so I do not write to somebody asking whether there are any points they want to make. If a point wanted to be made, they would have made it to me and other Members who have a close association with the Co-operative movement. I simply say to the Minister who has carried this legislation through that he will get no trouble from me, because I understand that a great deal of consultation has been done with the Co-operative Credit Union, Co-operatives UK and ABCUL, which plays a vital part in providing leadership. I believe that this is as big a step forward as was taken in 1844, when the Rochdale Pioneers took a leap forward. They were not the first co-operative in the country, but they are looked on as the founders of the modern Co-operative movement. After 180 years, who is to blame anybody for accepting that something that was relevant in 1844 and 1852 requires an overhaul, which is what it has had with this legislation? There has been no malice or agitation. I think that it is generally accepted in the country that small businesspeople are just as competent to run the affairs of a body such as a credit union as anybody else, provided that they have sound principles, that there is oversight and that, from time to time when required, the members will be faced with the fact that they will have do something drastic. To the Minister and anyone who is listening I say, on behalf of myself and others in the Co-operative movement, “Well done”.
The best guarantee of an audience at the City Hall in Newcastle was when there was a fear that the dividend was in danger or that a general manager was going to be sacked. I was there on two occasions when those things were prospective. We have to avoid that situation. I speak as an ex-student of the Co-operative movement. There are a number of other noble Lords, including the noble Lord, Lord Tomlinson, who have a strong connection with it. I wish this legislation well and congratulate all three main parties on having done a very good job on behalf of millions of people.
Some reference was made to numbers. I have some figures, too. There is great co-operative movement in Ireland. It is strong on credit unions. The same goes for the West Indies. A number of people have come from there and established their lives here. Across the world, the principle of co-operation as an economic and social force is well founded and I am proud to stand here and say on behalf of all those people, “Thank you very much”.
Lord Newby
My Lords, I thank the noble Lord, Lord Graham of Edmonton, for his generous welcome to this statutory instrument. He spoke eloquently about the role of the divvy. The divvy had a particular place in the Newby household because my mother in 1931 went to work in what was then called the check department of the Leeds co-op. Her role was to work out the divvy for the members of the co-op. She—and as a result I—have fond memories of the divvy and the part it played in working-class communities at the time. The noble Lord is absolutely right to say how important it was to people. That explains why the Co-operative movement was so strong at the time.
The noble Lord also drew attention to the funding that the Government are giving to the credit union movement. As he said, the DWP has earmarked £38 million for its credit union expansion project. The aim is to get credit unions to have a million more members by 2019. This is an ambitious target, but it will be achieved only if the leadership of the sector is well qualified. As the noble Lord said, skilled practitioners are needed to make it work and there are a lot of downside risks if they do not, so we hope that this funding will substantially help in doing this. I can also tell the noble Lord that only yesterday the Treasury launched a 12-week call for evidence and opinions on what more we can do to help credit unions to grow sustainably in future. We hope that we are not resting on our laurels, but are continuing to push this agenda forward.
The noble Lord, Lord Tunnicliffe, asked a number of specific questions. He was right that this statutory instrument just changes the nomenclature. It has no other substantive components to it. He asked about consultation. The original consultation that is referred to in the documentation was undertaken in 2007, and this was taken into account when the 2010 legislation was drafted. These regulations flow from that 2010 primary legislation and simply implement that. The Treasury did not undertake a formal review, but talked to Co-operatives UK and other stakeholders in the sector informally, just to confirm that their view had not changed. I can confirm that their view had, indeed, not changed. They very much welcome this, simply as part of bringing the nomenclature and thereby the sector more up to date.
I can confirm that the regulations are a permissive piece of legislation. An industrial or provident society currently in existence can do nothing if it opts to do so. The noble Lord asked what is being done to explain what the options are if one opts to change. The FCA is preparing guidance notes to bring the legislation to the attention of the sector, and to set out what its members need to do if they are changing status. However, as I said in my introduction, the cost involved in doing that will be minimal. We hope that many current industrial and provident societies will simply do it as they change their stationery and upgrade their websites.
Having dealt with noble Lords’ points, I hope, I commend the regulations to the Committee.