Financial Services Bill

Gareth Thomas Excerpts

Tuesday 22nd May 2012 Commons Chamber

[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

My hon. Friend is right to say that the Government made that commitment in the coalition agreement. Following their decision not to take seriously the case for Northern Rock to be converted into a mutual, many people, like him, doubt the coalition’s commitment to financial diversity. Is that not a further reason for the Government to take seriously his amendment to put right what they might see as a mistake in the public mind?

[Chris Leslie]

I thank my hon. Friend, who is entirely correct. He is an assiduous campaigner for the mutual sector and the mutual model, and he knows more than most about the Government’s failures over the past two years to make headway on this issue, on which they made a promise that remains to be fulfilled. Indeed, he recently wrote an article about how the Queen’s Speech could have been an opportunity to promote the mutual agenda in which he talked about ways in which the sector could be put more at the heart of banking reform. He said that we should consider expanding the credit union and CDFI—community development finance institution—sectors to reconnect banking with its local communities, and that we should look beyond the financial services sector to think about energy co-operatives, employment ownership measures, and co-operative housing tenure.

It is an important time for us to be debating the issue, because, as you will know, Mr Deputy Speaker, this is the international year of the co-operative.

--- Later in debate ---

[Chris Leslie]

Now is the time to think about the culture change that we want to see in the financial services sector. Yes, there are some good plc structures, but we have an insufficiency of good mutuals, building societies and so on. There should be new entrants of that type, and current ones should grow to provide some proper competition to the big banks.

[Mr Thomas]

Will my hon. Friend give way?

[Chris Leslie]

How can I fail to give way to my hon. Friend?

[Mr Thomas]

My hon. Friend is being characteristically generous. One big concern examined in some detail in the all-party group report that he mentioned was about the future of friendly societies. Does he agree that the debate provides the Financial Secretary with a good opportunity to set out how the Treasury is responding to concerns about the effect that a particular interpretation of case law by the Financial Services Authority is having on the future of friendly societies? Their proportion of the insurance market is at risk of going into reverse because of how the FSA has approached the matter, and the amendment may well help to achieve a culture change in the FSA and get its lawyers to adopt a slightly more helpful mindset.

--- Later in debate ---

[Steve Baker]

Looking at the amendment, I wonder whether it illustrates the tensions in the contemporary labour movement. On one hand, this should be a time of celebration for all those who believe in mutuality, co-operatives and voluntary self-help, because Members of all parties are signed up to the idea. There is a Conservative co-operative movement, and many of us are very serious about it. On the other hand, Labour insists on top-down control and state direction. It wants to enshrine in legislation measurement, management and the direction of Ministers’ performance.

Is it not time that, rather than insisting on the production of numbers and pretending that the Financial Secretary can direct people to help one another voluntarily and mutually, we eliminated barriers to entry, accepted spontaneous order and encouraged people to build up the bonds of friendship and mutual co-operation? Ministers cannot direct or legislate for those bonds.

[Mr Thomas]

Perhaps the hon. Gentleman could describe how the amendment would in some way create a barrier to entry to the financial services market.

[Steve Baker]

I was not suggesting that it would create a barrier to entry. I was suggesting that it would put in place measurement and management. That may well appeal to some people, but if we want spontaneous order, mutual societies and bonds of friendship, we cannot get them by state direction. There is very little point in measuring the Financial Secretary’s performance when we want spontaneous order and the bonds of mutuality. I do not support the amendment, but like many other Government Members, I certainly support the thrust of the Government’s policy.

--- Later in debate ---

Building societies and mutuals are the unsung success of our British financial services—they are unsung by a Government who promised to do the opposite.

[Mr Thomas]

Is not one of the unsung successes of the building society movement that it has sought to maintain an effective and broad-based branch network in the communities from which they grew, which sadly is not necessarily something that can be attributed to the major banks? There were wholesale bank branch closures in the last generation, and they are beginning again.

[John Healey]

My hon. Friend, who knows far more about this matter than me and many in the House, is absolutely right. At a time when a loss of trust and confidence in financial services is evident across the board, that local presence and face-to-face relationship counts for a great deal.

--- Later in debate ---

This is legal jargon that will be interpreted by the courts. Will it make any difference, though, if mutuals are not fostered, developed and encouraged in line with what the coalition agreement originally stated? Will it produce the intended result—that people spontaneously and with moral purpose determine the new kind of society we move into?

[Mr Thomas]

Will the hon. Gentleman accept that one lesson regarding the regulation of building societies, friendly societies and other financial mutuals arising from the inquiry by the all-party group on building societies and financial mutuals, to which my hon. Friend the Member for Nottingham East (Chris Leslie) referred, was that regulators did not put enough time and effort into understanding the mutuals market and that this simple amendment will help to prevent a repeat of that scenario?

[Mr Cash]

It may well. It behoves the Government to take this kind of amendment very seriously, despite drafting imperfections. It is important to the integrity of our financial system and, above all else, the sense of individual ownership in a mutual context for this movement not merely to be nudged along but to be massively encouraged. The more people have a stake as a result of being in a mutual condition, the better society will be.

I am completely in favour of capitalism—that might disappoint Opposition Members—but each category of activity in financial markets requires its own remedy, and the mutual system is vital to ensuring that there is a proper balance in society and that those who, for one reason or another, cannot get on to the capitalist ladder in the way that some can have the benefit of mutuals and can share in the prosperity that others provide. I regard that as a very important objective.

Even if the amendment is not perfect, the intention behind it is important. Wrapping the whole thing up in jargon—some of us are very familiar with jargon—will not solve the real problem in the way that mutual societies can. I hope, therefore, that the Minister will give careful attention to the objectives and purposes of mutuals, in the context of the amendment, and not simply say that the Opposition are talking nonsense or that the Opposition spokesmen are trying to be troublesome and criticise the coalition agreement. It is time we grew up, actually. By that I mean that instead of constantly talking about the Opposition as if they were simply trouble making and mischievous, we should recognise that in such matters we are trying to achieve something worth having.