Building Societies Act 1986 (Amendment) Bill

Julie Elliott Excerpts

Report stage
Friday 19th April 2024 Commons Chamber

[Julie Elliott (Sunderland Central) (Lab)]

I beg to move amendment 2, page 2, line 9, leave out from “(9B)” to end of line 11 and insert

“may not be made unless a draft of the instrument has been laid before, and approved by a resolution of each House of Parliament.”

This amendment changes the procedure that applies to an SI containing regulations under new subsection (9B) of section 7 of the Building Societies Act 1986 (inserted by the Bill) so that it is subject to the affirmative procedure.

[Madam Deputy Speaker (Dame Eleanor Laing)]

With this it will be convenient to discuss amendment 1, page 2, line 10, leave out from “to” to end of line 11 and insert

“approval by both Houses of Parliament”.

[Julie Elliott]

Thank you very much, Madam Deputy Speaker. The variety of Bills is in the strange nature of this place. We are going from the warm and fluffy Bill that we have just discussed, which I am delighted has received its Third Reading, to what is rather a dry Bill —but an important one none the less.

Amendment 2, which stands in my name, changes the procedure that applies to statutory instruments relating to proposed new subsection (9B) to section 7 of the Building Societies Act 1986. They will be subject to the affirmative procedure, rather than to the negative procedure as the Bill currently states. I tabled the amendment after talking to colleagues on both sides of the House. On reflection, it provides for closer scrutiny of the potential changes that could be made via secondary legislation under the Bill. The amendment does not change the immensely positive effect that I believe the Bill will have on the building society sector by bringing it in line with current practices, nor does it change the Bill’s aims, which will, in my view, enormously improve opportunities for people to get on the housing ladder. The result of the Bill will be a better landscape for first-time buyers, and the amendment just improves scrutiny.

[Sir Christopher Chope (Christchurch) (Con)]

I rise very much to support amendment 2 in the name of the hon. Member for Sunderland Central (Julie Elliott). I am grateful to her for effectively taking forward my amendment 1, which we were told was defective because, although it would achieve exactly the same purpose, it does not use the normal wording that Government drafters like.

After some discussion, it was agreed by the hon. Lady and the Minister that it was sensible to use the affirmative procedure in relation to these delegated powers, and that affirmative procedure is now reflected in amendment 2. It could have been reflected in amendment 1, but what is important is the substance of the matter. These are potentially very significant changes that could be made, and if they are to be made, it is important that they are open to proper scrutiny.

As we know, the negative procedure does not really enable proper scrutiny. As an example, Madam Deputy Speaker, you will recall that legislation was brought forward at the end of last year extending the breeds covered by the Dangerous Dogs Act 1991 to include dogs of the XL bully type. I tabled an early-day motion to try to amend that. That early-day motion was on the Order Paper, but it was never accepted or debated, meaning that that change, which affected hundreds of thousands of dogs and their owners, was made without any proper scrutiny in Parliament. That is why it is important to have the affirmative procedure where possible, and I am very grateful to the hon. Lady for having brought forward this amendment, which I support.

Amendment 2 agreed to.

Third Reading

[Julie Elliott (Sunderland Central) (Lab)]

I beg to move, That the Bill be now read the Third time.

It is a pleasure to bring this Bill back for further debate, as it now exists in an amended form. It is a key moment for a Bill that is important to the building society sector, and I must thank all colleagues from both sides of the House who have taken part as the Bill has gone through its various stages—they have been so supportive of the Bill. I am going to keep my remarks short so that if other Members wish to speak, they can do so, and to try to make sure that the Bill’s progress is as smooth as possible.

The Building Societies Act 1986 (Amendment) Bill will help level the playing field between building societies and banks, and will support building societies to be able to lend more money in a safe and secure way. To trade as a building society, the Building Societies Act 1986 requires the company to obtain a minimum of 50% of funding from its members—what is known as the wholesale funding limit. This Bill does not change that, and it does not dilute the unique ownership model of building societies. The fundamental nature of a building society—being run in the interests of its members—is not changed by the Bill; in fact, that is what makes the sector so special.

What the Bill does is disregard the following from the 50% wholesale funding limit: Bank of England liquidity insurance facilities, debt instruments raised to meet the minimum regulatory requirement for own funds and eligible liabilities requirements, and sums received under sale and repurchase agreements with a view to complying with Prudential Regulation Authority rules. This means that in times of national economic crisis, building societies will have more options within their gift for remaining comfortably solvent, and will therefore continue to serve in their members’ interests. The Bill is designed to allow future Governments to respond to the financial landscape of the day. That is why it does not specifically define funds, but instead defers the specification of funds to a later date through secondary legislation passed in this House. All the responses from the sector to the Government’s 2021 consultation on this issue, in advance of the Edinburgh reforms, were positive. Those reforms make the sector more robust.

The Bill also seeks to modernise the sector. It amends the 1986 Act to explicitly allow the option of real-time virtual member participation, bringing the sector in line with the requirements that the Companies Act 2006 places on businesses. It also enables the Treasury to introduce more flexibility for societies in relation to common sales and the execution of documents, in line with companies law.

The Bill is important because it would achieve a great deal in a very succinct manner, allowing the sector to operate on a more level playing field with banks. This is positive for a number of reasons, but especially in view of the sector’s support for first-time buyers. More than half building society lending goes to first-time buyers, and since 2020 building societies just in my region, the north-east and Cumbria, have lent them some £3.4 billion.

This Bill follows a number of previous private Members’ Bills—including that of my hon. Friend the Member for Preston (Sir Mark Hendrick), which received Royal Assent last year—that continue to modernise the sector. I will not restate all the facts that I presented on Second Reading, powerful as they are, but it is important to acknowledge that, while the housing sector has recovered significantly since the record low mortgage approvals during the covid pandemic and has recovered from the acute economic shock caused by the last Conservative Administration, mortgage approvals are currently still below the level that that we saw before the pandemic. That is why I think that a Bill such as this, which gives more choice to the building society sector to operate in the interests of its members, is a good thing.

As I have said, the sector has a strong record in supporting first-time buyers, and given that every £10 million of lending could support an additional 20,000 mortgages, I am proud to be introducing a Bill with the potential not just to support the housing sector and the wider economy, but to allow building societies to help more people on their journey to home ownership. I have spoken to many constituents in Sunderland who are struggling to get on to the housing ladder—young couples and families who just want the chance to have a place that is theirs and in which they can feel comfortable, away from a volatile and often unfair rental market. The Government’s failure to reform the sector is a debate to be had elsewhere on another day, but I expect this Bill to do more to support a sector that often goes above and beyond to support its members, and to help people get on to the housing ladder and secure a future for themselves. Its passing would be a landmark moment for the sector, and I look forward to seeing the positive effects that it would bring.

--- Later in debate ---

[Julie Elliott]

With the leave of the House, I would like to thank all Members who contributed at various stages of the Bill. On Second Reading, I had not expected the political history lesson we had from Members on both sides of the Chamber, but it was quite entertaining. It is an honour to have a debate on a Bill on which everybody agrees; everybody can see the very tangible benefits it will have for all our constituents.

It has taken a lot of work from a lot of people to get to this point. I thank not only colleagues who have taken part at every stage, but Treasury officials, who have been extremely helpful; the Clerks, whose advice, support and guidance is, as always in this place, invaluable; the Whips; the Building Societies Association; and our sister party, the Co-operative party. They have all contributed, and helped with advice and support, as I have taken the Bill through the House. I commend it to the House.

Question put and agreed to.

Bill accordingly read the Third time and passed.