Building Societies Act 1986 (Amendment) Bill

Lord Kennedy of Southwark Excerpts

2nd reading
Friday 10th May 2024 Lords Chamber

Moved by

[Lord Kennedy of Southwark]

That the Bill be now read a second time.

[Lord Kennedy of Southwark (Lab)]

My Lords, I am delighted to present this Bill to your Lordships’ House for its Second Reading today. I should declare to the House that I am a director of the London Mutual Credit Union, and while it is not a building society, it is a full member of the Building Societies Association, as it offers mortgages, and the BSA is very much in support of this Bill.

I thank all noble Lords who have signed up to speak in this debate and look forward to each of the contributions that will follow shortly. I am particularly delighted that my good and noble friend Lord Naseby will be speaking. We have worked together many times to support the co-operative and mutual sectors on legislative measures, and I am pleased to have his support again today.

In the last Session, I was able to get the Co-operatives, Mutuals and Friendly Societies Act 2023 on to the statute book following the success of my honourable friend in the other place, the Member for Preston, Sir Mark Hendrick, in steering it through the House of Commons. That Act of Parliament is permissive legislation that enabled mutual organisations to have the ability to opt into a restriction on the use of their assets. The co-operative and mutual sectors enjoy cross-party support, which is one of the strengths of the movement. This Bill has benefited from that cross-party and industry support. I am grateful to my honourable friend in the other place, the Member for Sunderland Central, Julie Elliott MP, for taking this Bill through the House of Commons. She did so with great skill, and we are all grateful to her.

Building societies were originally established to allow people to pool their savings and to buy a home. The world’s first building society was Ketley’s Building Society, founded in 1775 by Richard Ketley, the landlord of the Golden Cross, in Snow Hill, Birmingham. Since then, these important mutuals have played their part in enabling people to own their home. Owning the roof over your head is something that most people in the UK aspire to, and building societies have enabled generations of people to buy their own home.

I am grateful to the Library of the House of Lords and the Building Societies Association for their excellent briefing notes, and to officials at His Majesty’s Treasury for producing the Explanatory Notes explaining the purpose of the Bill in such clear detail. The Bill builds on the Building Societies Act 1986, which is a good piece of legislation that has worked well. The Bill allows for targeted, specific improvements to update and modernise the existing legislation. It comprises four clauses, which I will explain briefly.

Clause 1 amends Section 7 of the Building Societies Act 1986 and enables the Treasury to make secondary legislation, using the affirmative resolution procedure, to allow certain funds to be disapplied from counting towards the 50% retail funding limit. The funds to be exempted from the building societies wholesale funding calculation are set out in the Bill. These are Bank of England liquidity insurance facilities; debt instruments raised to meet minimum requirements for own funds and eligible liabilities; and sums received by the society under a sale and repurchase agreement entered by the society with a view to complying with a specified PRA rule.

Further, Clause 1 would allow the Treasury, through secondary legislation, to specify named funds, descriptions of funds and PRA rules relevant to the sums received under sale and repurchase agreements. Taken together, the clause allows for the exclusion of certain types of funding from the funding calculation, which requires building societies to obtain at least 50% of their funding from member deposits, thereby allowing them to acquire more funds without fear of breaching the funding limit.

Clause 2 allows for building society member meetings to be attended virtually, allows those members to speak and vote, and allows for proportionate measures to confirm the identity of those members attending and participating in the meeting.

Clause 3 extends the powers in Section 104 of the 1986 Act, again using the affirmative resolution procedure, with reference to common seals and the execution of documents, enabling provisions to be updated and processes to be modernised and allowing building societies to take advantage of them.

Clause 4 sets out that the Bill extends to the whole of the United Kingdom and comes into force two months after it becomes law—so it is small in size but not in its proposed effect. It will enable more funds to be made available to members, help more people own their own home, modernise processes and allow for greater participation of members and the more efficient execution of documents. All these changes need primary legislation, which is why we have this Bill today. Other measures will be introduced using secondary legislation outside of this Bill, which will help the sector further.

I was delighted, as I said earlier, when my good friend the honourable Member for Sunderland Central in the other place asked me to take this Bill through this House. In my 14 years of membership of this House, I have sat here as a Labour and Co-op Member of the House of Lords. I have been a member of the Co-operative Party for nearly 40 years. It has had an agreement with the Labour Party since 1918 to seek public office only jointly. The Co-operative Party has always sought to champion the positive role that co-ops, mutuals and friendly societies can play in our economy, in our society and in a variety of different spheres to improve people’s lives and give them the power to have a greater say in the things that matter to them. I am also delighted that Members from all parties support the Bill, and that it has the support of the Government. It is a really important measure which deserves support. I beg to move.

--- Later in debate ---

[Lord Kennedy of Southwark (Lab Co-op)]

My Lords, I thank all noble Lords who have spoken in this debate. My noble friend Lord Naseby’s support for the Bill, and his support of the mutuals financial sector over many years, have been very welcome. He is highly respected in the sector. It has been a pleasure to work with him on these issues over many years.

The noble Lord, Lord Holmes of Richmond, in his support for the Bill, highlighted the updating that enables virtual meetings to take place. He made an important point about when secondary legislation would be brought into force. He used the words “scale”, “growth” and “competition”. I very much agree with the noble Lord on those points. We are in complete agreement. I am grateful to the noble Baroness, Lady Kramer, for her support of the Bill and for setting out MREL and explaining it much more clearly than I could have done. I thank her very much for that. It is much appreciated.

My noble friend Lord Livermore again gave the support of His Majesty’s Opposition for the Bill. I am grateful to him. He said how important the Bill was to enable additional lending capacity to enter the market, allowing people to borrow funds and buy their own homes. My noble friend referred to me being the Opposition Chief Whip. I view myself as a very friendly, happy and co-operative Chief Whip—particularly when people are agreeing with me.

I thank the Minister and the Government for their support. I agree with the Minister very much about the importance of the mutual sector and those organisations that are rooted in their communities. We clearly must keep pressing the Government to get the regulations sorted out. Maybe there is scope for a few Oral Questions. Maybe it will get me off leasehold. Anyway, we will come back to that at a later date.

Finally, I refer to the points that the noble Baroness, Lady Kramer, made about any well-intentioned amendments. We can always make things better, but can I plead with noble Lords here? However well-intentioned they are, any amendments will ensure that the Bill fails. It is really important that we do not have any well-intentioned amendments turning up. This Bill does what it says on the tin. The industry supports it, the Government support it—we all support it. We now need to get it through the House with the minimum of fuss.

Bill read a second time and committed to a Committee of the Whole House.