Building Societies Act 1986 (Amendment) Bill

Nicola Richards Excerpts

2nd reading
Friday 19th January 2024 Commons Chamber

[Nicola Richards (West Bromwich East) (Con)]

I extend my thanks to the hon. Member for Sunderland Central (Julie Elliott) for bringing this Bill before the House. It is an honour to follow my hon. Friend the Member for Dover (Mrs Elphicke), who made a number of excellent points.

Across the country, building societies have a fascinating tale to tell about how they have become part of the social and economic fabric of the area. In my constituency of West Bromwich East, we have the headquarters of the West Brom, as it is now known, but myself and my constituents still refer to it as the West Bromwich building society. I must declare an interest: like many of my constituents, I have had a savings account with that building society since I was a child. I still have that little purple book.

The West Brom was originally called the Co-operative Steelworkers’ Society of West Bromwich. It was founded on St George’s day in 1849 by 20 local citizens who appealed for people to avail themselves of the advantages of the society and thereby become their own landlords. The initial gathering of founding members took place at the former Paradise Street Methodist chapel in West Bromwich, marking the establishment of one of the earliest building societies of its kind. It comes as absolutely no surprise to me at all that the people of West Bromwich East, just like those in the rest of the Black Country, have a strong history of being innovative and respecting hard work, independence and thrift. The society aimed to enable its members to acquire property from the fruits of their own honest industry and frugality, from a common fund raised by members’ contributions paid fortnightly, together with a facility to provide the safe deposit of money in large or small sums, as either temporary or permanent investments.

Over the years, the West Brom continued to grow and flourish amid periods of economic prosperity and a rise in demand for housing in the Black Country. It is worthy of mention that in 1881, a time when there were only 946 building societies across England and Wales boasting an average membership of 330 and receipts totalling just over £17,000, the West Brom stood out with over 2,500 members and an income exceeding £60,000.

In 1923, the Prime Minister Neville Chamberlain introduced the Housing Act 1923, which incentivised the private sector to engage in the extensive construction of housing, which was desperately needed. As a result, unlike its neighbouring areas, the town of West Bromwich experienced relatively low rates of unemployment during the depression, leading to strong support for building societies such as the West Bromwich. The West Bromwich has always been seen as one of the best managed and most successful societies. Its reputation for prudent lending and sound management enabled it to grow and consolidate its position during world war two and the post-war years, and to weather the storms of the early 1990s recession and property market slump.

Since its establishment, West Bromwich Building Society has undergone several relocations on West Bromwich high street before settling into its purpose-built headquarters at Providence Place in West Bromwich in 2016. One of the first constituency visits I made after I was elected to this place in 2019 was to the West Brom, where I was delighted to meet chief executive Jonathan Westhoff and learn about its enduring focus as a traditional building society. It provides a secure haven for its savers’ funds and enables individuals to achieve the ultimate goal of home ownership. As a mutual entity, those principles have guided the West Brom since its inception in 1849.

Like all building societies, the principal motivation behind every decision and course of action that the West Brom takes has been the wellbeing of its members. Through initiatives such as the community grant scheme and dedicated funding, the West Brom has significantly contributed to our local communities in West Bromwich, the Black Country and the wider west midlands. I am sure that many other hon. Members will have similar stories to tell about their local building societies in their constituencies—we have heard many already today. I am sure that many will continue to hold accounts with them.

An example of how much local people value West Bromwich Building Society is that last July, the Black Country Living Museum opened its own branch of the West Brom, which is set in 1949 and replicates the former premises in Cape Hill, Smethwick. I went there last summer, and it was amazing to see the beautiful old building, with the little yellow books. It is a great way to teach children about the history of our local community, which we are really proud of, and about financial incentives to save and home ownership.

The history of our local building societies and their success in supporting their members in home ownership show us that this model continues to endure and deliver for our constituents. But all such institutions must evolve. Given the illustrious history of many of our building societies, as I just outlined, it is only right that we continue to support them, as the Bill does. I am pleased that the Government are supporting it, as it will go a long way to supporting the nearly 23.4 million investors and 3.5 million borrowers who are members of the 42 building societies in the UK. I know that many people in my constituency and across the country rely on building societies for that most important function: providing their mortgage. Although significantly fewer people use building societies now than pre-1997, building societies still account for more than a fifth of mortgages. I have heard for myself just how vital a community asset these financial institutions are to so many people.

I know that the Building Societies Association supports the Bill and is especially pleased that the three types of funding outlined in it are to be excluded from the 50% member funding limit in the 1986 Act. Although the Bill will not make a drastic change to the operation of our building societies, it will allow them to raise a higher proportion of their funds from sources other than member savings. It has met with the approval of the financial industry, and it follows a Government consultation published in December 2021, the response to which was published in 2022. It received input from three building societies, with broad consensus that this is the right change to make, especially as it will allow more flexibility in accessing liquidity.

The Bill will allow building societies to continue to play their unique role and maintain the gap between how they and the banks operate. It will reassure consumers and the industry that we support this important part of our financial services industry, equipping building societies as they embrace the changing way we save, with increasing online options.

The example of West Bromwich is just one of many across our country. I look forward to continuing to work with the industry to do what I can to support it in this place. I am pleased that the Government have listened to the results of the consultation and are continuing to back our building societies. This Bill is the perfect demonstration of that.