§ House in Committee (according to Order).
§ [The Earl of ONSLOW in the Chair.]
§ Clause 1:
said the first Amendment standing in his name was of a drafting character, and he did not think 4 it would receive any opposition from the noble Lord in charge of the Bill.
In page 1, line 5, to leave out the words 'having for its object,' and insert the words '(hereinafter referred to as a thrift and credit bank), whose rules provide that its object shall be.' "—(Lord Denman.)
§ On Question, Amendment agreed to.
LORD DENMAN moved to amend Clause 1, which ran—
A society having for its object the creation, by means of the receipt of deposits and of borrowing moneys at interest, of funds to be lent out to the members of the society or for their benefit may (subject, to the provisions of this Act), on submitting to the chief registrar rules in conformity with the provisions of this Act, be certified by the chief registrar to carry on business as a thrift and credit bank within the area specified in such rules, and upon the grant of such a certificate the rules shall have effect accordingly.
By leaving out all words from the word "benefit" to the end of the clause, and inserting the words—
Either alone or in conjunction with trading or co-operative principles may, on complying with the provisions of this Act, be registered under the Industrial and Provident Societies Act, 1893 (hereinafter referred to as the principal Act).
As he had a number of Amendments on the Paper on behalf of the Treasury, he thought it would be for the convenience of their Lordships if he now explained the scope and objects of those Amendments.
§ From a mere glance at the Amendments it might be supposed that the Government were endeavouring to follow the practice, not unknown during the last year or two in their Lordships' House, of wrecking a Bill by Amendments in the Committee stage after it had passed Second Reading. That was not their intention at all. They were just as anxious as the noble Lord in charge of the Bill to encourage thrift and similar qualities, more particularly in agricultural districts where it was evident that the best results could be obtained from a Bill of this character. The Amendments, long though they were, really dealt with only one or two points. Before explaining exactly the bearing of 5 the Amendments he would state briefly the history and constitution of friendly societies. In the year 1905 the friendly societies and affiliated orders numbered 27,000 different bodies, with an aggregate membership of nearly 6,000,000 and accumulated funds amounting to £42,000,000. The societies had been of slow but steady growth, and had taken many years to reach these large dimension.
§ More than 100 years had elapsed since the first legislation dealing with the subject was brought before Parliament. In the year 1793 the first Act of its kind was passed for raising separate funds for the mutual relief and maintenance of members in sickness, old age, and infirmity. By an Act passed in 1850 it was enacted that a society might be established for other objects, in particular for procuring for its members food, lodging, clothing, and other necessaries, by exercising and carrying on in common their respective trades and handicrafts. In this way the provisions in the Industrial and Provident Societies Act were introduced. Other Bills wore brought before Parliament and passed into law, until, in the year 1870, a Royal Commission was appointed to inquire into the whole question of the working of friendly societies. This Royal Commission came to the conclusion that it was necessary for the successful working of these societies that the two objects of banking and trading should be kept separate and distinct. The Commission reported in the year 1874, and in 1875 and 1876 Acts were passed which provided, on the one hand, for the friendly societies, and, on the other, for industrial and provident societies. Under the one banking operations and under the other trading operations could be performed, and since that time various Acts had been passed carefully keeping these two functions entirely distinct so far as the friendly societies were concerned.
§ The Bill now before their Lordships would permit banking and trading to be carried out by the same society, which would reverse the practice and legislation of Parliament for over thirty years. He had always learned in their Lordships' House, and more particularly in Committee-rooms upstairs, that they must be very careful how legislation 6 of this character affected Acts of Parliament that already existed. Parliament had decided, after the most careful consideration and after the Report of a Royal Commission, not to permit friendly societies to perform banking and trading functions. The noble Lord made his Bill ancillary to the Friendly Societies Act, which would bring it into conflict with existing legislation, and the Government were not prepared to give their consent to this particular provision.
§ The promoters of the Bill had a particular reason for making it ancillary to the Friendly Societies Act. Under the Industrial and Provident Societies Act, whereby they could carry on trading, they could not obtain the provision of unlimited liability. What they desired to do was to bring this Bill under the Friendly Societies Act, so as to be enabled to introduce the principle of unlimited liability. That raised a very serious point and on behalf of the Treasury he had to say that they were not prepared to give their consent to that. There were obvious objections to the principle of unlimited liability—first, that people of moans would not be prepared to join such societies; secondly, that many people who had little or nothing to lose would join, because in any case they could not come to any harm. It was not very desirable that well-to-do people should abstain from joining, and people who had nothing at all to lose should form the bulk of the membership.
§ It was better that there should be a definite liability so that people joining one of these societies would know exactly what liabilities they incurred. All might go well if the societies were carefully managed and times were ordinarily I prosperous, but supposing that they were badly managed, or we came on times of distress, not only might all the members be involved in ruin, but many other people would be affected as well. One of the promoters of the Bill had told him that the principle of unlimited liability was the keystone of the Bill. One of the results of the Bill in village life would be that if they induced people to join these societies they would not only encourage them, but would compel them, to pry into one another's affairs in order to 7 ascertain how each stood financially. He had always been given to understand that one of the drawbacks of village life in this country was that, if anything, people knew rather too much about their neighbours; but if this Bill became law that disadvantage would be accentuated.
§ If a man of means were persuaded to pay, say, £5 into one of these banks in order to aid in starting its operations, that unfortunate person might have everything he possessed taken from him, under this Bill, to meet the bank's liabilities. If he were the only solvent person in the village, being a prudent man, he might resign his membership of the society; but under the Bill, he would be liable for twelve months after the date of his resignation for any debts of the society as they existed when his membership ceased; or if, worn out by the system of espionage which appeared to be contemplated, and by the knowledge that the society was working badly, he broke down and died, his estate would be liable for a year for the debts of the society as they existed at the time of his decease. He thought such provisions were entirely without precedent in an Act of Parliament.
§ Some noble Lords might remember the terrible ruin which, in certain cases, was brought about as a result of the principle of unlimited liability—the ruin of the Glasgow bank was a well-known example. Surely their Lordships should hesitate before accepting such a principle as that. He would put it to the noble Viscount on the Front Opposition Bench, Lord St. Aldwyn, whether, if he were still controlling the affairs of the Treasury, he would find it possible to give his assent to such a provision being passed into law. One of the able gentlemen, acting with Lord Wenlock in this matter had represented that if his (Lord Denman's) Amendments were carried it would be a fatal blow to the Bill. He had, accordingly, arranged a meeting, at which the registrar of friendly societies and an official of the Treasury were present, to consider if compromise were possible in regard to the Bill, and the conclusion arrived at was that it was not possible. The main question was whether the Committee were prepared 8 to accept the principle of unlimited liability.
In page 1, line 8, to leave out from the word benefit' to the end of the clause, and to insert the words 'either alone or in conjunction, with trading on co-operative principles may, on complying with the provisions of this Act, be registered under the Industrial and Provident Societies Act. 1893 (hereinafter referred to as the principal Act).' "—(Lord Denman.)
§ *LORD WENLOCK
said he had heard with much surprise that noble Lords on the Ministerial side of the House deprecated legislation which was likely to run counter to the existing law of the land. This Bill was an attempt to burst the bonds of red tape with which small societies were hampered, and to place them in a position similar to that in which more than 20,000 societies were working with advantage in different parts of the world. Under the Industrial and Provident Societies Act they would not be able to carry on their work. They could only proceed on the lines indicated in the Bill. The noble Lord had drawn a very harrowing picture of what he thought might occur; but the experience of the 20,000 societies to which he had referred showed that his fears were unfounded. His noble friend the ex-Viceroy of India introduced an Act upon similar lines for the benefit of the ryots of India, and, although it had been in existence only about three years, the measure was doing incalculable good. The Bill would prove beneficial in the United Kingdom, especially in Ireland. The principle of unlimited liability, as described by the noble Lord opposite, might present a doubtful appearance; but the Bill provided that the members of a society, at their annual general meeting, should fix the amount of liability, i.e. the maximum about to be lent out by their society in any one year, as well as the maximum sum lent to each individual. The system had worked with such great advantage elsewhere that he was told that there was not a single shilling in default in any of the 20,000 societies which he had mentioned. The system had been found to do good in Germany and other parts of Europe, and in certain parts of the East. He strongly opposed the Amendment, and had no hesitation whatever in saying that it would be 9 perfectly impossible to carry on these societies except on the lines indicated in the Bill.
§ *VISCOUNT ST. ALDWYN
said the noble Lord in moving the Amendment hail appealed so directly to him on this matter that he felt bound to trouble their Lordships with a few observations, although he had not prepared himself, as he would have wished, with regard to this somewhat complicated and difficult subject. He did not happen to be present in their Lordships' House on the occasion of the Second Reading, and his attention had only just been directed to the Bill. Therefore he had not been able to go into the details of the question or consider much of the matter which Lord Denman had very clearly presented to their Lordships.
He thought his noble friend in charge of the Bill had some reason to complain of the action of His Majesty's Government in this matter. What were the words with which the noble Earl the Leader of the House greeted this Bill on Second Reading? The noble Earl said—
We quite agree as to the great benefits which may accrue from the formation of credit banks for agricultural purposes such as those favoured by my noble friend, and therefore we cordially assent to the Second Reading while reserving such criticisms as we think necessary for the Committee stage.
Could it have been anticipated that those words indicated the amount of opposition which was now offered on behalf of the Government? The noble Lord had attacked root and branch what lie understood to be the principle of the measure. In fact, his noble friend who had introduced it went so far as to say that unless this principle could be accepted the Bill would not be proceeded with. Surely that was a matter which should have been discussed and dealt with on Second Reading rather than by an Amendment moved in Committee. But he was impressed by what the noble Lord opposite had said as to the possible mischiefs of unlimited liability. The unlimited liability which his noble friend desired to establish was, he understood, the unlimited liability, not of those who borrowed money from these societies, but of the members who were liable for the
debts of the societies. That might become, as Lord Denman had pointed out, a very serious matter indeed for such members. With regard to banks generally throughout the country, everybody now felt that limited liability was the proper principle on which banking should be conducted. It was quite true that for thirty years or more Parliament had drawn a great distinction between the powers of industrial and provident societies and those of friendly societies, and had prevented friendly societies from entering upon trading or banking functions; and he thought everybody who was interested in friendly societies would feel that they ought not to enter upon such objects. But the question before the Committee was whether this particular class of banks should he allowed the unlimited liability which his noble friend sought to establish on their behalf. These societies, as his noble friend had said, did exist in large numbers already, and, so far as he knew, they were proceeding very prosperously and with great benefit to many persons. Sir Horace Plunkett had taken a great part in establishing societies of this kind in Ireland, and he believed noble Lords from Ireland would say that much good had been done in that country by the working of these societies. He understood that they were worked now under the principle of limited liability, and what this Bill would do would be to extend that to unlimited liability. They were told that the societies could not continue their work on the principle of limited, liability. As to whether that was so or not, he was not prepared to say.
§ He hardly knew what to advise his noble friend to do in the position created by the action of the Government. He felt, on the one hand, that limited liability was the right principle. On the other hand, he would be very sorry to do anything that would check the growth and successful working of these societies. There was not, however, the scope for the operations of these societies in Great Britain that there was in Ireland. No country in the world could compare with Great Britain for banking facilities; there were fewer such facilities in Ireland, and therefore it was that these societies had been established and worked successfully 11 there rather than in Great Britain. Whether it was in the circumstances worth while to press the matter to a division was for his noble friend to decide.
§ LORD WENLOCK
inquired whether he correctly understood the noble Viscount to say that the societies in Ireland were worked now under the principle of limited liability.
§ VISCOUNT ST. ALDWYN
said he was not personally acquainted with their working, but he believed they were worked at present on the principle of limited liability.
§ LORD WENLOCK
said the societies in question had been working for fourteen years under the Friendly Societies Act with unlimited liability.
§ LORD AVEBURY
was in much the same position as the noble Viscount who had just spoken. He was under the impression that His Majesty's Government were satisfied generally with the Bill, and that the Amendments they intended To introduce would be merely of a drafting character. At the wane time he had been very much impressed by the arguments brought forward by Lord Denman, and could not help feeling that there was great force in what the noble Lord had said. The general tendency in banking legislation had been from unlimited to limited liability, and that was felt on the whole to be very healthy. He would be very glad to see the Bill come into operation, but he did not quite understand why the change from unlimited liability to limited liability should be regarded as fatal to the Bill. Perhaps his noble friend would be good enough to explain why he had so much opposition to the Amendment now proposed by the Government, which, prima facie, seemed to have very much to recommend it.
§ LORD WENLOCK
said the reason which had actuated the promoters of the Bill in favour of unlimited liability was that the societies which had been started in Austria, Hungary, and Germany on the principle of the limited 12 liability of the members had broken down and failed completely. If the Amendment were carried the promoters would be obliged to drop the Bill, because they felt that if such a condition were imposed upon them, it would make it impossible for these banks to be conducted with success.
*THE SECRETARY OF STATE FOR THE COLONIES (The Earl of CREWE)
My Lords, I am disposed to accept with some humility the mild chastisement which the noble Viscount inflicted upon His Majesty's Government with regard to this Bill. It is perfectly true that on the occasion of the Second Reading I did express warm sympathy with the objects of my noble friend opposite. I have always taken an interest in this question, and I recognise that these credit banks would, under certain circumstances, be of no small convenience in, at any rate, the rural parts of the United Kingdom.
I quite admit also that the present banking facilities, large as they are, do not in every case meet the needs of those districts. That. I think, has particularly been the case since the very wide substitution of joint stock banks for private banks. Private bankers in the country were more used to make small loans to small people on the strength of character rather than of financial stability than is the case with the joint stock banks by which they have been so largely superseded. So far, I fully admit that part of my noble friend's case. I very much regret that some conference did not take place before instead of after the Second Reading, between my noble friend and those who act with him and the Treasury. I think it would have been altogether more satisfactory.
It was hoped that some modus vivendi might have been reached on this matter, but it certainly does appear from what my noble friend behind me has said that, as matters stand, that is not possible. I can only suggest that, as the Treasury, before whom we all bow, are inexorably opposed to this particular provision in the Bill, the matter must stand aside for further consideration. I cannot see that it would be of any advantage to 13 my noble friend to proceed with the Bill this session. If we can devise home means, whether by a Committee or some other procedure, for a closer consideration of the merits and demerits of his particular proposal, I hope we may be able to arrive at some agreement. But, in the absence of agreement on this particular point—a point which I do not propose to argue at this moment—it seems to me that my noble friend would really gain nothing by proceeding further with his Bill at this moment.
§ THE MARQUESS OF LANSDOWNE
My Lords, I cannot help thinking that my noble friend who has charge of this Bill would do well to accept the suggestion which has just fallen from the Leader of the House. It seems to me to be clearly a case where it is absolutely necessary that the matter should stand aside, to use the noble Earl's phrase, for further consideration. For what has happened? As has already been pointed out when this Bill came up for Second Reading it was received with very general encouragement by His Majesty's Government. The expression of the noble Earl who leads the House was that he gave his cordial consent to the Second Reading of the Bill, but that he desired to reserve certain criticisms for the Committee stage. I ask your Lordships to look at the Bill by the side of the Amendments tabled by Lord Denman. Omitting the interpretation clause and the short title, the Bill consists of eleven clauses. The noble Lord who represents the Government proposes to strike out no less than nine of these eleven, leaving only Clause 1 and 2, in which he proposes to make very considerable alterations. Such a process of restoration leaves uncommonly little of the original work of art, and I cannot help thinking that the only course open to your Lordships is to adjourn this discussion, and that my noble friend who has charge of the Bill should consider, perhaps after some such conference as was suggested by the noble Earl opposite, what further course he should take.
§ LORD WENLOCK
said that, after what had fallen from the noble Marquess, the Leader of the Opposition and other 14 speakers, he was quite prepared to adjourn the discussion.
§ Debate adjourned accordingly, and House resumed.