§ 5.55 p.m.
§ Lord JACQUES
My Lords, I beg to move that this Bill be now read a second time. Industrial and provident societies are more popularly known as co-operative societies. They have always been able to take subscriptions to shares from their members and also to take deposits which have come very largely from the families of members. Indeed, my mind goes back to the days when it was the practice in the beginning of many societies for two members of the committee to sit at a trestle table on a Friday evening to take the share subscriptions and the deposits. However, shares and deposits have always been subject to statutory maxima. In 1893 the limit on shareholding was £200. No member could hold more than £200 in 719 shares. In the case of deposits no society could take more than 10 shillings at any one time from a depositor and no depositor could have more than £20 in a deposit account. These maxima operated for the subsequent almost 60 years.
It was 1952 before there was any change. In 1952 the maximum shareholding was increased from £200 to £500. In the case of deposits, instead of 10 shillings at any one time it was not more than £2 at any one time, and instead of the maximum in a deposit account being £20 it was £50. Since 1952 the maximum shareholding has been increased twice. In 1961 it was increased from £500 to £1,000. In 1975, in the Bill which I myself piloted through this House from the Dispatch Box, it was increased to £5,000. Therefore, since 1952 the maximum shareholding has been increased from £500 to £5,000.
However, no change whatever has been made as regards the maximum in the case of deposits since 1952. The purpose of the Bill is to give the same percentage increase to the maximum for deposits as has already been given to the maximum for shares. That is to say, the Bill purports to increase the amount of deposits that can be made at any one time from £2 to £20 and the maximum that can be held by a depositor from £50 to £500. That is the purpose of the Bill.
The only substantive part of the Bill is Clause 1(1) which sets out these increases in the maxima. The remainder of Clause 1, that is subsections (2), (3), (4) and (5), all do what has been done in the 1952 Act, in the 1961 Act and the 1975 Act. They give the committee of the society a facility for taking advantage of the new law immediately. For example, in the case of Clause 1(2) the committee can increase the maximum of a deposit holding from £50 to £500 by a resolution. It does not have to wait until the rules are amended. Subsection (3) allows the committee, by resolution, to increase the deposits that can be made at any one time from £2 to £20 in accordance with the Bill.
Subsection (4) says that the committee must pass its resolution within 18 months of the Bill becoming law if it wants to do it by resolution. Subsection (5) indicates that any change of the maxima must be 720 included in the next amendment which the society makes to its rules, otherwise the rules will apply and not the resolution of the committee. In other words, the increase by way of resolution is merely an immediate facility until there is a change of rule. But immediately there is a change of rule the maxima must be changed by rule and not simply by resolution of the committee.
Clause 2 is formal. Subsections (1) and (2) deal with the construction and citation. Subsection (3) deals with the commencement, one month after the passing of the Bill. Clause 4 provides that the Bill, like the parent Act, will extend to the Channel Islands but not to Northern Ireland.
In conclusion, there are three further issues I should like to raise. First, this maximum in the case of deposits, which has remained for 26 years, has been an unnecessary frustration. In consequence, the deposits held by depositors in co-operative societies have declined over the years. In 1966 it was £7 million; in 1976 it had fallen to £4 million; and it will fade away altogether if some change is not made in the maxima to correspond with the inflation that has taken place in the meantime.
Secondly, these deposits are not the substantial part of the funds available to co-operative societies. In point of fact, they represent less than 1 per cent. of the funds available in co-operative societies. They are a convenience for their members and their families, and we see no reason why that convenience should not be continued and kept up to date.
Thirdly, since this Bill was introduced to the House, there have been consultations between the co-operative union, which is the union of all co-operative societies—in other words, it is an employers' union rather than an employees' union—and the Chief Registrar of Friendly Societies representing the Treasury. They have come to an understanding. The understanding is that it should be adequate to provide new maxima that would take care of the inflation that has taken place since 1952, and that would be about one half of the maxima that are proposed in the Bill. That is to say, instead of £20 at any one time the Treasury are prepared to accept £10 at any one time; and instead 721 of a maximum of £500 in any one account, they are prepared to accept £250 in any one account. As I say, that takes care of the inflation which has taken place since 1952. I shall move amendments at the Committee stage to reduce the maxima proposed accordingly.
But what about the inflation of the future? In the 1975 Act, which increased the maximum shareholding, there was a provision that future changes should be made by order rather than by Statute. The Treasury are willing that this Bill should have a clause which would permit increases in the future to be made by order rather than by Statute. I hope that that will take care of future inflation. Therefore I appreciate the consideration and the sympathy which has been shown by the Registrar and the Treasury, and gladly accept their proposals; I shall propose Amendments at the Committee stage. With this happy result having been achieved with the Treasury, I hope that the Bill will have the wholehearted support of this House. My Lords, I beg to move.
§ Moved, That the Bill be now read 2a.—(Lord Jacques.)
§ 6.5 p.m.
§ THE PARLIAMENTARY UNDER-SECRETARY of STATE, DEPARTMENT of the ENVIRONMENT (Baroness Birk)
My Lords, first I should like to congratulate my noble friend Lord Jacques on the clear manner in which he has explained the purposes of this short Bill. Clear exposition is something we always expect of him—and we are never disappointed. This Bill is also a happy combination of legislation and the mover concerned with it since, as we all know, my noble friend has had a very distinguished career in the Co-operative Movement and was, in fact, Chairman of the Co-operative Union from 1964 to 1970.
As my noble friend pointed out, the limits which the Bill seeks to amend were fixed as long ago as 1952 and the Government accept that there is a clear case for some increase. The small deposit-taking to which the Bill relates is mainly conducted by retail co-operative societies. Its purpose is not so much to obtain funds for use in the society's business—since, as my noble friend pointed out, deposits contribute only very marginal amounts—but rather to encourage saving by young 722 persons who are disqualified by reason of age from becoming shareholders in the society; and also to provide a deposit facility for those who for any reason do not wish to become members.
It is not easy to form an exact judgment on what constitutes small deposits in this context, but in the Government's view realistic limits for these deposits would at present be £250 by way of gross amount and £10 for any one deposit. The purchasing power of the pound is just under five times less than it was in 1952, so these increases are more in line with the rate of inflation than those proposed in the Bill before your Lordships' House. Therefore, I am glad that my noble friend Lord Jacques is ready to accept these limits and will be tabling Amendments for the Committee stage. But with these limits there is a strong case for a provision enabling them to be varied by Statutory Instrument in the future. As he has indicated, he will be tabling an Amendment to that effect as well. My Lords, with the Amendments which my noble friend Lord Jacques has intimated that he will seek to introduce to give effect to these matters, I can happily say that this short but useful Bill is welcomed by the Government.
§ 6.7 p.m.
§ Lord CULLEN of ASHBOURNE
My Lords, I also am very grateful to the noble Lord, Lord Jacques, for having so clearly explained the purposes of the Bill. When I first read the Bill, together with the previous Acts of 1965 and 1975, it seemed to me that 10-fold increases were quite reasonable as the limits had been frozen for so many years, and that they would be consistent with the increases in the shareholdings that had been allowed. I also gathered that deposits were limited but loans were not, and this seemed to be a little absurd as a depositor who had reached his limit could presumably then make a loan to the society.
However, I now understand—as the noble Baroness has told us—that although these deposits amount to only £3.6 million now, the reason the figure is so low is that most of the depositors are young people. I may say that this figure of £3.6 million compares with the figure of £28 million for loans and £146 million of share capital. I quite understand the 723 societies wishing, so to speak, to get the young people hooked on the idea of saving at an early age before they are in a position to take any substantial interest either by way of loan or by way of shares.
So if it is indeed the case that the depositors are predominately youthful, I understand the Government's wishing perhaps to go only part way with the increases suggested. I am glad that the Government are sympathetic to the purpose of the Bill.
The only other point I should like to make is that there has been a recent development in the Treasury suggesting that there should be an insurance protection for depositors up to 75 per cent., and that this is now being considered by deposit taking institutions. I hoped, that being so, that the Government might have gone further and gone the whole hog on these increases, but perhaps when this new deposit insurance scheme comes into being we could look at the matter again. In any event, I gladly support the intention of the Bill in bringing more up to date the maximum permissible level of individual deposits.
§ Baroness BIRK
My Lords, before the noble Lord sits down, may I say that the Amendment which my noble friend will be moving at Committee stage, enabling the limits to be varied in the future by Statutory Instrument, in fact takes care of a certain amount of the points that he made.
§ 6.10 p.m.
§ Lord JACQUES
My Lords, there is one point that I should like to make. The Co-operative Union and the Treasury are at present negotiating the guarantee scheme for the societies' loans. I understand that they have not met with any difficulty. There will almost certainly be a guarantee scheme by which societies collectively will guarantee the loans of any one society. I am authorised by the Co-operative Union to say that the scheme, when completed, will also apply to deposits. I hope, with the noble Lord, Lord Cullen, that when that scheme comes into force, and if this Bill has been passed, the Government will be able to make any future changes by order, and I hope that they will look at the possibility of increasing 724 creasing the amount in the manner which he suggested. With the guarantee available, it certainly would appear to be justified.
§ On Question, Bill read 2a, and committed to a Committee of the Whole House.