Second Standing Committee on Statutory Instruments, &c.


Tuesday 28 March 1995


£7.50 net

Members who wish to have copies of the Official Report of Proceedings in Standing Committees sent to them are requested to give notice to that effect at the Vote Office.

No proofs can be supplied. Corrigenda slips may be published with Bound Volume editions. Corrigenda that Members suggest should be clearly marked in a copy of the report—not telephoned—and must be received in the Editor's Room, House of Commons.

not later than

Saturday 1 April 1995


© Parliamentary copyright House of Commons 1995

Applications for reproduction should be made to HMSO

HMSO publications are available from:
HMSO Publications Centre HMSO Bookshops The Parliamentary Bookshop
(Mail and telephone orders only) 49 High Holborn, London WCI V 6HB (counter service only) 12 Bridge Street, Parliament Square,
PO Box 276, London SW8 5DT 0171 873 0011 Fax 0171 831 1326 London SW1A 2JX
Telephone orders 0171 873 9090 68–69 Bull Street, Birmingham B4 6AD 0121 236 9696 Fax 0121 236 9699 Telephone orders 0171 219 3890
General enquiries 0171 873 0011 33 Wine Street, Bristol BSI 2BQ 0117 9264306 Fax 0117 9294515 General enquiries 0171 219 3890
(queueing system for both 9–21 Princess Street, Manchester M60 8AS 0161 834 7201 Fax 0161 833 0634 Fax orders 0171 219 3866
numbers in operation) 16 Arthur Street, Belfast BTI 4GD 01232 238451 Fax 01232 235401
Fax orders 0171 873 8200 71 Lothian Road, Edinburgh EH3 9AZ 031 228 4181 Fax 0131 229 2734 HMSO's Accredited Agents
(see Yellow Pages)
and through good booksellers
Printed in the United Kingdom by HMSO


The Committee consisted of the following Members:


Ainsworth, Mr. Peter (Surrey, East)

Austin-Walker, Mr. John (Woolwich)

Bayley, Mr. Hugh (York)

Cann, Mr. Jamie (Ipswich)

Carrington, Mr. Matthew (Fulham)

Church, Ms Judith (Dagenham)

Conway, Mr. Derek (Lord Commissioner to the Treasury)

Darling, Mr. Alistair (Edinburgh, Central)

Davies, Mr. Quentin (Stamford and Spalding)

Eagle, Ms Angela (Wallasey)

Fox, Sir Marcus (Shipley)

Hall, Mr. Mike (Warrington, South)

Harvey, Mr. Nick (North Devon)

Knight, Mrs. Angela (Erewash)

Legg, Mr. Barry (Milton Keynes, South-West)

Madel, Sir David (Bedfordshire, South-West)

Nelson, Mr. Anthony (Minister of State, Treasury)

Shaw, Mr. David (Dover)

Mr. J. D. W. Rhys, Committee Clerk

2 3 Second Standing Committee on Statutory Instruments, &c. Tuesday 28 March 1995

[MR. BARRY JONES In the Chair]

Draft Building Societies (Commercial Assets) Order 1995

4.30 pm

The Minister of State, Treasury (Mr. Anthony Nelson): I beg to move, That the Committee has considered the draft Building Societies (Commercial Assets) Order 1995. I welcome you to the Chair, Mr. Jones, and commend the order to the Committee, many members of which, not least my hon. Friend the Member for Shipley (Sir M. Fox), have taken a close interest in the prospects and prosperity of the building society movement. The Committee may be aware that the Government have recently completed their review of the Building Societies Act 1986. I announced on 24 February our intention, when a suitable opportunity arose, to replace with a more flexible framework the current prescriptive legislation governing the societies' powers and to introduce a package of measures to improve societies' accountability to their members. At the end of the first stage of the review of the 1986 Act, I announced three specific measures to extend societies' powers: increasing from 40 per cent. to 50 per cent. the limit on funds that they may raise in the wholesale market; allowing them to own general insurance companies which write buildings and contents insurance and mortgage payments protection policies; and allowing them to make loans to businesses without the security of a mortgage on land. The first of those measures will be implemented shortly through an order under the Deregulation and Contracting Out Act 1994. The second will be made when the details have been finalised by an order under the Building Societies Act 1986. The third is the subject of the order before us. The order allows societies to lend to bodies corporate, including companies and public authorities, as well as to unincorporated entities such as business partnerships, clubs and associations. Societies will be able to provide business finance by means of conventional loans and overdrafts, as well as the purchase of debt securities and the acquisition of loans and debts owing to third parties. 4 The power to lend unsecured to business is to be restricted for the time being to societies with assets above the qualifying asset holding of £100 million. However, when the conclusion of the recent review of the Act is fully implemented, the qualifying asset holding will be abolished and any society will be able to provide business lending, provided that the activity is permitted by its memorandum and it has satisfied the Building Societies Commission on prudential grounds. If Parliament approves the order, two further orders will be made under the 1986 Act following the negative resolution procedure. They will allow societies to provide business lending through subsidiaries and to offer certain banking services such as the provision of guarantees to business customers. The order represents the first step in the implementation of the outcome of the Government's review of the 1986 Act. It opens a new and important business opportunity to societies while introducing competition to an area that has until now been dominated by a few large institutions. The change has been welcomed by societies and the details of the order have benefited from consultations with the sector.

4.34 pm

Mr. Alistair Darling (Edinburgh, Central): I, too, welcome you, Mr. Jones, to the Chair. We support the order and I have already informed my hon. Friends that it is not necessary for us to make a long contribution to the debate. Many issues of concern exist for building societies at the moment which do not come within the scope of the order, which is fairly narrow. I shall not attempt to discuss those issues now. We generally support the Government's review, although we wait to see the small print on some of the proposals. We have no objection to the order before us and are keen to see it in force as soon as possible. I am grateful to the Minister for having set out his proposed timetable and I have no doubt that an opportunity will arise in the not-too-distant future to allow us to discuss those matters on which there is slightly greater controversy—for example, on takeovers and so on.

Question put and agreed to.

Resolved, That the Committee has considered the draft Building Societies (Commercial Assets) Order 1995.

Committee rose at twenty-five minutes to Five o'clock.


Jones, Mr. Barry(Chairman)

Ainsworth, Mr. Peter

Carrington, Mr.

Conway, Mr.

Darling, Mr.

Davies, Mr. Quentin

Fox, Sir Marcus

Knight, Mrs. Angela

Legg, Mr.

Madel, Sir David

Nelson, Mr.