Second Standing Committee on Delegated Legislation


Tuesday 18 June 1996



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The Committee consisted of the following Members:

Chairman: Mr. Patrick Thompson

Abbott, Ms Diane (Hackney, North and Stoke Newington}

Alexander, Mr. Richard (Newark}

Amess, Mr. David (Basildon}

Bray, Dr. Jeremy (Motherwell, South}

Bright, Sir Graham (Luton, South}

Church, Ms Judith (Dagenham}

Cohen, Mr. Harry (Leyton}

Darling, Mr. Alistair (Edinburgh, Central}

Eagle, Ms Angela (Wallasey}

Fox, Dr. Liam (Woodspring}

Gill, Mr. Christopher (Ludlow}

Hall, Mr. Mike (Warrington}

Hawksley, Mr. Warren (Halesowen and Stourbridge}

Hendrey, Mr. Charles (High Peak}

Jones, Mr. Nigel (Cheltenham}

Knight, Mrs. Angela (Economic Secretary to the Treasury)

Pearson, Mr. Ian (Dudley, West}

Richards, Mr. Rod (Clwyd, North-West}

Robinson, Mr. Mark (Somerton and Frome}

Mr. E. P. Silk, Committee Clerk

3 Second Standing Committee on Delegated Legislation Tuesday 18 June 1996


Draft Building Societies Act 1986 (Continuance of Section 41) Order 1996

4.30 pm

The Economic Secretary to the Treasury (Mrs. Angela Knight): I beg to move, That the Committee has considered the draft Building Societies Act 1986 (Continuance of Section 41) Order 1996. The purpose of the Order is to continue for a further five years the power of the Building Societies Commission, conferred by section 41 of the Building Societies Act 1986, to require a building society to apply for renewal of its authorisation under certain circumstances. The power was originally intended to be transitional, to allow the commission to review the deemed authorisations which had been given under the 1986 Act. That is why section 41 has effect for only five years at a time, and requires to be renewed after that. A section 41 power is useful and necessary in circumstances where, over a period of time, the commission has a number of grounds for doubt about the adequacy of the way in which a building society is conducting its business, and where the society is not responding sufficiently to the commission's prudential concerns. The society has up to six months to put its house in order, if that is necessary, before it seeks to satisfy the commission that it is fit to continue to be authorised. The power under section 41 has so far been used only once, which suggests that it is a useful discipline. The draft Building Societies Bill, on which we have just completed public consultation, would make the power permanent. I commend the Order to the Committee.

4.31 pm

Mr. Alistair Darling (Edinburgh, Central): The Economic Secretary has answered two of my questions, and I am glad to hear that the section will be re-enacted in the new Building Societies Act. I have only one outstanding question which relates to the new Act. I know that the Economic Secretary cannot anticipate the Queen's Speech, but the Government have said that they hope to legislate on the matter during this Parliament. Building Societies are worried that, as there must be a dissolution before April next year, there will not be much parliamentary time to get a new Act on to the statute book. I know that the Minister cannot give guarantees, but if there is to be a new Building Societies Act, which to a large extent would command all-party support, there 4 is something to be said for introducing it at the earliest possible opportunity in November, in the hope that it would conclude all its stages before Parliament is dissolved. Clearly, if there is an autumn election, that would be out of the question but, if the election is held in spring, there is some possibility of getting the legislation on to the statute book; otherwise it will have to be re-introduced, possibly in the second half of 1997 and will not be enacted until some time thereafter. Given what is happening in the building societies movement generally, and particularly with regard to conversion to plc status and mergers, a number of issues cause concern, as the Economic Secretary is well aware—for example, the question of time limits on membership, voting rights, and the question of who can benefit as a result of all these changes. All those are matters that should have been dealt with before now. I understand the Government's difficulty, but it might be helpful if the Minister, could tell the Committee and, through us, the world at large, what the Government's intentions are. If the Bill is not introduced at an early stage, I cannot see it becoming law much before 1998.

Mrs. Knight: I thank the hon. Gentleman for indicating his support for the Building Societies Bill, on which the formal stage of consultation was completed only last week. It will provide the framework that the building societies want for the future and has been drawn up as a consequence of their representations to the Government. I believe that, with all-party support, as the hon. Gentleman mentioned, Parliament would be able to legislate quickly. As the hon. Gentleman knows, I cannot give a firm date, but I can give him the same assurance that I gave the building societies: I am well aware of the importance of the Bill and am doing all that I can to ensure that the appropriate legislative time is devoted to the Bill, and that that happens as quickly as possible.

Mr. Darling: I am grateful for the Minister's response. Although there is all-party agreement on the need for new building society legislation, she will understand that there will be points of difference between us on specific matters—probably on various matters relating to takeovers and mergers. I say that so that those who plan such matters do not anticipate that the legislation will go through on the nod. The building societies would not want that, as there are points of contention and concern that will have to be addressed. However, on the need for a new Bill and on a large part of the Bill, I suspect that there will be virtual unanimity.

Question put and agreed to.

Resolved, That the Committee has considered the draft Building Societies Act 1986 (Continuance of Section 41) Order 1996.

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



Thompson, Mr. Patrick (Chairman)

Alexander, Mr.

Amess, Mr.

Church, Ms

Darling, Mr.

Fox, Dr. Liam

Gill, Mr.

Hawksley, Mr.

Hendry, Mr.

Knight, Mrs. Angela

Richards, Mr.

Robinson, Mr. Mark