Financial Mutuals Arrangements Bill

I beg to move, That the Bill be now read a Second time. It is a very great honour and privilege to be able to present the Bill to the House. As hon. Members will be aware, I am deputy chairman of the all-party group on building societies and financial mutuals. I am pleased that our chairman, the hon. Member for West Bromwich, West (Mr. Bailey) is in the Chamber this morning, and I pay tribute to what he has done to promote the well-being of the sector and to the work of the all-party group, which recently commissioned a detailed survey of the benefits of mutuality for the British economy. There is no doubt that those benefits are considerable. The mutual sector as a whole plays a vital role in British society, and more than 19 million British individuals—one in three of the population—are members of one or more mutual societies. That is a considerable number, and it compares favourably with other forms of economic participation and mass membership. For example, there are 8 million more members of mutuals than there are listed owners of shares. Mutual organisations have more than three times as many members as trade unions, and 20 times more than political parties—although nowadays that is not terribly difficult. There are about 9,000 industrial and provident societies—a term that covers all organisations registered as co-operatives, community benefit societies and credit unions. They range from the Co-operative Group, which employs more than 60,000 people, to football supporters trusts, which may not employ anyone. In total they hold assets of over £65 billion, have almost 10 million members and employ about 100,000 people. There are 60 building societies in the United Kingdom, and collectively they have more than £300 billion worth of assets and employ around 50,000 members of staff. They have about 2,150 branches, 22 million individual investors—although some investors have accounts with more than one building society—and almost 3 million borrowers. Friendly societies are the longest established and most numerous type of mutual insurance providers. The larger societies are members of the Association of Friendly Societies, which has 57 societies that hold funds of £15 billion for 5 million members. Not all mutual insurers are registered as friendly societies. Some of the largest mutual insurers are registered as companies, but all have a strong democratic mutual structure dedicated to offering the best deal to their members, rather than external shareholders. These societies collectively represent £8 billion in premiums, which accounts for 6.8 per cent. of the non-life market and 6.4 per cent. of the life market. The contrast between a mutual and a company can immediately be seen when we look at how they distribute the profits of their business. They do not pay dividends to shareholders, so they are able to operate on much narrower margins than plcs. That means that, all things being equal, they can deliver better value for their customers. They can also influence quite considerably the pricing policy of their competitors. For example, pressure from building societies was the main factor preventing banks from charging for access to cash machines, and a very creditable and successful campaign that was. A PA Consulting international study in 2003 showed that the size of the mutual sector in most countries has had a direct influence on the size of bank profits, finding that the"““profitability of the banking sector is inversely proportional to the market share of mutuals within the banking sector.””" The reputation of the mutual sector is such that one of its leading lights, the Co-operative Group, is the most trusted brand in the UK in the eyes of consumers. That was established in the 2006 research undertaken by the National Consumer Council and AccountAbility, which showed that that group was more trusted than any other high street operator.