Financial Mutuals Arrangements Bill

Indeed. We are presenting the Bill with a view to strengthening the mutual sector and removing some of the disadvantages that it currently faces under present legislation. It is extremely important that we recognise the value that the mutual sector gives to its customers and to the economy as a whole, and the fact that because of historical circumstances it is rather inhibited in what it can do. I am fortunate that in my constituency, Bournemouth, West, we have some of the leading financial mutuals. We have the UK headquarters of the Liverpool Victoria friendly society, the largest of all the friendly societies. We also have the Portman building society’s headquarters, which is at present the fourth largest, but it is about to merge, if its members agree, with the Nationwide building society. That will become by far the largest building society in the United Kingdom. Indeed, the merger will make it big enough to be extremely competitive with all the major plcs in the banking and lending sector. The building society movement has come of age. I remember that back in 1986, not long after I was first elected to this place, we deregulated the building society movement. We had a good debate on that deregulation, which I keenly supported, and it did a great deal to set the building society movement on the right course. We were also right at that time to consider that building societies as financial institutions did not have experience in the capital markets, did not have experience in unsecured lending and did not generally have the sort of banking experience that the clearing banks had. Therefore it was right, for the protection of members of building societies and the public as a whole, that some constraints were imposed on the degree of access that building societies could have to the financial markets. That is precisely what we did. We set for building societies a maximum gearing level—borrowing against the assets that they had, deposited by their members—of 50 per cent. Over the years that has worked pretty well. Indeed, until now it has been possible for building societies to operate reasonably adequately within the constraints imposed in 1986. However, the time has come when we need to free them up somewhat more. One of the things that my Bill will do is change those 1986 limits and take them up to higher levels of permitted access to the capital markets. That will be dealt with by means of regulations brought forward from time to time by the Treasury. It is no secret that we are talking of 75 per cent., with which all the building societies have said, through their trade body, that they will be entirely happy; I do not think there is a single dissenting building society.