Co-operative and Community Benefit Societies and Credit Unions Bill [HL]

My Lords, here we are again with the Co-operative and Community Benefit Societies and Credit Unions Bill. Let me remind the House that while this Bill has the appearance of a Private Member’s Bill, it is to all intents and purposes a government Bill. I understand that the Treasury drafted the first version which did not complete its passage during the previous Session, and to my knowledge it has certainly drafted the revised version before us today. That said, I join others in paying tribute to the noble Lord, Lord Tomlinson, for persevering with the Bill. Last summer, as we have heard, he introduced the first version after it managed to navigate the obstacles put in the way of Private Members’ Bills in another place. As the noble Lord, Lord Tomlinson, has said, that Bill was found wanting by both the Delegated Powers and Regulatory Reform Committee and the Constitution Committee of your Lordships’ House. One of the most important tasks of your Lordships’ House is to prevent badly drafted legislation becoming law. However good the intentions behind a Bill—and, in its first version, the Bill was manifestly well intentioned and remains so—it is our duty not to pass into law substandard drafting. I am pleased that noble Lords around the House have supported the crucial role of your Lordships’ House in that today. I tabled amendments to the previous Bill in order that the House could consider the points raised by the committees. Having done that, the Bill could only have completed its passage before prorogation in November if the Government had been prepared to co-operate in making the changes; in particular, that required them to modify their approach to the handling of Private Members’ Bills in another place. The Government chose not to pursue that course, even though it was a Private Member’s Bill in name only. We were disappointed with that. However, the noble Lord, Lord Tomlinson, did not take this lack of support lying down. He has pursued the approach, which we on these Benches suggested to him, of tabling a perfected version of the Bill early in this Session as his own Private Member’s Bill. He has, of course, as I have noted, been assisted by the Treasury in doing so, but we should be clear that it is the noble Lord, Lord Tomlinson, who has pushed it forward. I thank both the Delegated Powers and Regulatory Reform Committee and the Constitution Committee for considering this latest version of the Bill so promptly in this Session. Both committees raised points in relation to the order-making powers in Clauses 4 and 5 of the first Bill, and both committees, as the noble Lord, Lord Tomlinson, has said, are satisfied that their points have been addressed in the revised Bill. The Constitution Committee also raised important points in connection with Clause 6, which was, and is, drafted in a wide and unspecific way. It felt that the Treasury should have identified the consequential provisions that it needed to alter in advance of drafting legislation. The Treasury said that this was the way that it usually did things. Reading between the lines of the Constitution Committee’s report, it has accepted, quite sensibly, that having 811 existing statutory references to cope with was an acceptable reason for not pursuing a more detailed drafting approach in this Bill. However, as a matter of principle, it does not accept the Treasury’s usual way of doing things, which is to draft a skeleton Bill and then flesh it out in largely unscrutinised secondary legislation. The Treasury is not the only department which likes to draft its Bills in a skeleton way and I hope that the whole of Whitehall has noted our Constitution Committee’s warning that it will remain vigilant over this kind of drafting. The Bill is relatively modest in its scope as it brings co-operative and community benefit societies and credit unions within the architecture which exists to regulate ordinary companies. For example, the powers in relation to the disqualification of directors may not amount to much in practice because relatively few are likely to be disqualified, as we have found with the use of the powers in relation to companies. However, we hope that they will be a strong reminder to those who take governance positions that they must follow the highest standards in relation to the organisations that they lead. These are extremely good things. Like other noble Lords, I am not going to repeat the speech that I made on Second Reading of the first version of the Bill other than to reiterate that my party supports diversity of provision of financial services and, hence, supports credit unions and other financial mutuals for their contribution to that. As the right reverend Prelate the Bishop of Salisbury and the noble Lord, Lord Elystan-Morgan, reminded us, they play a crucial role in reaching parts of society which conventional financial services organisations either cannot reach or do not want to reach. I shall not pursue that further but I should like to pick up on one or two points that arose in our debates on Second Reading of the first version of the Bill and which are worth pursuing again today. At the first Second Reading I asked the Minister when the Government planned to introduce the secondary legislation that the Bill provides for. I did not get an answer in the debate in July but the noble Lord, Lord Myners, wrote to me subsequently to say that Clauses 1 to 3 would be dealt with as soon as practical—that time-worn phrase—but that Clauses 4 and 5 would be subject to further consultation with the sector in order to see what the sector would like the powers used for. I have a couple of questions for the Minister about this. First, can he give the House an idea of the timing for the Bill overall, on the assumption that it can proceed through your Lordships’ House without substantial Committee or Report stages? When could it receive Royal Assent? Put simply, does it have a chance of becoming law if we have an election in, say, late March or early May? Would either of those timings allow the Government to introduce the relevant orders before likely dissolution? That is, does "as soon as practicable" mean that it will be in this Parliament? In relation to the more substantive powers of Clauses 4 and 5, can the Minister say a little more about the consultation? Will it take place in advance of the Bill receiving Royal Assent or must it be a sequential process? I was intrigued by the reference of the noble Lord, Lord Myners, to consulting on what the sector wanted to do with these powers. The use of Clauses 4 and 5 should be a matter of public policy and the Treasury should have a clear idea of what it wants to achieve with those powers. Indeed, the Treasury should be consulting on what it believes should be achieved with the powers and not on what the sector wants to achieve. For example, implementing the powers for investigations, as allowed for by Clause 4(2)(a), should be a matter of policy whether or not the sector wants those powers. Can the Minister enlighten the House on that? In another area, we know that the most important changes to credit unions will come not from this Bill but from the legislative reform order which has been consulted on. The noble Lord, Lord Myners, told the House in July that this reform order would be published in draft by the end of last July and would be laid before Parliament when the House returned from Recess in October. As I understand it, none of this happened in the previous Session of Parliament but a draft order was laid before the House in late November. I also understand that this will be dealt with by the super-affirmative procedure. What timetable are the Government working to in respect of this order? Furthermore, can he say whether the Government think it is appropriate to complete the processes in relation to the legislative reform order in advance of the Bill of the noble Lord, Lord Tomlinson, receiving Royal Assent; that is to say, are they connected together or are they entirely separate processes? The Bill is, in part, about the governance of credit unions and other financial mutuals and I have one last question for the Minister relating to governance. In our Second Reading debate in July, the noble Lord, Lord Myners, told the House that the Treasury had asked Sir David Walker to extend to mutuals his review of corporate governance of financial institutions. This seemed to be a most interesting development and so I looked carefully through Sir David’s helpful report, which was issued late last month. As far as I can see, he has not addressed himself to financial mutuals. I searched the rather lengthy document with a search tool and could find no reference to building societies, none to credit unions and only a few references to the word "mutual". The only organisation with the word "mutual" that comes up in the search is "Old Mutual plc" which, as I am sure noble Lords know, is not the kind of mutual that we have been talking about today. I know that it is a slightly unfair question to the noble Lord, Lord Faulkner—who is the Minister today—because he is not the noble Lord, Lord Myners, but he will be able to help the House with whether Sir David Walker will produce anything about governance in financial mutuals. If that is not the case, what will the Government do to ensure that high standards of governance in financial mutuals, corresponding to those developed for banks and other financial institutions, exist? I know that the noble Lord, Lord Tomlinson, is now interested only whether I shall table amendments to the Bill, so I shall conclude by offering my Christmas gift to him and say that I have no intention of tabling any amendments to the Bill.