Legislative Reform (Industrial and Provident Societies and Credit Unions) Order 2011

My Lords, industrial and provident societies—co-operatives as they are better known—and credit unions have made a long and invaluable contribution to our society. For centuries they have been a driving force for common endeavour and mutual support. From high street co-operatives to pubs and football clubs, from healthcare to agriculture and from education to local shops, co-operatives and credit unions are cornerstones of our communities. The strength of the co-operative economy today, with more than £30 billion in turnover and more than 13 million members, is testimony to the trust and value that we place in them. Credit union membership continues to grow across Great Britain, enhancing the diversity of our financial services, with membership on track to exceed 1 million this year. Despite a difficult economic environment, credit unions continue to provide much needed finance and support to local people and communities. Co-operatives and credit unions are a key element of the coalition Government’s vision to empower local communities. Both will benefit from the changes introduced by the legislative reform order that we are debating today, which will reduce burdens and remove obstacles to enable them to grow and extend their services to new members. The legislative reform order has been a long time in the making. Consultations with the mutual sector began in 2007, and co-operatives and credit unions took the lead in proposing measures designed to bring their regulatory and legislative frameworks into the 21st century. The proposals themselves fall into two parts: those applying to co-operatives and those applying to credit unions. There are six proposals of benefit to co-operatives. The first abolishes the minimum age for membership and reduces it for those wishing to hold office. This will enable young people to engage more actively with their local co-op, and in some cases to become officers sitting on their local committees. The second removes the restriction on the maximum holding of non-withdrawable shares in a co-operative. This will enable co-operatives to raise capital more easily. The other four proposals remove burdens and increase choice for co-operatives by: allowing them to choose their own year-end dates; removing the requirement to have interim accounts audited; permitting them to charge non-members for copies of their rules, while protecting the rights of existing members; and enabling easier dissolution. Taken collectively, these measures will have a positive impact in reducing burdens on co-operatives, removing unnecessary costs estimated to total £33 million, and delivering net benefits from improved access to capital of a further £7 million. With respect to credit unions, the legislative reform order contains eight proposals. The first four enable credit unions to extend their membership base and serve a greater number of customers by: opening up the common bond requirements; removing the limit on non-qualifying members; and allowing bodies corporate to become members for the first time subject to a cap. These proposals will allow credit unions to serve a greater number of people by extending the membership base and enabling mergers to take place where this is considered appropriate. The fifth proposal allows credit unions to issue interest-bearing shares, which could encourage increased savings, helping to tackle chronically low rates of saving across the country, and which, in turn, could lead to greater lending. The remaining proposals relax restrictions on share withdrawal, allow credit unions to charge an appropriate rate for providing ancillary services and remove the 8 per cent limit on dividends, unless the rules of the credit union provide otherwise. These proposals will substantively update credit union legislation and provide a welcome boost to the mutuals sector and its members. Such is the enthusiasm for these reforms that a recent survey by the Association of British Credit Unions identified that over 60 per cent of credit unions are intending to extend their geographic coverage once the LRO comes into effect. As noble Lords are aware, the LRO was previously laid in Parliament in March 2010 and the Committees of both Houses recommended changes to the order prior to its approval. These recommended changes were: first, that the affirmative resolution procedure be used for any changes to the caps relating to corporate membership; secondly, for members to be required expressly to endorse a decision to abolish the 8 per cent limit on dividends; and thirdly, for the proposal enabling credit unions to charge a market rate for ancillary services to apply only to new members, and to be subject to a review after two years. I am pleased to confirm that each of these recommendations has been taken on board in the new draft order before the House today. The Delegated Powers and Regulatory Reform Committee has recommended that the order is, "““in a form satisfactory to be submitted to the House for affirmative resolution””." In conclusion, credit unions and co-operatives have been waiting a long time for this LRO to be made and many stand ready to take benefit of the order as soon as it takes effect. This LRO reflects our commitment to promoting the mutual and co-operative sector in Great Britain, ensuring that we enhance diversity in our financial services and that we support a sector that provides finance, employment and support for millions of people, including those hardest to reach and most in need of help. This legislative reform order will support and enable growth of co-operatives and credit unions and I look forward to hearing your Lordships’ views on these proposals. I very much hope that you will lend your support to these important reforms. I beg to move.