I congratulate the hon. Member for Preston (Sir Mark Hendrick) on his Bill’s successful Committee stage and on its reaching Third Reading today. Mutuals and co-operatives are not an insignificant sector of our economy: across the UK, the industry comprises more than 7,000 co-operatives, employing some 250,000 people with an annual turnover close to £40 billion. The sector is not standing still; it is growing, with more co-operatives forming despite the very challenging circumstances caused by the covid pandemic.
Perhaps nothing highlights the purpose of the Bill better than mutual insurers and friendly societies, the origins of which stretch back to the late 17th century. In 1703, the Amicable Society, chartered by Queen Anne, was set up to provide support to widows and children in the event of the policyholder’s death. Such organisations spread rapidly across the country. As the industrial revolution took hold in our towns and cities, mutual insurance and friendly societies acted as a social safety net for their members in case they were injured in what Blake described as the dark satanic mills. Thankfully, we have moved very far from those working conditions, but that does not mean that we no longer require mutual societies. The development of the sector continued for much of the 19th and 20th centuries. Many of the UK’s now well-known insurance companies began as mutual societies; there were then the various amalgamations, mergers and takeovers to which the hon. Gentleman referred.
There are 50 financial mutuals currently operating in the UK. According to the Association of Financial Mutuals, they represent 30 million members and write £20 billion of premiums annually; as I said, the sector is not at all insignificant. Many farmers in my constituency have policies with their local NFU Mutual, and people can remember the days of the man from the Pru—it was frequently a man—coming round to collect membership subs. Mutuals take many different forms. The Hughenden valley community shop in my constituency is a fine example of such an organisation today; it does a tremendous service to people in the area, and was particularly welcome during the pandemic.
In the insurance market, mutualisation is no longer the norm in the UK. Many of the well-known mutual assurance societies of old have been demutualised. The Prudential, Aviva—previously Norwich Union—and Scottish Widows were all mutual insurance societies, but are now fully commercial entities or subsidiaries of larger financial institutions. While I in no way criticise the work of those commercial entities, fully commercial
organisations with shareholders have different priorities from mutual organisations, as the hon. Gentleman pointed out. There is absolutely room for both in our economy.
Mutuals now represent just 7.9% of the insurance market in the UK, according to the International Cooperative and Mutual Insurance Federation. That is far below the market influence that such organisations have on the continent: the market share is 58% in France, 60% in the Netherlands and 46% in Germany. There is scope for mutuals to grow again in the UK, and I welcome any comments from my hon. Friend the Minister about how we can increase competition in the insurance market to ensure that mutuals can compete with their commercial rivals
On the specifics of the Bill, although I appreciate that it does not represent the full proposals that the hon. Gentleman wished to bring before the House, he should be congratulated on and pleased with what he has achieved in securing Government support for this important piece of legislation. As my hon. Friend the Minister said in Committee, we should not let the perfect be the enemy of the good.
The changes proposed by the Bill will allow the Treasury to bring forward regulations to allow members of the society to choose to adopt legal restrictions, with the effect, as has been outlined, that the assets would be limited to specific purposes in line with the objectives of the mutual society. That will bring in a new degree of parity. At present, of course, the restrictions for mutual organisations are voluntary and based on the vote of the membership. As many hon. Members have noted in the Bill’s previous stages, that raises the possibility that restrictions could easily be removed in future, which would ultimately make it easier to demutualise.
The Bill will permit those mutuals that wish to remain mutuals a greater degree of certainty in protecting their legacy assets in future. It will also remove some of the financial incentives of demutualisation. Notwithstanding those potential advantages, I am particularly pleased that it is an opt-in system, because it is not for the state to dictate how such societies should operate; that should always be for their members. We should enable the possibility, rather than obliging any organisation to behave in a specific way. I commend the hon. Gentleman for bringing forward the Bill and I hope to see it on the statute book shortly, following its successful passage in the other place.
9.56 am