I absolutely agree, but the bureaucracy of Government sometimes gets in the way of things happening.
The Bill will help level the playing field, enabling building societies to compete more fairly with banks. It will support them to lend more money in a safe and secure way. Over half of building society lending—55%—goes to first-time buyers. Crucially, as the building society sector directs a greater proportion of lending to first-time buyers than banks do—there is a theme here—that will benefit more people looking to get on to the housing ladder.
Modernisation of building society legislation is long overdue. There are some archaic requirements about the way building societies fund themselves that put them at a competitive disadvantage compared with banks. Competition in banking is good for consumers, and given that building societies drive innovation, particularly in supporting first-time buyers, strengthening the sector is a great route to supporting aspiration across the UK at the same time as supporting a sector that works co-operatively and mutually. Building societies work for the benefit of their members up and down the country, engaging in a system of co-operative banking for mutual benefit, not for profit.
We are lucky to have three building societies in my Sunderland Central constituency: Newcastle, Yorkshire and Nationwide building societies all have branches in Sunderland, so I see at first hand the excellent support they give to members. It is incredibly important to my constituents to have a branch that they can visit to talk through any financial issues and receive the support they need face to face. I see the work of building societies as both a strong British tradition and a strong Labour tradition. I am delighted to have the support of the Co-operative party and the Building Societies Association, which represent both traditions.
The first form of a building society was in 1775, when Richard Ketley brought people together in a pub—in what is now the constituency of my hon. Friend the Member for Birmingham, Ladywood (Shabana Mahmood) —to put money into a shared fund, collecting regular subscriptions until there were sufficient funds to be able to provide a house for one of them. They drew names, very much like the drawing of names for a private Member’s Bill, to decide which member would be the next beneficiary; this continued until all members of the group had a house. The arrangement required trust, hope and a commitment by the community that no one would be left behind.
At that time, most building societies were created as terminating societies, which meant that the building society terminated trade once all its members were housed, so many were created, housed their members and then disappeared. That practice continued until 1980. By 1825—50 years after the first building society was created—over 250 terminating building societies were in operation, although it took until 1845 for the first non-termination society to be formed: the Metropolitan Equitable.
In 1836, the first legislation dealing with the industry was introduced, recognising building societies for the first time in this House through the Regulation of Benefit Building Societies Act. The legislation, along with previous court cases, led to the formal recognition of the rights of building societies as entities, resulting in a boom in the sector. By 1860, the number of building
societies had risen to almost 3,000. In 1874, the Building Societies Act was passed—an historic precursor to the Building Societies Act 1986, which I hope to amend through my Bill.
The history of building societies has played an important role in the history of working people supporting each other in their mutual ambition of owning their own home, and in financial institutions serving the communities they represent. It is a trend that is even more prevalent today; as banks shut branches at an alarming rate, building societies are gradually taking a bigger share of branches in the community that remain open. Building societies now account for 28% of all high street branches in the UK, as opposed to only 14% 10 years ago. Although this may be caused by the closure of bank branches in the main, it shows a commitment to keep branches open by building societies, on which so many of my constituents rely. That face-to-face engagement, personal support and visibility is so important to many people. Branches are so much more accessible to those who have specific needs, especially in the digital age, where those with internet access often have the best opportunities and access to the best deals.
The original purpose of building societies embodies the famous phrase in clause 4 of the Labour party’s constitution, that
“by the strength of our common endeavour we achieve more than we achieve alone”,
with communities coming together to support each other and provide a strong and secure economic foundation for their collective futures. Families in Sunderland and across the country are struggling to find a secure home. Research by the Resolution Foundation shows that 80% of 25 to 34-year-olds would prefer to buy their own home than to rent. Home ownership is something many strive for, to provide financial security and ultimately to turn a house into a home. My Bill aims to support them in doing just that.
As I have said, it is quite clear that there is a housing crisis in this country, for homeowners and renters. We must at this point consider the damage done by the previous Prime Minister and her Chancellor, and the economic damage caused by her Government to the country, especially people with mortgages. I believe we also need reform in the rental sector to sort this out. The system is broken and is not working for people. The Bill will go some way towards making the housing ownership landscape easier for all.