Last summer’s ‘Reforming financial markets’ white paper had a lot say about mutuals, with a complete section relating to them, including proposals for ‘a modern legislative and regulatory framework’ for credit unions, industrial and provident societies and friendly societies.
The gyst of the paper’s focus on mutuals was that while there was strong support for them in principle, there was a recognition that there weaknesses in some aspects of the governance and regulatory arrangements for the sector. It is a point well made and one that has been made repeatedly in this column over the years.
Among the proposals included in the white paper were the ending of the historic – but confusing – term ‘industrial and provident society’, with all IPSs to be renamed co-operatives or community benefit societies. These proposals and suggestions for corporate governance reforms would not be put forward by government but were left to a private members’ bill that was at that time going through Parliament and is at present being considered by the House of Lords.
Sadly, though, many other reforms to mutuals that were examined in the white paper have in effect lapsed. This suggests a loss of confidence in mutuality by officials in the Treasury and that the proposed reforms are no longer a priority.
A Treasury spokesman told the News: “There was quite a lot on mutuals in general [in the white paper]. What we have said is that there is still policy work that we are working on. There is nothing in the Financial Services Bill on the specific problems facing mutuals. That is work that is ongoing and will be addressed seperately.”
One of the keenest felt losses relates to Northern Ireland, where mutuals are regulated differently than in the rest of the UK – and less effectively. Regulatory failure was evident in the solvency crisis that hit the Presbyterian Mutual Society, whose members are seeking compensation from either the UK or Northern Ireland governments.
There is a comparable potential weakness in regulation of credit unions in Northern Ireland. While credit unions in Great Britain are regulated by the Financial Services Authority and are allowed to provide a reasonably wide range of financial services – including bank accounts – there is weaker oversight and less extensive opportunities for credit unions in Northern Ireland. Should a credit union fail in Northern Ireland, members have to fall back on the unions’ own guarantee arrangements and cannot call on the Financial Services Compensation Scheme – as is the case in England, Scotland and Wales.
It was widely understood that equality of treatment for Northern Ireland credit unions would be included in the Financial Services Bill – but it is not. The Treasury spokesman explained that it had been decided to delay all reforms relating to the mutual sector and that proposals for reforms of the sector will still be brought forward. “It is nothing specific about Northern Ireland,” he said. “We are working with trade bodies representing mutuals on this. We have officials working on this now.” He added: “The mutual model has been put under pressure and we believe it should be given its own airing.”
But the official denied that the Presbyterian crisis was a factor in the delays. He said that many of the changes relating to mutuals could be made using statutory instruments and so do not require Parliamentary time. These may be achieved before the General Election. Others that require primary legislation – and this particularly affects credit union reform in Northern Ireland – are now very unlikely to be enacted before an election.
A spokeswoman for Northern Ireland’s Department for Enterprise Trade and Investment said that difficulties had been caused by these reforms needing legislation in both the Northern Ireland Assembly and Parliament. “ It was concluded [by officials in DETI and the Treasury] that as several separate pieces of new legislation need to be enacted in both GB and NI, the current FSB [Financial Services Bill] was not a suitable legislative vehicle for such changes,” she said.
She added: “A UK-wide joint DETI and HM Treasury public consultation on the department’s proposals for amending the legislative framework for NI credit unions is planned to take place before the summer. The [enterprise] minister [Arlene Foster] has also sought an early meeting with HM Treasury to discuss the legislative position.”
SDLP leader Mark Durkan, who is an MP and an MLA, is also trying to speed-up the process. “I am hoping to meet Treasury ministers on this. Credit unions in England are under FSA regulation, so there is no reason why legislation can’t happen to make credit unions in Northern Ireland under FSA regulation.
“Regulation by the FSA has been agreed universally in the Assembly and has been accepted by the Treasury. But the Treasury are refusing to legislate and showing no good reason. This must be hugely frustrating for the credit union movement here and I intend to move table an amendment in the Commons to ask the Government to follow through on a way forward to follow through on a way forward that everyone has already agreed.”
Tommy Jeffers, development worker at the Ulster Federation of Credit Unions, confirmed that the sector is unhappy with the delay. “We are disappointed,” he said. “In November officials had thought they would get it in before the change in government. Seemingly, it hasn’t happened.”
Peter Hunt, general secretary of Mutuo, confirms that there has been extensive discussions taking place between Treasury officials and representatives of the mutual sector, who have been pushing ministers to bring forward early legislation, but that progress has stalled. “There is no chance of legislation on this coming before the General Election,” he says. “They got spooked by the Presbyterian. In general, mutuals are not a very high priority within the Treasury. The threat is that with a different government [the movement’s] pestering won’t be as effective.”
1 thought on “Legislation to reform mutuals held back: Co-operative News”
Very informative article .Those of us affected by the PMS situation are most frustrated by lack of actual action by the Government and the N.Ireland Assembly and are fearful that we are to be totally deserted by those who could help but lack the will to do so.
I must add that Mr John McFall Chair of the Treasury Select Committee is the exception as he has taken an active and informed interest in our plight.