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Mr. Burstow: Will the Minister clarify the way in which clause 7 will work in respect of the compensation arrangements in certified contracts? In cases where the courts make an ultra vires ruling, will the public be able to challenge the reasonableness of clauses in such contracts? If they cannot, taxpayers will continue to lose money as local authorities will be obliged to pay under the compensation clauses.
Mr. Raynsford: The hon. Gentleman is getting slightly carried away by the technicalities of the subject. The legislation is designed to ensure that local communities do not have to meet additional costs. It establishes a sensible certification framework that will make sure that proper questions are asked before contracts are entered into. Our objective is to ensure that proper safeguards exist.
The private sector would not enter into contracts if it did not believe that it could recover the contribution that it expected to receive through the compensation route should a contract be ruled ultra vires. We have achieved the proper balance. We are ensuring that local authorities have the power to enter into contracts and we are establishing a more prudent framework for making contracts in order to safeguard public interest, while providing the equivalent of a safe harbour for the private sector so that it may invest confidently without fearing that it may be left with no way of recovering its investment. That is a sensible and practical way of addressing real, existing problems.
The hon. Gentleman also questioned the certification process, which he described as bureaucratic. It is not: it is a sensible provision that any sensible local authority will welcome. It will help to concentrate the mind on the process of reaching agreement on the contract. It will also ensure that the proper steps are taken to assess the probity and appropriateness of a contract so that the local authority may enter into it with confidence. That is the correct way to deal with partnership arrangements.
The Government believe that partnerships between the public and private sectors are the best way of raising the quality of services delivered to the community. On 8 May,
my hon. Friend the Paymaster General announced an end to universal testing: the rule that all projects had to be tested for private finance potential. On the same day, Malcolm Bates was asked to launch a rapid review of the workings of the private finance initiative. As I have said, that review has been completed and accepted by the Government. The summary and conclusions of Malcolm Bates's review were published this morning, and we have lost no time in ensuring that speedy action is taken to reinvigorate the private finance initiative and establish a framework for successful public-private partnerships.
The main conclusion of the Bates review was that public sector structures must be simplified and responsibilities made clear. A new Treasury task force will be set up, covering both policy and central input on projects. That will end the confusion over who is responsible for what at the centre, while making the best use of available resources and expertise. There are clear recommendations for removing the barriers that have hindered the progress of many projects to date, including measures to keep down the costs of tendering for projects.
The Government will consider carefully with the task force and PPPP the implications of developing public-private partnerships in local government and how such projects should be encouraged. The Bill is an essential part of the framework for ensuring that projects can be taken forward successfully under the partnership approach. We do not want uncertainties about local authority powers to curtail an approach that can deliver innovative schemes at best value to local communities. I am pleased to commend the Bill to the House.
Question put and agreed to.
Bill accordingly read a Second time, and committed to a Standing Committee, pursuant to Standing Order No. 63 (Committal of Bills).
Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),
Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),
Motion made, and Question proposed, That this House do now adjourn.--[Mr. Graham Allen.]
Ms Sally Keeble (Northampton, North):
I am pleased to make my maiden speech on the Adjournment concerning an issue that touches closely the lives of many people not just in my constituency but across the country. The future of building societies affects some of the most important aspects of people's lives: their homes and their family finances.
However, I shall begin by paying the traditional tributes to my predecessors. Many new women Members of Parliament have said with pride that they are the first women to represent their constituencies in Parliament. I take even greater pride in saying that I am not the first woman Member of Parliament to represent my constituency: the first Member for Northampton, North was Maureen Colquhoun in 1974. Before her, there was only one Northampton seat, which was represented for some years by Margaret Bondfield--a Labour Member of Parliament and the first woman from any political party to achieve Cabinet rank. There may be many women in Parliament now, but we have not been here for very long. Margaret Bondfield was one of the first female Members of Parliament and, during the election campaign, I met a very elderly man who remembered canvassing for her in the early 1920s.
My immediate predecessor was Tony Marlow. He is a man of very strong views--most of which I disagree with--but I pay tribute to him for two achievements. First, he commanded the loyalty of the people of Northampton, North who returned him faithfully to Parliament for 18 years--an achievement which I would do well to emulate--and, secondly, he gave more grief to his own party than he ever did to mine. If, during my parliamentary career, I can manage to cause as much trouble for the Conservatives as he did, I shall be well pleased. I wish him an enjoyable retirement.
Northampton, North is an entirely urban constituency, comprising residential suburbs overwhelmingly populated by home owners and people in work who want to get on and who expect to pass on a better life to their children. I am very proud to represent them in this place. However, home ownership is not lightly won in my area. Northampton is a town of quite low wages, and the fragility of family finances was a deciding factor in the general election.
A large chunk of my constituency lies in the new town development of Northampton. Many of the people in this eastern part of the town came originally from the council estates of the inner cities in search of jobs and a better life. One of the first people I met in Northampton, North was a man who had moved there from London. He had found a job and bought his new town home. He described graphically what it was like moving from a cramped Lambeth council flat to a brand new three-bedroom house situated in the middle of green fields. However, when bad health and a spell out of work put him behind with his mortgage repayments, he lost his home. Like many others, he said that he had voted Tory since 1979. Like them, he bought the Thatcher dream, and its betrayal was a potent factor in the general election result.
As with home ownership, the quality of life enjoyed by many in Northampton, North is hard won. A bank in one part of my constituency reported that it had turned down a third of all applications for bank accounts because people's incomes were too low. Some people find a solution in self-help, and the Weston Favell credit union in my constituency is one of the oldest in the country.
Northampton has had to adjust to changing circumstances in the course of its long history. It was once the seat of a roving Parliament--until it passed a poll tax. It was briefly a university town until the students there behaved so badly that King Henry III ordered that Northampton should never again have a university. However, Nene college in my constituency hopes to change all that, and I support strongly its efforts to achieve university status. Northampton became the famous centre of Britain's boot and shoe industry and, since that industry's decline, it has become a major distribution centre and something of a centre for financial services. Quite a few of my constituents work for Barclaycard, which has a new headquarters just outside my constituency. Inside its boundaries lies part of the headquarters of the Nationwide building society, whose links with the town go back to 1848.
That long history is now in jeopardy, and with it the future of the building society movement. Nationwide is the last of the major national mutual building societies. Five independent and, some would say, maverick candidates are standing for the Nationwide board in this month's elections on a manifesto pledge to get the society to abandon its mutual status, giving a windfall bonus of shares valued at £1,000 to each Nationwide member.
The Building Societies Association has predicted that, if the five succeed in the Nationwide elections, the remaining 70 mutual building societies--many of them are small, locally based organisations--would probably take steps to turn themselves into plcs rather than be precipitated into the chaos of an unplanned conversion, which would be simply a dash for cash.
Nationwide branches throughout the country saw 25,000 people a day apply for new accounts until the society pulled down the shutters last week. The Coventry building society--another mutual organisation--has seen four times the normal level of new accounts, with most investors depositing the minimum sum possible. The pressure finally became so intense that, last week, the society increased its minimum deposit. That did nothing to dampen enthusiasm, so today it increased the sum again.
During this weekend, the chaos of the Nationwide board elections descended into farce when the leader of the five mavericks said that he still wanted to see Nationwide members get their windfall, but as a reward for keeping the society's mutual status. That a large, major financial institution, which holds mortgages on 1 million homes, should have its future decided on such whimsy is appalling.
It is easy, of course, to criticise people for opting for the quick buck, and it is also wrong. The attraction of receiving a lump sum is very real, especially when in some instances it is the first time that such a payment has been received by an individual. The long-term cost of those windfall payments, however, will be substantial.
First, there is the loss of the cheaper mortgages that building societies have provided. Secondly, there is a loss of access to home ownership for people on lower incomes
who buy smaller houses than others. Building societies were created to help such people, and traditionally they have catered for them. Even now, building societies provide almost twice as many mortgages as do banks for people in the lowest income groups. Less tangibly, there is the loss of a savings culture, and in its place the encouragement of a credit culture, which has already seen people get themselves into unmanageable levels of debt.
The arguments about long-term benefits over short-term profits are difficult ones to advance in the immediate post-Tory era. The arguments in favour of the mutual building societies are rational but not immediately as attractive as £1,000 cash in hand.
Some people have raised the possibility of introducing further legislation to deal with the problems to which I have referred. The sad fact, however, is that the largest of the mutual building societies have already converted, and the fate of the others could be decided within a month. We need to ensure that, if the door is to close on an era of mutual building societies, people will still have real choice in financial services and that those on lower incomes can still have the benefits of services that are provided in the interest of the customer--of the borrower and saver--and not merely those of the shareholder.
The Government are committed to long-term planning and we are pledged to enable individuals to have their own savings accounts. I ask my hon. Friend the Paymaster General to do three things. The first is to set out Government policy towards the mutual building society and, in particular, Government attitudes towards the long-term benefits that they offer. Strong support and encouragement should be given for those who believe in the benefits of mutual building societies.
Secondly, I ask that the Government look in the longer term at the effects that conversion has had on the customer--on home ownership and savings, especially for people in lower income groups. Thirdly, I ask my hon. Friend the Paymaster General to say whether the Government, in carrying out their pledges on individual savings accounts, will consider ways of encouraging schemes that embody the mutual principles.
Financial services should be run in the interests of borrowers and savers and not for shareholders. Services should be accessible to those with low incomes, with saving schemes that demand only small initial deposits and provide checking facilities that enable people to manage their money more effectively. There should be real choice and diversity, with different types of services with different interest rates and benefits. I am not talking merely of bank accounts provided in different places.
It took 200 years for building societies to build up £290 billion of assets, assets which are held by millions of building society members. It could take only another year to fritter away that legacy.
That the draft International Monetary Fund (Limit on Lending) Order 1997, which was laid before this House on 28th February, in the last Session of Parliament, be approved.--[Mr. Graham Allen.]
Question agreed to.
That the draft Army, Air Force and Naval Discipline Acts (Continuation) Order 1997, which was laid before this House on 21st May, be approved.--[Mr. Graham Allen.]
Question agreed to.
5.14 pm
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