Wednesday, 7 May 2014
Friendly Societies and Industrial and Provident Societies (Miscellaneous Provisions) Bill 2013: Committee Stage
Cuirim fáilte roimh an Aire Stáit go dtí an Teach. My hope is that by discussing this issue, we will have some further thoughts on it before Report Stage. Friendly societies have been a major part of the financial life of citizens, particularly the less well-off, a contention for which I will adduce evidence later. It is proposed not to allow the creation of new friendly societies in a financial landscape that has to be described as a wilderness. Why were the friendly societies picked out in this legislation? Whatever else happens in Irish financial affairs, there will be no more friendly societies. I could nominate dozens of candidates to which the extinction clause included in the section should be applied much sooner than the friendly societies. Perhaps the Minister of State will reflect on the issue before Report Stage because, without being aggressive about it, I am at a loss to understand the reason friendly societies merit the fate that is envisaged for them in the Bill. They have done a great deal of good, certainly when compared to other sections of the financial services sector which caused a great deal of harm. I will refer to these later.
According to the explanatory memorandum, the "main amendment in the area of friendly societies provides for the closure of registration of new societies." The House should only accept this measure following the deepest consideration and debate. What are friendly societies and why does the Government not want new societies to be founded? The Registrar of Friendly Societies, Ms Helen Dixon, states that friendly societies are registered under the Friendly Society Acts 1896 to 1977 and established for various purposes, primarily to provide small life assurance benefits, sick benefits and death benefits to members, provide benefits to non-members and promote particular activities or interests. Let us dwell briefly on the primary activities to which Ms Dixon alludes. The provision of small life assurance benefits, sick benefits and death benefits appears to be a good thing. Reading Ms Dixon's reports, one does not encounter the types of conflicts and disastrous economic performance one finds in other sectors. The reason for putting an end to the foundation of any new friendly societies is not obvious from her statements.
The number of registered friendly societies is in decline and currently stands at 48. As I indicated, we should compare this sector with what has taken place in the banking and insurance sectors. The case of Setanta Insurance was raised on the Order of Business before the Minister of State joined us. In addition, a major High Court decision was made against a stockbroker recently.
We have had to pay €1 billion to insurance companies that failed. We had to intervene in the case of a credit union in Newbridge. We have no building societies left and we have a collection of zombie banks which have cost us €85 billion. In that particular landscape I do not share any sense of urgency that we should today seek that no new friendly societies should be formed.
The Public Service Friendly Society is an example of one. It had its annual general meeting in Buswells Hotel in the week before I started my research on the Bill. That society provides access to low-cost illness protection, specified illness cover, assistance in financial difficulty, travel insurance and help for members struggling with school costs. It provides advice and direct educational grants - repayable as well as non-repayable. For those who find themselves in a tight financial spot for whatever reason, the society can help. It provides a first-contact confidential service, and offers support and direction. That is obviously a very good society. Why would we not anticipate that the next generation of people would be equally adept at forming such a good society as the Public Service Friendly Society?
Across the water these societies are stronger. The UK's newly formed Financial Conduct Authority is responsible for the governance of 10,000 such societies. In the UK friendly societies manage the savings and investments of 4.5 million people with total funds of £15 billion under management. Based on the accounts of the registrar, Ms Helen Dixon, friendly societies were established to encourage self-help, personal responsibility and enable people with limited financial resources to improve their economic status. They do not have shareholders which means the full benefits of the products are passed on to their customers. They typically offer better returns, lower charges and better service than insurers with shareholders.
These are mutual benevolent societies or fraternal organisations gathering together for the purposes of insurance, pensions, savings or co-operative banking. They have a very distinguished role. A great and former Member of this House, Sir Horace Plunkett, founded such societies throughout the country, out of which grew the very strong agriculture and dairying sector, not least in the Minister of State's neighbourhood and constituency. Before modern insurance and the welfare state, friendly societies provided financial and social services to individuals. Before the development of large-scale government and employer health insurance, these societies were there. If members became sick, they would receive an allowance from their mutual society. The society might have a doctor whom the member could consult for free. We already mentioned the funeral expenses. They have also been very active in Scotland.
I place before the Minister of State that evidence of their record and what they are doing now. They do not appear to be in trouble unless the Minister of State has information as to why this section is included in the Bill. I point to what they do, the parts of society in which they work, their idealism, their solvency and their providing help for people particularly in a State that has such financial difficulties that we frequently find in this House that many of the things we would like to do are not possible. Would the development of a mutual self-help society, such as the Public Service Friendly Society, not be positive? Should we not encourage and promote the establishment of new ones, which would therefore mean not going ahead with that section of the Bill? Can we now say that no friendly society will ever be established again in Ireland? That is what this section provides for. Do we really intend to tie the hands of future generations? Would they not be just as idealistic as Sir Horace Plunkett, George William Russell and others who went before us?
Before voting for the section preventing the establishment of any friendly society in Ireland again, we should consider their record in the United Kingdom and here. We should consider their establishment by the kinds of practical patriots we so badly need. We should consider the new generation. We continually look for people with initiative and entrepreneurship, and we desperately need new financial institutions. Friendly societies have played a noble role. Who am I to say they could never do so again?
I was disturbed, as was the Minister for Communications, Energy and Natural Resources, Deputy Rabbitte, when he told the House that the banking institutions had intervened to push down the rate of interest paid in the Post Office Savings Bank. I hope it could not possibly be true that banks have put pressure on the Government to get rid of friendly societies in the same way as they put pressure on the Government to reduce the rate of interest paid in the Post Office Savings Bank. The Minister, Deputy Rabbitte, was very concerned about that.
The bank bailout bill is approximately €85 billion and we are setting up an inquiry into that today. We have paid about €1 billion in insurance - in one year Quinn Insurance lost €900 million, and PMPA and ICI lost a couple of hundred million pounds each back in the 1980s. The administrators of Quinn Insurance are suing the firm's accountants, PricewaterhouseCoopers, for €1 billion. We could go through the list of what is wrong in financial services. I would make a very strong case that the friendly societies should not be scheduled for abolition by this House of Parliament. That is why I do not support section 5.
I hope that, on reflection, all Members of the House could come back and ask cui bono; for what benefit are we proposing that a group of self-help people should never again come together for their mutual benefit? Why are we saying that we never again want a new friendly society established? Cessation of registration of new societies seems to be so draconian that there should have been a Green Paper or White Paper before proposing that it be done in section 5 of this Bill. Given the wilderness that is the Irish financial sector, what singles out friendly societies for this kind of treatment, as proposed in section 5(1)? I am not sure there will be any support for such a measure when this comes to be discussed widely in the country. We might wish to register them differently, although that is not apparent in Ms Dixon's report.
There were some scandals.
I heard a man in Spain who had taken money being interviewed by RTE. One deplores that and better regulation is needed. I praise RTE for that piece of investigative journalism. It was a long time ago. I think a youthful George Lee might have been on its perimeter. The money, however, was peanuts compared with what has happened since.
If there is a problem with friendly societies, I would be delighted to consider it but the overwhelming weight of evidence is that they were very good in the past. While they have reduced in number to 48, I would never rule out the possibility that the next generation, on whom we rely to clear up so many of the other problems that have arisen here in the past seven or eight years, would not have the idealism to reinvent friendly societies. If they did, they would run contrary to this Bill.
I would be most interested to discuss how the Minister of State proposes to proceed in this matter. I make an earnest case that these were good for the country and for their own members. They did not impose the kind of burden on society that some of the other financial institutions, which behaved disgracefully, did.