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Presbyterian Mutual Society

Sir Nicholas, I count it an honour to sit under your chairmanship today. I thank you for the courtesy you have shown to my hon. Friends over the years. I wish you well in your retirement and thank you for your superb chairmanship and leadership. Thank you for calling me to open what I trust will be a profitable debate on a subject that touches the hearts of many of my constituents. I welcome the opportunity to open this timely debate on an issue that needs to be resolved to the satisfaction of all of the people involved. I ought to start by painting a backcloth to what is an injurious situation that affects the lives of many ordinary people and their families. The Presbyterian mutual society is an industrial and provident society with about 10,000 members. Its aims are""to promote thrift among its members by the accumulation of their savings; to use and manage such savings for the mutual benefit of members; to create a source of credit for the benefit of its members at a fair and reasonable rate of interest; to procure or provide legal, accountancy, consultancy or secretarial services and advice to members towards assisting them in the establishment, improvement or expansion of their business or financial affairs and generally to undertake all or anything expedient for the accomplishing or incident or conducive to or consequential upon the attainment of all or any of the objects including the acquisition of property and any rights or interest therein."" Membership of the society was obtained by the purchase of shares. The maximum shareholding was £20,000. Members who wanted to place more money with the society could do so by making loans to it. A dividend was paid on shares and those who made loans received interest. The society grew rapidly, with its assets rising by more than 12 times from £24 million in 2002 to £309 million in 2008. It made significant advances for buy-to-let properties, and development and agricultural land. It is clear from the rules of the PMS that it was intended to be a thrift institution, as it aimed""to promote thrift among its members by the accumulation of their savings"." That the PMS was accepted for registration with that rule indicates that it was acknowledged by the authorities to be a thrift institution. PMS savers who put in their money as shares had every reason to believe that they were in the same position as those in credit unions, who likewise deposit their money in the form of shares and are none the less recognised by Government as savers. PMS members are certainly not shareholders in the ordinary sense of the term. The shares did not derive their value from being traded and were withdrawable at any time at their original value. The value of the shareholding did not determine the voting power of the member; all were equal. As the recent court case indicated, shareholders could turn themselves into creditors at the stroke of a pen by applying to withdraw their shares. As the Treasury Committee report of February put it,""it is understandable that PMS members considered them as analogous to deposits in a building society"." In the light of that, I cannot understand how the Treasury can justify regarding the members as akin to equity-style shareholders. Like so many things in life, all went well until circumstances outside the control of the PMS took centre stage. As a result of the collapse of the Icelandic banks, the Government effectively guaranteed all deposits in conventional banks. Although that had a stabilising effect on the wider financial system, it prompted many PMS members to move their money from the society. In the first three weeks of October 2008, the PMS responded to many members' requests for withdrawals, which reduced the balance of the PMS current account from £25 million to just £4 million. On 25 October 2008, the board met and decided that no further payments should be made to members until it had been professionally advised on the liquidity of the society. By the time of a subsequent meeting on 6 November, a further £50 million worth of requests had been made and three members had announced their intention to commence legal proceedings for the recovery of their investments. Faced with that problem, the priority of the board became asset protection and it was resolved to place the society into administration to achieve that. Legislation was passed quickly in Northern Ireland by my colleague Arlene Foster, the Minister of Enterprise, Trade and Investment in Northern Ireland. That news was welcomed at the time because it protected the assets of the society and prevented a fire sale that would have resulted in many small savers not getting back any of their invested money.