HM Treasury News Release
113/97 25 September 1997
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FRIENDLY SOCIETIES: RAISE YOUR PROFILE
Friendly societies were today told to raise their national
profile and play their part in giving consumers an alternative
to their more commercial competitors by the Economic Secretary,
Helen Liddell.
Speaking at the Association of Friendly Societies' Conference in
Leicester, the Minister also told the delegates that the
Association had a key role to play as the Government re-shapes
financial services regulation. She said:
"As the Government redraws the structure of financial
services regulation, your Association will have a key role
in ensuring that the new structure will take into account
the distinct needs of your unique contribution to the
[financial services] industry.
"It would be illogical to have Friendly Societies outside
NewRO. More than that, it would have sent the wrong signal
about the value we place upon the societies work.
"Placing friendly societies' regulation at the heart of
the financial services regulator will help us to create the
kind of financial climate that will allow your members to
prosper and grow.
"This is an opportunity for fresh thoughts, new initiatives
and modernised practices. But the principles on which they
are based are already with us. They are timeless: mutual
respect and assistance, the values of community. They are
as valid today as they were when friendly societies were
first created."
NOTES TO EDITORS
1. Media copies of the Minister's speech are available from the
Treasury Press Office on 0171 270 5185. Other copies are
available from the Treasury Public Enquiry Unit on 0171 270 4558.
2. If you have access to the Internet you can find this
information at http://www.hm-treasury.gov.uk. Material on other
Treasury matters can also be found at this address.
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HELEN LIDDELL'S SPEECH TO ASSOCIATION OF FRIENDLY SOCIETIES'
CONFERENCE AT LEICESTER ON 25 SEPTEMBER 1997
It really is a genuine pleasure to be here today. Any
politician given an invitation to a conference of Friendly
Societies will seize it gratefully. Indeed, to refuse it would
be unthinkable. Ours is a profession whose invitations are
sometimes issued in the same spirit of tolerance as the manager
of Glasgow Rangers might expect if asked to speak to the
supporters of Glasgow Celtic. Or vice versa.
But I have a particular personal reason for wanting to come
here today - and not one, I suspect, shared by every Minister of
the previous Government. Two of my grandparents were collectors
for friendly societies. The community in which I grew up was
typically working class, the kind of community where friendly
societies always provided stability and security. Financial
stability for many people not regarded as sound and profitable
prospects for more commercial organisation; and financial
security for the pre-NHS medical bills because we knew the
"shilling a week" man always came good.
Every Scottish politician is expected, at one time or
another, to speak at a Burns' Night Supper and we become experts
at quoting him. Burns had the immeasurable advantage of saying
something about almost every subject under the sun, including,
though he little suspected it at the time, your conference today:
"When first the human race began,
"The social, friendly, honest man,
"Whate'er he be,
Tis he fulfils great Nature's plan,
And none but he."
Social, Friendly. Honest. That was the motivation of
friendly societies. They were trusted by communities who needed
to trust someone, someone to turn to when times were bad.
Your societies were built on the principles of self-help and
mutual support. I believe that many of the changes of recent
times will work to your advantage.
The Government elected on May 1 is a Government committed
to community and equality, a Government which recognises what
friendly societies have known since their creation - that
encouraging thrift and providing protection and savings for those
on modest incomes is not just good neighbourliness but sound
economics.
Alistair Darling told you at last year's conference, almost
a year ago to the day, that the promotion of the savings culture
would be an important part of our economic strategy. Our
manifesto was our prospectus. It recognised that the benefits
of savings and planning for the future - having something behind
you for when the bad times come - should be available to all.
The Government is grateful for the help and advice which
members of your Association are already giving to the Department
of Social Security's work on Welfare Reform. At the Treasury,
I have already met representatives of the Association. I've
learned from them. I look forward to many more meetings in the
future.
One of the things we're looking at is the Individual Savings
Accounts which will embody our shared belief that it isn't only
the well-off who are entitled to share the fruits of prudence.
Indeed, prudence matters most to those whose incomes are the
least.
These Individual Savings Accounts are intended to encourage
long-term savings, especially among those on low incomes, and to
further the principles of existing savings schemes such as TESSAs
and PEPs.
Ours is a Government where Scots, to say the least, are
prominent, including the Chancellor, Gordon Brown. The Rainy Day
is something with which, literally and metaphorically, we grew
up. Putting something aside for it in the metaphorical sense is
in our bones, part of our nature.
I know you are anxious to ensure that the spirit of mutual
self-help which your individual societies represent can be made
better use of and extended through the activities and functions
which they are already authorised to carry out. We look forward
to hearing what you may propose and to working with you to make
those services, savings or insurances, even better to give
comfort and confidence to those who want to provide for their
future.
These are not empty words; they are also a well-meant and
well deserved compliment to your Association. That so much has
been achieved in only two years demonstrates the value of a
unified movement which acts as a focal point and clearing house
for discussion and analysis of future developments and can act
as a direct route to Government.
I can assure you, with absolute confidence, that as the
Government redraws the structure of Financial Services
regulations in this country, your Association will have a key
role in ensuring that the new structure will take into account
the distinct needs of your unique contribution to the industry.
Let me tell you, briefly, what our intentions are and how
you can play your part.
The 1980s saw a huge change in the nature of financial
services, a change that outstripped the legislation. Financial
products became increasingly sophisticated and complicated; the
boundary lines between different kinds of financial institutions
became blurred; the Financial Services Act, with its emphasis on
self-regulation became out-dated and unable to meet the needs of
the customers.
There were great scandals, too, not least the huge scandal
of the mis-selling of personal pensions and we have by no means
heard the last of that. I promise you.
Those scandals were the inspiration for the Chancellor's
statement on May 20 - less than three weeks after labour became
the Government - that the entire regulatory structure would be
reformed.
There will be only one financial regulator, which will give
the retail customer one point of contact; within the new
structure, there will be varying levels of sophistication so that
the man and woman in the street can have complete confidence that
their best interests are being cared for. At the other end of
the spectrum, the wholesales end of the business will have the
freedom to be creative while the regulator keeps track of the
risks sometimes associated with complex financial products being
traded.
Financial services are big business in Britain. To be world
leaders, we must have a regulatory system which is also a world
leader, one which will give our financial services industry a
true, competitive advantage. Above all, the public must be
certain that financial regulation is in the best possible hands.
Work on the necessary legislation has already begun. In
July, Sir Andrew Large produced a Report for the Chancellor
which charts a way forward to integrate the existing self-
regulatory organisations and the other financial services
regulators into an enhanced Securities and Investment Board
(NewRO) which will become operational within two years or shortly
afterwards. New Millennium, new regulator, to coin a phrase.
The Friendly Societies will fall within the ambit of the new
regulator. It is important to you. Let me take a minute or two
to explain why.
The chaos of the 1980s taught us that we need a consistent
and coherent approach to the regulation and supervision of
financial institutions which give advice or services to the
public. It would be illogical to have Friendly Societies outside
NewRO. More than that, excluding them would have sent the wrong
signal about the value we place upon the societies' work. In
effect, exclusion would have downgraded the work you do and the
service you provide.
What's more, the benefits from bringing different regulators
together, so that they can share best practice and learn from
each other's experience and expertise, are clear, apart from the
financial and operational economies of scale which NewRO will
create. If we are to breed public confidence in the new system,
we need to demonstrate efficiency, and efficiency includes
keeping a firm grasp upon cost. Placing friendly societies'
regulation at the heart of the financial services regulator will
help us - Government and members here today - to create the kind
of financial climate that will allow the members of your
Association to prosper and grow.
That's where you come in. We need advice and guidance from
you in creating this super-regulator and tailoring it to the
needs of your societies and your members - and we want it now.
We will publish the Bill for consultation next summer. It
will be long and complex. It will bring together and rationalise
regulatory structures at present and set out in five major
statutes and hundreds of pages of ancillary legislation and
regulations. It is a mammoth task. I ask you now to work
towards our publication timetable so that you can seize the
opportunity to influence these fundamental changes.
The Prime Minister has made clear his ambition for a more
modern Britain. A modern Britain is not compatible with closed,
exclusive Government. We want those with knowledge and
experience to help us in creating a framework for the future.
The chance and the challenge I offer to you today is for you to
help us create a financial services industry for the next
century. One which we can together build on the crucial role
friendly societies will have in providing a unique service to
their members.
There's a lot to be done in which we need your help.
Individual savings accounts. Work on Welfare Reform. The
reform of financial regulation. I know that you, in turn, are
anxious that we should take into account the need to make the
industrial assurance business more efficient. The present
legislation is out of date, framed in the 1920s and the late
1940s - if I may say so, before I was born. That increased
efficiency must be balanced by consumer protection for
policyholders. Officials in my department are currently working
with the Friendly Societies Commission and the Association of
British Insurers to find a solution which meets these twin - and
inseparable - requirements.
I think the future is exciting. There is the opportunity
for fresh thoughts, new initiatives and modernised practices.
But the principles on which they are to be based are already with
us. They are timeless : mutual respect and assistance, the
values of community. They are as valid today as they were when
friendly societies were first created.
Your contribution over the past two hundred years has too
often been unsung and unrecognised, except by those like me and
my family who have been past beneficiaries.
You should raise the national profile of your work. Let a
wider public know what you do. Friendly Societies are important
institutions, with much to be proud of. They have a special role
in our community. Of course, they are also big business. You
collected 790 million Pounds in 1995, and your members
benefitted from payments of 770 million Pounds. That is a
great achievement. On that basis, you are well able to play your
part by giving consumers an alternative to your more commercial
competitors.
As I said earlier, there's a lot to be done. Today, I am
offering you the prospect of working with a Government which
shares your aims and principles. You are serious people and so
are we. You now have a once in a lifetime opportunity to help
meet the challenges of the 21st century. I'm sure you will
respond in the spirit of your traditions and make your future
even more valuable than your past.