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More power to mutual trends

As the chairman of the Parliamentary all-party group for building societies and financial mutuals, I have spent a lot of time over the last four years arguing the case for mutuality.

It has been disappointing to see the number of conversions from building societies or mutual life insurance companies to plcs since 1997 but there have been some notable exceptions such as Nationwide and the Leek.

For IFAs and their clients, mutuals offer competition and diversification in a marketplace that would otherwise be driven by shareholders and large powerful companies more concerned with the bottom line than the interests of customers.

Those of us who believe in the benefits that mutuality offers have pressed ministers to do more to strengthen the hand of mutuals.

Now there are signs the Government may be starting to address the fact that, unless something is done, the UK&#39s mutual and co-operative sector could quickly disappear.

As we head towards the next election, debate on our manifesto has highlighted the need to offer broad support for mutuals, including looking into the issues that have led to conversions.

I would hope that a statement along these lines would be a precursor to a root and branch review of mutuality, including the way mutuals are governed and looking at what steps can be taken to ensure their continuing success. For example, how can we enhance the democracy within societ-ies while not leaving them continually at the mercy of windfall-hungry carpetbaggers?

An area the Government has delivered on is that of mortgage regulation. In the next 18 months, the industry will see the statutory regulation of lenders come into being for the first time.

This is an idea that consumer groups, intermediaries and lenders themselves have been calling for. What is proposed, however, has I believe, not gone far enough.

The Government has not included the regulation of advice and it has left intermediaries regulating themselves. This sort of halfway house is totally unsatisfactory, leaving intermediaries exposed to criticism and consumers without statutory protection.

I think that there is every possibility the FSA will revisit this issue in the future and extend the regulatory regime.

Finally, a comment on the FSA&#39s review of polarisation. This is critical to the future of the financial services market.

I support the measures taken in the first phase of the review, namely to allow the depolarisation of stakeholder pensions. As one who firmly believes in tackling the problems of financial exclusion,I think this change will help the market to reach further down the income scale.

Lower earners, are unlikely to seek out IFAs to help them with any savings they can afford to set aside. Therefore, improving the product ranges of the places where they are most likely to shop – high-street banks, building societies and direct -selling life offices – and increasing competition in this sector of the market can only result in those on lower incomes getting a better deal.

IFAs will not, I believe, see their businesses suffer as a result of this limited change.

Looking towards phase two however, I am yet to be persuaded about the need for further relaxation. How any change would be better for consumers is yet to be demonstrated and this must be clear and measurable before any other changes are introduced.

Summing up, I believe this Government has made a good start in beginning to address the problems that are holding back the financial services industry. There is still much to do and there are many of us in the party who will continue to lobby the Government for further change.

I will keep fighting for mutuality, which I firmly believe brings essential diversity and competition to the financial services market in the UK, and for steps towards tackling financial exclusion, which is important if we are to reduce dependence on the state by developing and extending the savings habit throughout society.


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