The speech made by Helen Liddell, the then Economic Secretary to the Treasury, at the Association of Friendly Societies’ conference held in 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.
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