That this House welcomes the contribution of co-operative and mutual businesses to the UK economy; notes that they provide substantial jobs in Britain, generate significant tax revenues and involve consumers and employees in decision making; and calls on the Government to review what further steps it can take to help grow that sector.
It is a pleasure to move the motion in this, the first week of Co-operatives Fortnight. Co-operative and mutual businesses—from retail giants such as John Lewis, Nationwide and the Co-operative Group through to social enterprises, credit unions, energy co-ops, community banks, childcare co-ops, friendly insurers and housing co-operatives—offer a route map to a more democratic and fairer economy. Co-ops and mutuals exist already in every sector of the economy, from financial services to housing, food retailing, public services and sport, supplying affordable and sustainable services to consumers, providing rewarding work and strengthening community enterprise.
My hon. Friend has mentioned financial services. Does he agree that building societies in particular provide an excellent service on the high street? High street banks have vacated many communities en masse, but building societies are a mainstay, and are gaining more business and better understanding from consumers because they are there to support them week in, week out.
That is an extremely good point. Building societies are one part of a co-op and mutual movement that already has a combined income of more than £133 billion, with assets worth many billions more. It is a serious and significant part of our economy, yet all too often Government, regulators, policy makers and thinkers dismiss its huge potential for expansion—expansion that could help to challenge wage stagnation, widening inequality and our growing environmental crisis.
Co-ops and mutuals put economic power in the hands of ordinary people, and, remarkably, those ordinary people, supported by skilful management, can be entrepreneurial, highly productive, and visionary—who knew? There are those on the right who criticise co-ops and mutuals for being some sort of left-wing throwback to the 1970s, and dangerously radical; and there are those on the hard left who think that they are not public ownership at its best, but just a front for business as usual. More generous critics take a benevolent, paternalistic approach, tolerating co-ops and mutuals until bigger, more serious players in the City or the unions enter the room.
My hon. Friend is making an excellent start to what I am sure is going to be a great speech, but may I suggest to him that co-ops are, in fact, dangerous? They undermine the existing order, and empower people to take charge of their own lives. They are dangerous, and they should be.
I was about to say something that I hope my hon. Friend will be able to support even more wholeheartedly. I have always believed that co-ops and mutuals are the future: that they spread wealth and power more fairly, that they strengthen British-owned business, that they provide competition and choice for consumers in a range of critical markets, that they create diversity and enterprise, that they take a long-term view, and that they are a counter to the short-termist, riskier business models loved by City editors. We in this great Chamber should surely be able to allow our communities to direct and influence the economies that surround them and on which they depend.
Will my hon. Friend join me in supporting agricultural co-operatives, which play an important role in trying to bring about more sustainable, locally connected food and farming systems? Does he share my disappointment that countries such as the Netherlands and France have far more of them than we currently have in the UK?
I absolutely endorse my hon. Friend’s comments. I know that fisheries co-ops are another part of the sector in which she is interested. They, too, make a huge contribution, and could do a lot more with a little more help.
The economy is not some separate space to be run only by so-called management experts on grotesque levels of pay who can continue to ignore the rest of the country. Why should our neighbours, our friends and those we see at the school gate not have a say in how businesses and services on which they depend are run? They are allowed a say in political decision making, so why should they not be allowed a say in the businesses that they work in or depend on? Co-ops and mutuals can be life-changing and transformative, and the Government and the other Opposition parties should join Labour in committing themselves to double the size of the sector from between 4% and 5% of GDP to 10%.
The Oxo Tower on London’s South Bank was redeveloped by the enterprise Coin Street Community Builders. It now contains five floors of social housing run by Redwood Housing Co-op, subject to some of the lowest rents in the capital while being in one of London’s prime spots. Armed forces credit unions are another powerful example of the difference that co-ops can make. They were established after a long campaign by the Co-operative party, and are helping to combat the problem of payday lenders who prey on our armed forces personnel. Those are two remarkable stories, in my view, but much more is possible. Access to capital, further legislative reform, better Government funding, more Whitehall efforts to raise awareness and more expertise on the sector in the civil service are the key asks of Britain’s co-op and mutual sector.
I appreciate that finance is not an issue or problem reserved to co-ops and mutuals, but because of their different ownership models they often have real difficulty in accessing finance for expansion, and indeed for getting started. Big corporations can access large investment through debt funding or, crucially, can create capital by selling shares. Co-operatives and mutuals cannot at the moment do the latter without demutualising. Clearly we need to protect this unique governance model but also allow mutuals to issue permanent investment shares— that is to say, create indivisible reserves—which cannot be distributed to members even beyond the lifetime of the mutual. The European Union states offer this already in their mutual and co-operative legal set-ups, and a further five EU states have it in a slightly different form, yet in the UK we do not offer this route to raising significant finance for co-ops and mutuals.
Does my hon. Friend agree that almost all start-up businesses have difficulty in accessing finance but that, ironically, it is more difficult for co-ops, notwithstanding the fact that the survival rate of starter co-ops over five years is almost double that of other businesses? That is an anomaly that we would reasonably expect the financial services market to correct.
My hon. Friend is absolutely right. I pay tribute to the work of programmes such as Co-op UK’s Hive programme, the resources that are available from Stir to Action, some of the local measures that we have seen in Manchester and Preston, and Social Investment Business’s mutual Reach Fund, but these are all relatively small-scale and need to be scaled up.
The Minister will not be surprised to hear me—and, I suspect, other hon. Members—urge the introduction of further legislative reform to help credit unions offer more services to their members and enable them to invest their members’ money in an expanded range of ways to generate a return for savers. Credit unions are the most active, responsible lenders to the poorest and most financially vulnerable and excluded people in the UK, but they are held back from doing more by outdated legislation and a digital approach to regulation by the Financial Conduct Authority.
I declare my interest as a former director of the Staffordshire credit union, which sadly went bump because the FCA’s misunderstanding of the difference between the capital reserves we had to hold and the sustainability of our loan book meant that we could never meet its ever increasing targets and thresholds. That has left a number of former consumers unable to access even the basic banking arrangements that we offered, and I wholeheartedly agree with my hon. Friend’s comments about the way in which the FCA regulates. It needs to better understand what credit unions are, and how they differ from commercial high street banks.
My hon. Friend makes a powerful point. There needs to be a significant culture change in the FCA’s approach to credit unions and other financial mutuals. I recognise that there has been some Government support—indeed, the Minister has been helpful in ensuring more support for credit unions—but wholesale reform of the objects and powers of credit unions through primary legislation, providing a clear basis for innovation and development in the sector, is overdue.
I do not usually stand up for the Financial Conduct Authority, but is it not in the interesting position where the rise of digital currencies, crowdfunding and all the new opportunities opening up to co-operatives mean that we are in a challenging and innovative but quite unstable situation?
My hon. Friend seems to have gone from being dangerously radical earlier to being conservative within the space of about 10 minutes. He makes a reasonable general point about the changing landscape, but I am struck by the number of credit unions that have stories to tell of their difficulties with the FCA, and I believe that the point that my hon. Friend the Member for Stoke-on-Trent Central (Gareth Snell) and I have made about the need for cultural change in the FCA’s approach to mutuals is justified.
As the Association of British Credit Unions Ltd and the Building Societies Association have noted, new primary legislation for credit unions could allow them the chance to offer additional services at an affordable price in areas such as house insurance, where consumers often pay a premium if they pay on a monthly basis. Under the Credit Unions Act 1979, credit unions are permitted to offer credit to their members in the form of a loan, but the Financial Conduct Authority has taken a strict and literal view of this, limiting credit unions to offering cash loans. ABCUL and credit unions such as Plane Saver and London Mutual have noted that credit unions could provide an affordable and responsible alternative to a number of other consumer credit markets, such as secured car lending. Indeed, one credit union highlighted to me that the FCA had effectively stopped it offering an alternative to the high-cost credit that BrightHouse locks its customers into when they cannot afford to pay outright for basics such as cookers and fridges.
There should be a legal right for payroll deduction to join a credit union to be available to an employee if they desire it. I hope the Minister will ask his officials to check that every branch of the Government offers payroll deduction to join a credit union if civil servants want that facility. There should also be a requirement for the Department for Work and Pensions, local authorities and housing associations to signpost those in need to credit unions to help them avoid the payday loan companies and illegal lenders who prey on our most vulnerable people. Further help to allow credit unions to invest in new technology, so that they can provide a good digital offer, is key.
My hon. Friend is making an excellent speech. Does he accept that community land trusts have a particular benefit in rural areas, where they can provide cheaper or affordable housing? Does he agree that we need to examine how planning rules can encourage, rather than disadvantage, community land trusts in such settings?
I do agree, and I hope that my hon. Friend will catch your eye, Madam Deputy Speaker, to develop that point further.
Soldier On, a US veterans charity, opened the Gordon H. Mansfield veterans community in the autumn of 2017, with 51 homeless veterans moving in. Those veterans received not just the keys to their own apartment in a housing co-operative, but the keys to a new life away from the danger and insecurity of the streets. Soldier On has 14 new units under construction and is looking to develop 100 more units in New York and a further 70 in New Jersey. That model of housing co-ops on, probably, donated Government land could work in the UK and should be happening here. I gently ask the Treasury to encourage the Ministry of Defence to stop some of the sales of the almost 50 empty properties of which it is trying to dispose.
Co-operatives and mutuals are a great British success story, but they could be an even bigger one. I urge the House and the Government to embrace the sector and to champion the doubling in size of its contribution to our economy.
It is a great pleasure and a privilege to follow the lead of the hon. Member for Harrow West (Gareth Thomas). I sometimes disappoint him in other matters, but I salute his work on furthering the co-operative movement.
I will never forget the moment when I fell in love with the principles and ideas of the co-operative and mutual movement. Shortly after my election, I had been encouraged to study a book called “Working-Class Patients and the Medical Establishment” by David Green, who now runs the Civitas think-tank, and the moment that I mention came when I read this quote—I hope that Members will forgive the old-fashioned language—taken from the Oddfellows Magazine on the eve of the passage of the National Insurance Act 1911:
“Working men are awakening to the fact that this is a subtle attempt to take from the class to which they belong the administration of the great voluntary organisations which they have built up for themselves, and to hand over the future control to the paid servants of the governing class… This is not liberty; this is not development of self-government, but a new form of autocracy and tyranny not less but the more dangerous because it is benevolent in its intentions.”
That speaks to the kind of radicalism that the hon. Member for Huddersfield (Mr Sheerman) introduced to the debate. Perhaps it is a spirit too radical for our age, but it is pretty obvious that, in so many countries around the world, there is a crisis of political economy and a lack of faith not only in the institutions of government but in the institutions of market economy. I am grateful to see Opposition Members nodding, and in that spirit we need to recapture some of that radicalism. It is about free individuals in society standing up not only for themselves but against entrenched interests and entrenched power better to serve their families and their communities. That was the moment when I realised, as a free market Conservative, that I perhaps had something to learn from the traditions of the left.
The hon. Gentleman and I are bitter opponents over the UK’s future in Europe, but we sometimes put that to one side. We are working together on a new initiative called FairLife—he knows I agree with the Rochdale principles—to open up the system so that people know they are getting a fair deal on financial services, just as they know they are buying ethical products through Fairtrade.
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Such a form of co-op and mutual share capital would offer stronger protection against demutualisation and therefore maintain and enhance corporate diversity. Above all else it would allow co-ops and mutuals to compete in the marketplace with other big businesses without one hand tied behind their back. In the UK building societies have a version of this already, called core capital deferred shares, which allows them to access capital markets without risking their mutual nature, but other financial mutuals and co-ops in the UK do not have anything like that.
Outside the EU, Desjardins in Quebec has raised more than $4 billion through this route, and Australia passed legislation on 5 April this year allowing its co-ops and mutuals to issue share capital while protecting their co-operative and mutual nature. If the Australians can do it, if most of Europe can do it, and if British building societies have it already, why should not British co-operatives and other mutuals also be allowed to raise finance in this way?
I recognise that the Minister and his officials have looked at this once already in the light of Lord Naseby’s successful Bill in the other place, and indeed my own and mutuals’ representations, but I hope he might be persuaded, particularly given that similar legislation is now on the statute book in Australia, to bring key experts in this area together with officials again to try to find a resolution to the problems that have stopped this method of raising finance being allowed in the UK. The Co-operative Group, other retail co-op societies, Co-operatives UK, friendly insurers and the Building Societies Association all support progress on this issue, and I urge the Minister, who has been sympathetic to co-operatives and mutuals in the past, to be willing to take a fresh look at this.
Britain’s co-op and mutual movement suffers from a lack of dedicated banking funds. Across Europe, dedicated mutual or co-op banks exist, are highly profitable and have been around for ages. I have long thought that the Royal Bank of Scotland could and should be converted into a mutual to help address this gap in the UK and to challenge the continuing big banking monopoly in the City. The Minister may not yet be ready to join me in making that jump, so perhaps I can ask him to explore whether the British Business Bank might begin to have a dedicated mutual growth fund to encourage the setting up of new mutuals.
Responsible Finance, an excellent organisation that champions Britain’s existing community banks, highlights the need for dedicated finance for start-up worker co-ops. There is at present an absence of patient capital or capital blended with grants to reduce investment risk for start-up worker co-ops. A dedicated fund would enable specialist co-op lenders to take a higher level of risk in this area and mean that more capital would be available.
Greater understanding of the needs of the co-op and mutual sector by the civil service, and across all parts of Government, is important, and the Treasury is in a good position to facilitate such an awareness-raising effort. In Homes England, for example, a dedicated group of staff could promote and help housing co-operatives. A co-operative development agency could be tasked with promoting interest in co-ops and mutual entrepreneurialism across the country. The Treasury should be able to check that Government funding announcements do not discriminate against co-operative and mutual models. Co-op schools and energy co-ops have not been helped at key moments. Finally, why oh why are the Government not doing more to promote employee ownership trusts—a move they announced in the 2014 Budget—as a way of enabling the owners of companies to get the exit they want, realising the value of their business while securing its ethos, values and employees for the future?
The Government have sought to dispose of unwanted buildings and other land, but some of that should be allocated for sale or transfer for co-operative housing. We need more community land trusts to lock down ownership of land for those who need it most, and I will give just one example, with Armed Forces Day this Saturday in mind. In the US, homeless veterans are being helped into homes built on donated Government land, subsidised by Government funding and run as housing co-operatives. That has given veterans the chance to take control of the environment, rules, regulations and rents that they live by and pay, while getting proper support to rebuild their lives.
What is it that make co-operatives different? A briefing supplied by Co-operatives UK states:
“What makes co-ops different is how they allow people to democratically own and control the things that really make a difference—like capital, organisation and scale—so that these create real value for people and planet. They are one of the best tools we have for applying social responsibility, solidarity and democracy in a market setting.”
Perhaps it is that language of solidarity and democracy in the market that frightens off some of my Conservative colleagues, which I very much regret.
The Rochdale principles of the movement’s founding pioneers talk of open membership; democratic control— one person, one vote—not based on share ownership; distribution of surplus in proportion to trade, which is economic participation; payment of limited interest on capital; political and religious neutrality; cash trading, so that people do not get into credit trouble on the basics; and the promotion of education.
Those principles have of course been refined by the International Co-operative Alliance to open and voluntary membership; democratic governance; limited return on equity; surplus belonging to members; the education of members and the public in co-operative principles—my goodness, we could do with more of that; and co-operation between co-operatives.
If we accept, and I am afraid that today it is a question of if, that prices, profit and loss are the only way to co-ordinate a global society of billions of people, and if we accept that we must live in a free market society to best serve one another, it is time to look at civil society—that great panoply of institutions between the individual and the state—and ask how that inclusive spirit of free enterprise shared by mutuals and co-operatives can help to rebuild people’s faith not only in a market economy but in government. We therefore need to recapture the Rochdale principles, and I encourage my colleagues on the Treasury Bench to think carefully about how a Conservative Government can stand for some of these principles in a market economy.