Co-operatives

(Limited Text - Ministerial Extracts only)

Thursday 14th July 2016 Westminster Hall

[The Minister for Civil Society (Mr Rob Wilson)]

It is always a pleasure to serve under your chairmanship, Mr Hollobone. I hope you will indulge me today, because I feel slightly nervous, as I always do on the first morning of a test match.

I thank the hon. Member for Cardiff South and Penarth (Stephen Doughty) for securing this important debate. I also compliment him on his excellent timing for it, following as it does the International Day of Co-operatives only a couple of weeks ago.

I congratulate my new shadow, the hon. Member for Salford and Eccles (Rebecca Long Bailey), and I wish her the best in her new job. It is a bit disconcerting to have a new shadow here, but with an old shadow, the hon. Member for Harrow West (Mr Thomas), sitting just behind her.

We have heard some important things today. Certainly, everyone has commented on the huge value we all see in co-operatives in this country. We in the Government share that enthusiasm, because we believe that a balanced economy is the best way to create a healthy economy. That involves a number of different aspects, from rebalancing our economy across the various regions of the UK, to bringing in greater balance in terms of gender diversity in our industries, all of which means encouraging and supporting a diverse range of business models as well.

Co-operative enterprises have a proud history in this country, as a number of hon. Members have commented. Back in the 1760s, weavers in Fenwick were already forming a society to sell cheaper oatmeal and to help their members with savings and loans. Hon. Members might recall the famous work of the great Welsh reformer, Robert Owen, and the Rochdale principles agreed by pioneering artisans in 1844, which paved the way for the co-operatives that exist throughout the world today.

We want to uphold the co-operatives tradition and ingrain it ever deeper in this country. We have nearly 7,000 independent co-operatives across sectors and across the UK—my own constituency has the True Food Co-op, a not-for-profit community shop that has been selling local food at affordable prices since 2004. I hope you do not mind the constituency plug, Mr Hollobone, in particular today.

I am pleased that the model is increasing further in popularity, with the co-operatives sector growing by 6% a year—that is about 250 new co-operatives every year. Together, as others have said, they make a huge contribution to our economy, worth more than £30 billion and owned by about 17.5 million of our citizens. What makes co-operatives so unique is the democracy that runs through their core: they are run by their members, for their members. From farming co-operatives to football club co-operatives, they are all about their members working together to shape their own service, and their own success.

I noted the interest of the hon. Member for Cardiff South and Penarth in the armed forces credit unions. To remind him, the Government gave £0.5 million from LIBOR funds to establish payroll deductions to allow armed forces personnel to access credit union savings and loans. I understand the project is up and running well, with members joining in large numbers. In due course, it will also serve people in receipt of an armed forces pension. I hope that deals with his concerns.

It is the fact that the co-operative model gives members a stake in their futures that makes it so powerful. A study by the industry trade body Co-operatives UK found that that stake gives members of co-operatives much more motivation and boosts the UK’s productivity to the tune of almost £60 billion. The model is not only productive but highly resilient, as was shown by the financial success of the co-operative sector in the years following the economic downturn of 2008, when it continued to increase its average turnover.

Co-operatives are more productive and more resilient, but they also give their members more control over what matters to them. It is not distant shareholders who have a say; the customers, residents, suppliers or fans that own those businesses set their direction and priorities. Therefore, co-operatives often have a real focus on the social and environmental benefits that those owners want to see. That is why they should undoubtedly be seen as a force for enormous good, not just here in the UK but across the world.

I was asked about learning from overseas. Officials have met the leaders of the co-operative movement in the US to learn about how they have achieved a thriving co-op sector. The Government’s mission-led businesses review, which I commissioned at the turn of the year and co-ops are considered part of, will draw on best practice from around the world.

[Ms Karen Buck in the Chair]

[Hannah Bardell]

The Minister is making some interesting and important points. I hope that he will come on to the apprenticeship levy, which businesses have raised with me. I would be grateful to hear his thoughts and reflections on that and the point about not discouraging apprenticeships in the current business environment.

[Mr Wilson]

I will certainly come to that if I have time, but I have several questions to address, so I will write to the hon. Lady if I do not.

It is important that we create the right kind of environment to help co-operative businesses to flourish, and in 2014 we introduced several measures to do just that. My hon. Friend the Member for Wycombe (Mr Baker) raised the question of further ambition for the sector. He was a bit harsh on what we did in 2014. With those measures, we started by consolidating laws to make it easier for societies to understand and apply the legislative framework and rules governing them. We also simplified the electronic registration process to help new societies get going, and more importantly, made it easier and cheaper for them to raise capital by increasing from £20,000 to £100,000 the withdrawable share capital an individual member may invest. To ensure that any business claiming to be a co-operative functions properly and lawfully, we gave the Financial Conduct Authority further powers to investigate any suspicions of impropriety.

The new Prime Minister has set out her commitment to public service mutuals and co-operatives as a means of safeguarding public services. I was interested to hear the views of the hon. Member for Harrow West. I know that many hon. Members would support the notion that he raised about Channel 4 and perhaps the BBC, but we will see in due course what the Prime Minister has to say about that. The Department for Culture, Media and Sport has published its White Paper on the future of culture in the UK, and the Government will consider the future of key public bodies in light of consultation responses. That will ultimately be for the new Secretary of State at DCMS to consider, but I am sure that the hon. Gentleman will want to get his views heard in that consultation.

I want to say a few words about the important role that co-operatives play in the social investment market. The Government are committed to helping to develop the retail social investment market, which allows people to invest in causes that they really care about. Community shares, which enable local people to buy shares in local assets and invest in causes that they care about, are a great example of social investment models in action and make up an estimated 6% of the overall UK social investment market. We are excited to see large-scale community share-raising by organisations such as FC United of Manchester, which raised £2 million from 2,000 local people. The Government support such share offers through the social investment tax relief, the second anniversary of which we recently celebrated. Several community share offers have benefited from that relief, which has allowed local people to buy shares in Clevedon pier, Portpatrick harbour and Burley Gate community shop and post office.

We have also taken specific measures to support credit unions, which are financial co-operatives. We have around 500 credit unions in the UK, ranging from large and complex financial institutions to much smaller organisations run by volunteers for just a few hundred members. British credit unions combined have a membership of 1.6 million, more than £2.8 billion in assets and more than £1.2 billion in outstanding loans to members, and play an essential role in broadening the range of financial services on offer to customers in the UK. They aim to promote savings and provide an alternative source of finance. That is good for competition, and it is good for customer choice when it comes to the question of whom to bank with.

[Mr Baker]

The Minister is quite right: I was slightly harsh. He has reminded us of the Government’s spectacular achievements with co-operatives and mutuals. I simply look forward to us doing even better in this Parliament.

[Mr Wilson]

I have addressed that point, and I am sure that the Prime Minister will be thinking carefully about what she will do in the coming few weeks. To add to the success that my hon. Friend refers to, we have taken significant steps to support the credit union sector. We are running a credit union expansion project, backed by an investment of almost £40 million. That will help to create a tool to automate loan decisions and help credit unions to decide which loans to make and which to refuse, thereby speeding up that process, and a shared IT system and banking platform will be developed for credit unions to use. Overall, the project aims to help meet the growing demand for modern banking products for people on low incomes by modernising and expanding the credit union sector. Around 7 million people have fallen into the trap of high-cost credit. Some are charged more than 6,000% in interest on short-term loans. By helping credit unions to grow, we aim to save consumers up to £1 billion in loan interest repayments by March 2019.

In short, the Government see enormous value in the co-operative sector because of the contribution it makes not just to our economy but to our communities. That is why we have taken steps to support co-operatives of all kinds and will continue to look at further ways in which we can broaden that support.