Co-operative and Mutual Businesses

Debate between Gareth Thomas and Barry Sheerman

Thursday 27th June 2019 Commons Chamber

[Gareth Thomas]

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.

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

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.

--- Later in debate ---

[Gareth Thomas]

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.

[Mr Sheerman]

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?

[Gareth Thomas]

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.

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.