Co-operative and Community Benefit Societies (Environmentally Sustainable Investment) Bill

Anna McMorrin Excerpts

2nd reading & 2nd reading: House of Commons
Friday 11th September 2020 Commons Chamber

[Anna McMorrin (Cardiff North) (Lab)]

I beg to move, That the Bill be now read a Second time.

May I start by thanking all those present today and extending my gratitude to those who support my Bill and to the Members who are unable to attend because of ongoing shielding responsibilities? I thank the Minister and his officials for the many discussions we have had on this Bill and the consideration they have given it. I also thank my hon. Friend the Member for Harrow West (Gareth Thomas) for his advice and support. I wish to pay special thanks to my brilliant team—Hannah Buckingham, James Metcalfe, Lauren Kinsey, Mike Ash-Edwards and Charlie Roberts—who have been with me all the way, poring over legislation, dealing with briefings and emails, visiting projects and researching and preparing for this Bill.

Legislation that supports positive social and economic transformation has never been more necessary. I firmly believe that my Bill, the green share Bill, as it is known, has so much to offer. It feels like a lifetime ago that, in January, as a Back Bencher, I was lucky enough to have been selected in the ballot for a private Member’s Bill. It was a significant moment: the opportunity to put forward legislation that has the possibility of going the distance, becoming law and effecting change. The turmoil over the past few months has been difficult, and we know that these difficulties will continue as we navigate our way through this covid crisis. There has never been a more important time for this Bill, which supports positive social, environmental and economic change and helps tackle the climate emergency from the ground up. It is a Bill that delivers that necessary transformation.

Like all Members selected in that ballot, I was inundated with emails asking me to put forward important pieces of legislation. I want to thank all those who inundated me with their brilliant suggestions and idea; this provides a reminder of the scale of change we need to see across this country. The time and circumstances right now are calling for us to be bold; we cannot go back to business as usual. We must create a society that provides the jobs and opportunities of tomorrow and that reduces the inequalities and injustices of today. My green share Bill is an opportunity to do just that. It aims to build a more equitable and sustainable economy, rooted in all our communities and with environmental sustainability at its heart. It unlocks much-needed finance and creates a level playing field for co-operatives.

We are living through a climate emergency. Innovative green projects within our local communities must be at the heart of our rebuild and the fight against runaway climate change. Yesterday’s report by Climate Assembly UK that was presented to the House highlighted that the public want greater choice and competition for green energy and sustainable services. As we look to rebuild communities post covid, innovative and sustainable projects that create green jobs and apprenticeships and that generate cheaper and cleaner energy and more sustainable living environments must be a priority for all.

The Bill empowers our communities and investors to do their part in tackling the climate emergency from the bottom up. If we are to help to tackle climate change, we must legislate to enable our communities to rise to that challenge. Top-down approaches from the UK Government alone are not enough, even if they did not fall woefully short of the radical action required. Too often, we have heard the Government make big announcements, but we do not see the delivery of those promises on the ground. Instead of action, we have seen empty rhetoric and missed targets. Instead of climate action, we have seen abject failure and staggering hypocrisy.

People across this country are demanding change. Research last year by Greener UK and the Climate Coalition found that almost 70% of the British public want urgent political climate action and leadership. When I asked constituents in my constituency of Cardiff North what they wanted to see, the answer was healthier, greener and safer communities. This Government are not delivering. When we have a Government who are still willing to funnel billions into fossil fuel projects, how can we trust them to have our best interests at heart? The gulf between action and empty words is widening daily, and with it, the window of opportunity to make any meaningful difference to our planet is shrinking.

Covid-19 presents a significant fork in that road for the UK Government. Do we continue on a path of limited decarbonisation, missed targets and missed opportunities to future-proof environmental legislation, or do we use this opportunity to take a bold approach to rebuilding a more sustainable, resilient world that transitions away from a fossil-fuel driven economy and embraces serious measures to tackling the climate crisis at all levels? We must step up and begin to put the mechanics in place that are needed to deliver on our binding targets, including the Paris climate agreement, our commitment to keep global warming to a maximum of 1.5°C and the UN sustainable development goals that were adopted by the UK in 2015. Action must start now, and the Bill provides an opportunity fundamentally to transform our communities and do just that.

The Bill provides a way for co-operatives to raise private investment. The maximum threshold that can be raised through fixed term withdrawable shares is currently £100,000. Co-operatives UK said that that is the biggest practical limitation on societies seeking institutional investment, because as a result, co-operatives have less money to invest to innovate and grow their businesses. There is a need to facilitate new capital in co-operatives, without compromising their co-operative nature or members losing control. My Bill would remove the threshold that is holding co-operatives back, while enhancing the economic democracy and accountability that lies at the heart of co-operatives. The new green share would protect the economic democracy at the heart of co-operatives operating a one person, one vote system. The Bill would also safeguard co-operatives from individuals or businesses that seek to liberate—or asset-strip—a legacy asset by demutualising a society and taking over its business for private benefit; that threat would be nullified.

Some may ask about potential loopholes in the Bill. I accept that where there is risk, there are always those who are actively exploring ways to undermine financial law. That is why the Bill protects against tax and fraud loopholes by allowing the Treasury, by regulation, to address such concerns and establish a pilot scheme for the framework. In my correspondence with the Economic Secretary to the Treasury over the last six months, he has been enthusiastic about doing so.

Despite their value to customers and the community, mutuals and co-operatives in the UK are hugely underappreciated. Several barriers prevent co-operatives from growing to their full potential and place them at a disadvantage. Allowing my Bill to progress today would represent parliamentary acknowledgement of the value that co-operatives add to whole sectors and communities, and it would signal our intent to amend existing law, under which co-operatives have one arm tied behind their back. This House should champion, celebrate and recognise what co-operatives have done for the country.

I will provide a little bit of context for the Bill. The co-operative model is a truly British success story and a very successful Welsh story, and it was at the heart of economic renewal in the past. Robert Owen, a prominent Welsh textile manufacturer, was one of the founders of the co-operative movement, and he proposed the creation of “villages of co-operation” as a response to the economic crisis in 1815 at the end of the Napoleonic wars. The first co-operative societies were established in Wales in the early 1840s, among them one started by the Chartists in Pontypridd. The strength of the movement in south Wales was in small valley villages such as Troedyrhiw, New Tredegar and Caerau, which reflected how the coal industry developed. In North Wales, they grew in coal and slate communities such as Leeswood and Llanberis. In mid-Wales, they developed in towns such as Newtown and Welshpool.

Co-operation was about much more than trading; it was a way of life for many. It became a central part of the culture of the local community, similar to that of the chapel. People identified with it and were loyal to their co-operative societies, which became an ingrained way of life. As was said of the Blaina Co-operative Society in 1922, it was

“undoubtedly the biggest thing in the valley outside of the coal industry itself”.

What started as a community model for pooling resources and working as a collective to provide low-priced flour, oatmeal, sugar and butter has grown and inspired the growth of co-operatives across the world. There are roughly 1 billion members of co-operatives worldwide, in more than 100 countries. That is something to be proud of.

In Wales, the feeling of co-operation and belonging has endured. The values of co-operation, fairness and social responsibility are still with us in our communities, and we need to harness and protect those values and strengths. A lesson that we can all learn from co-operatives, as the current health and climate crisis demonstrates, is the potential for renewal and transformation—for keeping up, adapting and tackling the challenging conditions that lie before us.

During this coronavirus crisis, we have seen the spirit of co-operation and community coming to the fore to provide resources to those who most need them. More than £4 million of food and other services have been donated by the Co-operative stores to FareShare for distribution to community food bank and for fundraising. Some 5,000 jobs have been created and targeted at those whose employment has fallen foul of the current crisis. That is just a fraction of the good work that co-operatives have done to support communities, businesses and people. As we face up to the scale of the economic damage caused by the virus, our society must look at the co-operative model as a model of sustainable and ethical economic and social regeneration.

This green share Bill is an acknowledgement of the crucial work that co-operatives do and a recognition of the unlimited possibilities that would be available for people and communities from Cardiff to Canterbury from Manchester to Middlesbrough by unleashing them from these archaic restrictions. Co-operatives can be part of the revival again, whether that is coming out of this covid crisis or addressing the catastrophic climate crisis before us, both of which continue to rage in tandem.

Co-operatives are already leading the way in sustainable business and green projects. The current crisis demonstrates the need for this Parliament to look again at the current restrictive rules and instead put in place legislation that allows them to flourish. We must have economic development, job creation and vital infrastructure built from the ground up, so that we can guarantee economic and social success that works for all.

The Government have been inconsistent in their commitments in England, scrapping a policy to power 1 million homes by community energy in 2017. That is in stark contrast to the Labour Government in Wales, who wholeheartedly support community energy projects and the development of clean energy generation. Since 2010, renewable electricity in Wales has trebled.

Housing associations would also benefit from the legislation in this Bill with capital to retrofit and to build new homes, which again is something that the Labour Government in Wales are spearheading. Millions has been announced for the Welsh innovative housing programme, the optimised retrofit programme and improved quality standards. We need to see that same commitment from this UK Government for England.

Despite the lack of commitment from the Government here, communities and co-operatives continue to press ahead undeterred, because they recognise the value such projects add, but those projects need to be valued and not neglected. Energy co-operatives in the form of renewable or low-carbon energy are now established in all corners of the British Isles.

In March, I visited Awel co-operative wind farm, a joint venture between Awel and Egni in Mynydd y Gwrhyd, south Wales. The wind farm was commissioned in 2017 and has a huge range of local members, including charities, sports clubs and the local arts centre. It really is a community project.

We have Egni Co-op, which was the first solar photovoltaic co-operative in Wales. It is now undertaking the biggest roll-out of rooftop solar in Welsh history. It develops rooftop solar on schools, businesses and community buildings to help reduce their carbon footprint. It has just completed the largest rooftop solar installation in Wales on the Geraint Thomas velodrome in Newport. It has a share offer that has raised £1.3 million so far.

Both projects have the best of co-operative values at their heart, combined with environmental sustainability. They demonstrate a new way of greening our energy network and local economies. Such projects strengthen communities and serve as educational facilities and tourist attractions. They show where community enterprise, private investment and co-operative governance can work together and lead the way.

Both the projects I have visited, alongside others I have spoken to, would really benefit from this green share Bill, but this Bill would also unlock vital finance and help these projects go from strength to strength. Dan McCallum, the director of Awel co-op, strongly supports the Bill. In his words:

“This Bill will really help in terms of unlocking other sources of finance, supporting and strengthening the co-op model. We’ve been amazed at the interest people have shown in renewable energy and co-ops, but any ways of expanding on that and strengthening the model can only be a good thing.”

We face the mammoth task of tackling climate change and transitioning our economy to net zero. It will be particularly challenging to effect climate action at local level, but it is my belief that by allowing co-operatives to expand and bringing the community with them, they can help us rise to that challenge.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

As the hon. Lady knows, I am a co-sponsor of the Bill. I am very supportive of the principle of co-operatives. On climate change, she said a few minutes ago that Wales had done better than the rest of the UK, citing how it has trebled its renewable electricity production since 2010. That is exactly what the whole of the UK has done as well—it has gone from 6.5% to 20%—so it would be good to recognise some of the achievements of the entire UK as well as those of the Welsh Government.

[Anna McMorrin]

The real point I was making is that the regulatory framework and legislation put in place by the Labour Welsh Government have allowed such projects to come to the fore, particularly community energy projects—and in fact onshore wind, which has not been the case in England—but I thank the hon. Gentleman for his comments.

My green share Bill unlocks an exciting market for external investment in co-operatives and mutuals, allowing them to grow, maintaining competitiveness and investing in green sustainable projects.

[Anthony Mangnall (Totnes) (Con)]

I am fascinated by what the hon. Lady is saying, but could she clarify where she draws the line on green projects? Does carbon capturing come into it? There are myriad projects out there that have their pros and cons. Where does she, in this Bill, draw that line?

[Anna McMorrin]

Environmental sustainability needs to be defined. At the moment, co-operatives have very strong environmental sustainability values at their heart, but that would clearly need to be set out in the confines of this Bill.

Added to that, environmental and social governance, or ESG, is the buzzword of the City right now. Investors have flooded into the market looking to immunise their portfolios against climate risk and help promote a sustainable recovery from this pandemic. This Bill provides such an opportunity or pathway for investment, and it would be a travesty if this Government were to walk away from that opportunity.

My Bill is not just warm words on the environment. It would provide a genuine route towards greening our local communities for the benefit of all, creating green jobs, creating green skills, raising capital for the vital retrofitting of housing association stock, and strengthening sustainable and secure sources of good-quality British food and produce from British farms. The list is endless. My Bill is a bid to match co-operative values to the mission of climate action, with communities pooling resources collectively to install and generate energy; taking small steps with huge benefits, such as creating cheap renewable energy, so that no one in the community is left behind by rising energy costs and fuel poverty or priced out of green evolution.

Co-operatives UK expects there to be 1 million employee and worker owners in the UK co-operatives sector by 2030, but we can go one step further: we can ensure that co-operatives kickstart a local green economy and create local jobs and skills. There are Awel and Egni co-operatives and others across the country, such as Brixton energy and Bristol energy co-operatives and OrganicLea, a co-operative farm that trains local people. Initiatives such as these spark local imagination and creativity and put the power back into the hands of local people.

The Bill is about not just the co-operatives of today, but the ones of tomorrow that could be born out of the successes of this Bill—the co-operative bus and rail companies creating genuinely affordable and environmentally sustainable modes of transport as we decarbonise our roads, or seed capital for communities to take over local utilities. In Wales, we have Dwr Cymru, which is a prime example of a semi-mutual water company run on a not-for-profit basis, with profits invested and recycled solely for customer benefit. I am thinking of co-operative run social care, childcare and other communal services, as proposed by the Welsh Co-operative Centre in its “better, fairer, more co-operative Wales” report, or even co-operative agriculture, food production, or community zero-waste cafés and restaurants, such as SHRUB co-op in Edinburgh. Action is needed—not empty words and greenwash—and that is what my Bill aims to deliver.

[Julie Marson (Hertford and Stortford) (Con)]

The hon. Lady mentions Co-operatives UK and action. Does she acknowledge that in June this year, Co-operatives UK, when reviewing and commenting on her Bill, called it “counterproductive” and “impractical”. We want positive action, for sure, but her Bill just does not deliver that.

[Anna McMorrin]

I thank the hon. Member, but she is being very selective in her comments. She fails to mention that Co-operatives UK also said that it fully supports the Bill and that what this needs is more detail in the Public Bill Committee. That is exactly what is needed. We are on Second Reading now. We need to take the values and strengths of the Bill through to the next stage to make this legislation able to really transform communities across the country. I hope that the hon. Member will be with me on that.

Legislation of this kind is, in fact, already in force around the world, from Australia to Canada, Italy and the Netherlands, demonstrating that this can be done. Back in 1844, the co-operative pioneers envisioned a community business model where shared values of sustainability, equality and fairness took priority. Co-operatives can play a major role in helping to rebuild our communities, end fuel poverty, create jobs and foster a sense of community pride in helping to tackle climate change.

Each one of us must play our part in the fight against climate change, but for so many people, the feeling of being able to physically effect change feels remote or expensive. Pundits, legislators and policy makers talk of climate change, quite rightly, as the greatest threat facing us, but many workers are focused only on making it to the end of the month. Climate action often feels distant, but it is our job to find ways of not only solving the crisis, but rooting the solution in the lives of workers and families. It must be viewed as a benefit to their health, wealth and happiness.

[Gareth Davies (Grantham and Stamford) (Con)]

I applaud the hon. Lady’s championing of green issues. Will she describe to the House how she intends the capital raised through green shares to be ring-fenced so that there is not greenwashing?

[Anna McMorrin]

I thank the hon. Member for making a very good point. That is what needs to be avoided—greenwashing and big announcements and intentions that are not delivered on. But, as I think I have demonstrated in my speech, what this does is deliver on the ground from the bottom up, transforming communities, changing lives and making sure that projects are actually delivered. That is needed by this finance.

[Gareth Davies]

I am grateful again to the hon. Member for giving way. I am curious about why the Bill proposes green shares and not green bonds, because the use of proceeds of such bonds can be ring-fenced. There is also an established international framework of green bond principles, whereas no such framework exists for green shares.

[Anna McMorrin]

Bonds can go only so far for co-operatives. They also undermine the very essence of the democracy of a co-operative, which makes them far more difficult. However, I thank the hon. Member for making an excellent point.

Climate action feels distant and we must find ways of resolving that, with people and communities viewing it as a benefit. I believe the Bill provides the opportunity to do just that, binding people together, and binding people and place together, in one common endeavour. There has never been a more important time to do just that. I hope that the Government will see that and work with me to progress these values and the Bill.

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[Andrew Lewer]

That does indeed highlight the importance of leading by example, so long as that example is a significant carbon reduction coupled with a successful economy, rather than wholesale carbon reduction done in a way that leads to economic problems, which would lead to other countries deciding not to follow the example for obvious reasons.

[Anna McMorrin]

The hon. Gentleman is making a good speech, but does he not agree that the Bill actually does what he describes? It builds in the opportunity to build renewable or sustainable environmentally friendly projects across the board from the ground up. Sustainability covers a wide area in Wales, as defined by the Well-being of Future Generations (Wales) Act 2015.

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[John Lamont]

My hon. Friend makes an excellent point. I agree that there is some uncertainty around that. This is one of the issues that needs to be flushed out during parliamentary scrutiny of this Bill, so that we have as much clarity as possible on that point, but he is right. As I said, we need to be sure that any investment will be in the green environmental projects that we want to see promoted by the Bill.

[Anna McMorrin]

I want to clarify the point made by the hon. Member for Grantham and Stamford (Gareth Davies). Actually, members can invest in a project, which would be the green shares, because that is what co-operatives do—they are wholly owned by the members. This is unlocking investment from outside as a bigger investment called a green share. I just wanted to correct the hon. Member.

[John Lamont]

I am grateful for that point, but the fact that the hon. Lady had to make it suggests that it is not entirely clear in the Bill. Hopefully, during the Bill’s progress, we can get clarity on the face of the Bill about how that will work in practice.

It is argued that these redeemable shares are important on two levels. The first is the important benefits of environmentally sustainable investment—for example, in the retrofitting of existing housing association homes or the expansion of renewable energy co-operatives. The second is the benefits to co-operatives themselves. Co-operatives UK is just one advocate of such redeemable shares, noting that they could be

“particularly useful for larger societies raising significant equity investment from individual and institutional non-user investor members.”

It notes that redeemable shares

“provide a straightforward and clear exit route for shareholders, just as withdrawal does, but would be fully under the control of the society.”

This Bill will not only allow co-ops and community associations to raise private investment capital for environmentally sustainable purposes, but it also has profound wider benefits. Locally, our communities and economies would benefit from the development of green jobs and skills, and the Bill might be part of that. In my constituency, there is clear evidence that that is happening already, but we need to do more to facilitate it. More widely, we could see benefits in the form of cheaper, greener energy; warmer, more energy-efficient homes; and cheaper, more sustainably and locally sourced food. For my constituents and the rural economy in the Scottish borders, the Bill could encourage such initiatives.

Equally important are the safeguards in the Bill. Such protections prevent the undermining of the co-ops’ or societies’ ethos or their conversion into commercial companies through the issuing of green shares. Upholding the ethos of co-operatives and community benefit societies is crucial to the success of the Bill and the aims behind it and to sustain the longevity of these societies. I am confident that those objectives can be achieved through the provisions in the Bill, which include limiting voting rights to one vote, regardless of the value or number of shares held, limiting the rights of investors to the assets of the society in the event of its liquidation, limiting the ability of investors to de-mutualise and, lastly, enabling societies to remove the right to vote for their conversion into a company.

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[Simon Baynes (Clwyd South) (Con)]

I, too, would like to acknowledge the hard work of the hon. Member for Cardiff North (Anna McMorrin) in securing this debate and bringing the Bill to the House. The excellent work of co-operatives and community benefit societies is felt very deeply in my constituency of Clwyd South and elsewhere in Wales and the UK. As the hon. Member mentioned, many people are very grateful for the help and support they have provided, particularly during the covid-19 pandemic. Often, they have been in a position to fill in the gaps in provision, which has been so important over the past few months.

I, too, pay tribute to Wales as the birthplace of the co-operative movement. I grew up just south of my constituency in Montgomeryshire, and Newtown, the centre of that county, is where Robert Owen was born in 1771. He is a much admired figure, although

in my opinion he should be better known to the outside world, as I am sure the hon. Member would agree. His progression through life was very interesting, in the sense that it was on a truly United Kingdom basis. He grew up in Newtown; then he went to work in England, where he ran a mill in Manchester; and then went to help his father-in-law run his mills at New Lanark, which became probably the most famous aspect of his work. He was therefore represented in three of the four countries that make up the United Kingdom. I also agree with the hon. Member, however, that there is something in the culture and society of Wales that has a great affinity with the co-operative movement.

I welcome the intention of the Bill to introduce another mechanism by which to promote environmentally sustainable investment. I, too, agree that the bottom-up approach is extremely important in such environmental investment. I have seen that very much in my constituency—for instance, in Corwen, which has an interesting hydroelectric scheme that was developed by the community. That was one of the reasons why earlier this year I supported the Local Electricity Bill, a private Member’s Bill that would make it easier for such projects to feed their electricity into the national grid.

I strongly support such a localised projects, and the Dee valley in my constituency is full of innovative environmental schemes. Heat pumps are an important part of that, and diversification through environmental projects is extremely important for the farming community, which often finds itself struggling in current circumstances. The co-operative movement is an important part of how the farming community operates, so building environmental projects from the ground up through the co-operative movement makes good sense.

I welcome the UK Government’s record in this area and the progress that they continue to make in improving the environment for everyone’s benefit. We have heard various statistics quoted this morning from both sides of the House, but we should be in no doubt that this Government and, to be fair, previous Governments have made considerable progress. For instance, carbon emissions fell by 42% between 1990 and 2017. There is plenty more to do, but we are on the right trajectory. I am pleased that the Government have renewed their commitment to environmental projects—for instance, by committing to plant 40 million more trees, restore peatland to capture carbon and create the community-led nature recovery network to create and enhance local habitats and by tripling the funding that helps to preserve the globally significant biodiversity in the UK overseas territories and their waters. These are just a few of the many examples of this Government’s commitment to the environment.

As was touched on earlier, the Government have also sought to find the right conduits to promote the environment through the financial world. In July 2019, the Government published their “Green Finance Strategy”, which details action in three areas: greening financial services, accelerating investment into the UK’s clean growth and working to position the UK at the vanguard of the global green finance market. Progress has been made in environmentally sustainable investment, and it continues to be made. Like others, I pay tribute to the enormous contribution made by mutuals and co-operatives to our diverse UK economy, including in Clwyd South and across Wales and the UK. The importance of the sector is shown by the fact that the all-party group for mutuals found that mutuals generate more than £130 billion of income each year.

It is perhaps worth reminding ourselves of the precise wording of the Bill:

“A Bill to enable co-operative and community benefit societies to raise external share capital for the purpose of making environmentally sustainable investment; to make associated provisions about restricting conversion to company status and the distribution of capital on winding-up; and for connected purposes.”

It is entirely admirable to consider ways to increase our ability to invest in co-operatives. Those are admirable aims, and I am pleased to hear about the close co-operation and consultation that has taken place between the hon. Member for Cardiff North and the Government, as that is crucial.

All Government Members greatly respect the Bill’s aims and intentions. However, my professional background has given me experience of factors that might militate against the Bill’s good intentions. For 25 years, I worked in the financial and business world and on solutions to help companies raise funds for a wide ranges of purposes, including environmental improvements. For the past 15 years, I have been on the other side of the fence, having set up two charities and served as a trustee in non-profit making enterprises, during which time I worked with co-operatives and community benefit societies.

From that experience, I learned—I accept that the Bill does not state that this should always be the case—that one size does not fit all with community investment. I have spent many hours, particularly in the past 15 years, working with community groups and considering ways to create a structure for them to gain membership and financial support. Co-operatives are an important part of that, but other structures also suit the circumstances, and we must bear that in mind.

That practical hands-on experience makes me concerned that the Bill may undermine the integrity of co-operatives and expose them to exploitation as investment vehicles, rather than socially beneficial institutions. I fully accept that the hon. Lady seeks to place safeguards in the Bill, but if external finance is brought in, there is a fundamental question of what the consequences will be on the co-operative. Like previous speakers, I have concerns that the green shares proposed in the Bill might unintentionally create a capital instrument with similar characteristics to a mini-bond.

I am pleased that the Treasury has conducted a review of the currently regulatory arrangements for the issuance and marketing of non-transferable debt securities such as these mini-bonds, and I am pleased that process is ongoing. It is important to consider the outcome of that review before consideration is given to the creation of any capital instrument similar to a mini-bond.

A further consideration—again, this has been touched on previously—is that investors may underestimate the risks that green shares expose them to, because of the ethical ambitions that are rightly attached to the instrument. Ethical investment ambitions are entirely laudable, but they have various aspects that can militate against them. The first is the long lead-in period for investment return, and the second is their sensitivity to changes in the regulatory environment, as we saw with the electricity feed-in tariffs a few years ago.

The hon. Lady may well be right that this is the right vehicle in which to place that ambition for green investments, but from my experience of working in the financial world, I know they are often quite difficult investments. My hon. Friend the Member for Northampton South (Andrew Lewer) mentioned how people who invested in the car industry in 1900 would have lost their money, and one of the key things in the investment world is the difficulty of being the pioneer. Often, not the pioneer but those who come later get the return. I am concerned that the vehicle created would be almost a hybrid co-operative, given the external investment, and whatever we say about the good intentions of a co-operative, at the end of the day investments made through it need to have a return of some description, otherwise it will be a loss-making enterprise.

[Anna McMorrin]

The hon. Member is making some excellent points that need to be examined as the Bill progresses, but this form of legislation is in place in other countries, so we can take the evidence of what has worked, for example, in Australia.

[Simon Baynes]

I thank the hon. Lady for her comments. I cannot claim to be an expert on the legislation in all the different countries around the world, but I would assume that it operates in different contexts. I am just trying to make a general point, from my own experience of investment options, that they can sometimes be a very complicated way of putting money into the green environment. That is the simple point I make.

The other point I would like to touch on is the exit from the co-operatives. To go back to the precise wording of the Bill, it is also

“to make associated provisions about restricting conversion to company status and the distribution of capital on winding-up”.

I totally understand where the hon. Member for Cardiff North is coming from on demutualisation, and we have all seen examples of demutualisation in the past that have perhaps not turned out as well as everybody expected, but one of the problems in the financial world—at the end of the day, if people are to invest in green shares, it is in a sense a financial investment—is that we have to leave an escape route for people. If something goes wrong—as we saw in the Co-op itself when it had huge financial problems in its lending arm which, I believe, has now been hived off—removing the ability to exit those problems is a very big ask. While the intentions are very admirable, that is not necessarily wise for the long-term health of the co-operative institution.

In the 2020 Budget, the Chancellor announced that the Government would bring forward legislation to allow credit unions—obviously, a form of financial mutual—to offer a wider range of products and services. That will support credit unions to continue to grow sustainably over the longer term and will allow them to continue to play a pivotal role in financial inclusion. This also needs to be taken into consideration in the preparation of this Bill.

I agree with the hon. Member for Cardiff North that locally based financial support is crucial. I became increasingly frustrated during the covid-19 crisis by the performance of the high street banks and the fact that they have vacated the local market for the provision of finance. I am sure that many Members on both sides of the House felt the same way. We have built up a series of contacts in those banks so that we can take our constituents’ concerns to them and say, “Please can you unblock this problem?” The fact that the big high street banks no longer know their customers on the ground in the regions is a major issue. The intention behind the Bill, and indeed behind the credit union proposals, is to fill the gap in the market for locally based co-operative vehicles—rather like those in Germany—that provide finance to local businesses.

I strongly commend the hon. Member for Cardiff North for her excellent speech and for introducing this Bill, but I hope that I have highlighted effectively some of the difficulties that it presents, despite the fact that it was created with the very best of intentions.

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[Gareth Davies]

I thank my hon. Friend for her intervention. I will comment on the protection of members’ rights shortly. It is not just me who is critical of the detail of this Bill. As my hon. Friend the Member for Hertford and Stortford (Julie Marson) noted, Co-operatives UK said that the Bill is “impracticable and counter- productive”. The hon. Member for Cardiff North did intervene on my hon. Friend to note that Co-operatives UK said that detail should be filled in at a later stage, but I would have liked to have seen the detail at this stage.

[Anna McMorrin]

Co-operatives UK has firmly supported this Bill, so I think the hon. Gentleman is being a little disingenuous in forgetting that point. He is absolutely right that we need to build on those safeguards and protections and make sure they are in place for consumers and the local community, but the co-operative movement and Co-operatives UK are firmly behind the Bill and want it to move to the next level.

[Gareth Davies]

I thank the hon. Lady for her intervention. She is right that Co-operatives UK is supportive of the Bill, its principles and its spirit, as am I, but it did say that it was “impractical and counterproductive” and that the detail needed to be filled in at a later stage. My point is that this is lacking in detail and is not clear.

I will give her an example. In proposed new section 27A(3) of the Co-operative and Community Benefit Societies Act 2014, the Bill states:

“A green share may be transferable but is not withdrawable”.

However, proposed new section 27B discusses the detail of withdrawing and redeeming shares. This is clearly contradictory. I suspect that the Bill should have said that the green shares are non-transferable but are withdrawable, which would have made it consistent with shares currently issued by other co-operatives and their members. My point is that the Bill we are debating today is just not clear enough and the detail is lacking, as I will mention in a moment.

[Gareth Davies]

I thank the hon. Gentleman for his intervention. As I will go on to explain, I think the issues are deeper and more multivarious than I have sought to describe.

If the Bill raises questions, the substantive issues raise even more. I have five issues with the Bill. First, it does not allow co-operatives to issue shares to non-members unless they are a group. The distinction leaves co-operatives without the right tools to raise capital for non-green ends.

[Anna McMorrin]

The hon. Member is fundamentally wrong on that point. The Bill allows that for environmentally sustainable purposes. That provision can then be defined in Committee. I went on to talk about the governance models that are used within the City and investors. That is what we want to see and it covers a whole array of areas to invest in. It is not narrow. It is wide enough to cover the whole co-operative movement.

[Gareth Davies]

I am very grateful to the hon. Lady for the intervention. I do not know where to start. Limiting this to green-only is great and fine, but why not broaden it to other causes, not just green issues? She mentioned the example of Australia to my hon. Friend the Member for Clwyd South, but she will know that Australia has implemented a similar law, but not around green shares. I simply ask why she has limited it to just green shares. Why are we trying to run before we can walk? If she is going to cite Australia, why not copy Australia?

[Anna McMorrin]

I thank the hon. Member for giving way yet again. Does he understand the definition of sustainability, and has he looked at the law in Wales, for example, where we have the Well-being of Future Generations (Wales) Act 2015, which covers a whole array of sustainable development that is ensuring that projects are about long-term sustainability? Yes, that is something that we need to properly define, but it can come under the ESG model that is currently being talked about by investors. He is completely wrong when he talks about this being limited to just so-called green projects.

[Gareth Davies]

I am grateful again for the intervention. I am not sure how the hon. Lady can make the comment, “Does he understand the definition of sustainability?” and then go on to say, “Obviously, we need to define what sustainability means.” That is exactly my point. The Bill is well-intentioned but not clear enough in its definition of sustainability—[Interruption.] She can protest all she likes but it is there in black and white, and I urge every colleague in this place to read the text.

The second issue I have is that the Bill allows green shares to be issued to external investors but not to co-operative members, as I mentioned in an earlier intervention. By limiting the issuance of green shares to non-members, it would limit the co-operative’s ability to raise capital for green causes. If green causes are so important, why not make the ability to buy green shares available to all members? The hon. Lady intervened earlier to say that members could do so, but that is not true. She says that because when an external investor buys a green share, they become a member. That is the only way in which members can buy a green share.

Thirdly, the new powers for co-operatives apply only if they issue green shares. If the new powers are so beneficial, why not provide them for all co-operatives without the requirement to issue green shares? The Bill says, if a co-operative issues a green share, it will get additional powers essentially to prevent it from becoming a company. If that is such a good idea, why limit it to green shares?

Fourthly, the power permanently to prevent a co-operative from becoming a business is against members’ interests. Currently, the decision to become a company is left with members. Why take that power away from them? Whether a firm is better run as a company or as a co-operative is beside the point. We should let members decide. It is unclear who in the co-operative gets to decide on such matters. Perhaps she will clarify that in her closing remarks. The real purpose of the Bill would be to sustain the co-operative model at the expense of members’ and workers’ interests.

Finally, the Bill lacks sufficient detail, as I have outlined before. The framework for deciding whether shares are green is vague and requires the Treasury to fill in the detail. Likewise, rules to ensure that the shares are not abused for tax avoidance are left out of the Bill again for the Treasury to decide the detail. I am getting déjà vu from Wednesday, when the Opposition called for an extension to the furlough but could not say what was to be extended, for how long, or how much it would cost.

I can only conclude that this idea is nice in principle and right in spirit, but it is merely an idea and not a substantive, workable piece of legislation. For that reason, I cannot support it.

[Sir Christopher Chope (Christchurch) (Con)]

It is a pleasure to follow my hon. Friend the Member for Grantham and Stamford (Gareth Davies). I lack his knowledge about capital markets as indeed I lack the knowledge exemplified by my hon. Friend the Member for Clwyd South (Simon Baynes) on financial instruments, of which this might be one. I will nevertheless try to contribute to the debate by encouraging the hon. Member for Cardiff North (Anna McMorrin) to have another go next Session. The Bill has a lot in it that is worthwhile, but, as many of my hon. Friends have pointed out, it is not there quite yet.

I have been a regular attender on Fridays for many years and participated in the debates around the 2014 Act, steered through with a lot of skill by the hon. Member for Harrow West (Gareth Thomas). My recollection is that that Bill was an iterative process: it did not get through in the first Session in which it was put forward because there were difficulties in definition and all the rest of it. The hon. Member for Cardiff North should recognise that, for example, one the most famous private Members’ Bills ever, the Abortion Act 1967, was on its fifth or sixth iteration before it actually got on to the statute book because it was gradually amended and lobbied about so that, when it came to a final decision, everybody felt confident that they were doing the right thing. I congratulate the hon. Lady on bringing forward the Bill and on the way in which she opened the debate.

One of the things I looked up in preparation was what James Wright, the policy officer at Co-operatives UK, said in a press release—I think in February—soon after the hon. Lady announced her intention of bringing forward a private Member’s Bill with this subject matter. Speaking for the co-operatives, he said:

“When it comes to legal reform, our top priority is for co-operative societies to have the option of legally guaranteeing that their ‘common capital’ will remain ‘indivisible’, over the life of the business and after. Right now, they can’t do this and it’s becoming a problem.”

He goes on to say that

“having some kind of statutory ‘asset lock’ which commits capital surplus to mutual and social purpose is increasingly a must in many parts of our social economy. So it’s a damaging anomaly that co-operative societies can’t give their common capital statutory status.”

Nowhere in those remarks did Mr Wright say anything about limiting this problem to environmentally sustainable investment issues. I suspect that the hon. Lady, because of her passion for environmental issues, has decided that it would be better to work the two ideas together. I suggest to her that the case put at that early stage by the Co-operatives UK policy officer was obviously a very strong case for one thing—she referred earlier to the limit on being able to raise capital of more than £100,000 and the way this was inhibiting the expansion of the co-operative movement—but if the main aim of the Bill is to remedy the problem identified by Mr Wright in the quote I have just used, there is no need for the Bill to go into issues of environmentally sustainable investment.

I would ask the hon. Lady to think about why she has narrowed the Bill in such a way. She said in answer to an intervention that the Bill was wide enough to cover the whole co-operative movement, but that is not what it says in the long title of the Bill, which, to remind her, says:

“A Bill to enable co-operative and community benefit societies to raise external share capital for the purpose of making environmentally sustainable investment”.

[Anna McMorrin]

The hon. Member is making some important points that we have discussed throughout the development of the Bill. Environmentally sustainable projects are just that—it needs that definition—but can he point to any projects within the co-operative movement that do not meet a sustainable objective? It is in the very values of the co-operative movement. Also, does he not see that we are facing a climate emergency and that unless we take drastic action now, on the ground, and radically transform our economies, we will not succeed?

[Sir Christopher Chope]

I will not engage with the hon. Lady on the climate crisis, because I think there is far too much scaremongering going on in relation to that and a lack of realism about the ability of our country, individually, to change the course of the global climate. That is apparent now. We have heard this week that despite the substantial reduction in the global economy the global CO² emissions continue to increase and climate change is not being remedied as a result.

[Sir Christopher Chope]

I accept that. Interestingly, proposed new section 27A(5)(b) talks about

“the capacity to adapt to change”.

That is where I am very much with the hon. Member for Cardiff North, because I think we should be concentrating our resources in this country on adapting to climate change, rather than trying to put our heads in the sand and say, “We’re going to make it go away.”

On the issue of the definition, if environmentally sustainable investment is basically the be-all and end-all of everything that the co-operative movement is involved in, why do we need to use language about green shares? Why do we not make it much more general? If the hon. Lady is so confident about her definition of “environmentally sustainable investment”, why has she included a Henry VIII clause in proposed new section 27A(6)? It states that

“The Treasury may by regulations revise subsections (4) and (5)”,

which contain the definitions. Why do we need to do that? Surely, if it is so obvious, it should be on the face of the Bill and we do not need to give the Treasury even more power than it already has. I am sure that when my hon. Friend the Economic Secretary replies, he will say how eagerly he looks forward to being able to exercise these additional powers.

I ask that as a slightly rhetorical question. However, sometimes Members are tempted to make their Bills complicated, and whenever they encounter a bit of difficulty with the Government, they say, “We’ll appease the Government by giving them a power to amend the Bill”—thereby, in a sense, negating the whole purpose of the Bill. If the hon. Lady ever redrafts the Bill in a way that gets the support of the House on Second Reading, I suggest that she leaves out the Henry VIII clause and has the confidence to say, “That’s what I’m putting in the Bill. That’s what we’re going to keep in the Bill, and that’s what it means.”

I looked at the explanatory notes. I am grateful to the hon. Lady for producing explanatory notes on the Bill, which often does not happen with private Members’ Bills. She says in those explanatory notes that the environmental goals in the Bill are based upon those in the Well-being of Future Generations (Wales) Act 2015, to which she referred earlier. In that case, why do the environmental sustainability goals set out in proposed new section 27A(5)(a) not include the whole wording of those in the 2015 Act? It states that the goals are:

“to create an innovative, productive and low carbon society which recognises the limits of the global environment and therefore uses resources efficiently and proportionately (including acting on climate change)”.

If she looks at the relevant section of the 2015 Act, she will find that it goes on to say:

“and which develops a skilled and well-educated population in an economy which generates wealth and provides employment opportunities”.

She is nodding, but why is that not included? Why was that excluded? Why did the explanatory notes imply that everything set out in this Bill came word for word from the 2015 Act?

I think that the whole issue about the greenness of this may have been included in order to seduce members of co-ops into signing up to changes in their rules that they would not otherwise wish to do, were they aware of the full implications of so doing. This echoes one of the points that some of my hon. Friends have made. A non-green co-op—the hon. Lady seems to say that all co-ops are green—can only become a green co-op under the Bill, and thereby issue green shares, if authorised to do so by its rules. It is obviously possible for a co-operative to change its rules. One can see how easy it would be for a co-operative to say to its members, “Look, we are planning to change our rules so we can issue green shares and do all these wonderful environmental things.” Who would be bold enough to cause a problem in that co-operative society, I don’t know, but would the people who were being seduced into supporting that be aware of the fact that by enabling the society to have a green share, it was then triggering clause 29A(1), which requires that

“The Treasury must by regulations make provision—

enabling the rules of a society with a green share to permanently prohibit the distribution of a capital surplus”?

That would mean that people who had invested in a co-operative society in which the normal investment rules applied—where they would be able to withdraw their investment, but not trade it—would find themselves in a completely different regime where the shares would be transferable but not withdrawable; not only that, they would also find they were prohibited from being able to benefit from the success of that co-op by perhaps wanting to make it into a corporate body, thereby redeeming the additional value which had accrued to their shares as a result of its activities, going back to the point about the 2015 Act in Wales, so that people in the co-op could generate wealth and prosperity, and with it employment opportunities.

So why, as soon as the co-op became green in name as well as in substance, should it result in those restrictions on members of the co-op? They might perhaps, by definition, be in a minority in opposing the change in the rules of the co-op, but why should they be penalised by that change in the rules so that a completely different regime applies retrospectively? Is the hon. Lady not concerned about minority rights being ridden over? I suspect that that is one of the problems that has come to light in the co-operative movement and that is why it has turned out to be a lot more controversial than she thought it would be at the beginning.

As will be apparent, I have some quite serious issues with the Bill. I would like to see a much more concise Bill, without all this stuff about green shares, which is a distraction from the core. What the hon. Lady really wants is to change the fundamental structure of co-ops so that they can attract investments greater than £100,000, and so that members of those co-ops cannot de-mutualise. Those are very serious issues. If that is what she thinks the whole of the co-operative movement should be doing, so be it.

I suspect that what the hon. Lady really wants to do is to enable a different sort of co-op with those objectives to be established. In so doing, however, instead of saying, “From now on you can start a completely new green co-op,” she is enabling existing co-ops to be changed, against the wishes of a minority of their members, into a different vehicle from that in which they made their original investment, thereby preventing them from withdrawing that investment, as they can at present. That is a very serious issue that goes to the root of it. It may be an attractive notion, and we heard that there are precedents for it elsewhere in the world, but because of the importance of the co-operative and community benefit movement, it is absolutely imperative that, if we are to change the rules, we do so in a clear, unambiguous way, and certainly do not allow the spectre of further changes by stealth through Government regulations that are not subject to proper consultation.

I fear that, when the hon. Member for Cardiff North responded to an intervention on the fact that the objectives could be changed but already covered all co-operatives, she was showing the lack of—how can I put it?—intellectual rigour applied to these principles.

[Anna McMorrin]

indicated dissent.

--- Later in debate ---

[Steve Double (St Austell and Newquay) (Con)]

It is a pleasure to make a short contribution to this debate. I pay tribute to the hon. Member for Cardiff North (Anna McMorrin) for bringing the Bill forward and for her clear passion and dedication and her knowledge of these matters.

There is no doubt about the vital and valuable role that co-operatives play in our country—they are just one of the many diverse models of ownership and governance that we have. It is one of the strengths of our economy that we have such a diverse array of ownership models. Clearly, co-ops, often being rooted in communities for mutual benefit, can play a really important role. There are many aspects of the Bill that I wholeheartedly applaud.

However, in the time that I have, I want to say a few words about the other aspect of this debate: the environment and sustainability. In opening the debate, the hon. Member fell into the trap, which so many of those who are passionate about the environment and sustainability fall into, of failing to recognise the significant progress that our nation and this Government are making on this matter. We are world leaders in so many ways.

When people refuse to acknowledge or just avoid acknowledging the progress we are making, and refuse to engage constructively with the debate, they undermine the argument. That is becoming counterproductive. Environmentalism is becoming seen by more and more reasonable, decent people in our country as an extreme thing—that is clearly represented by Extinction Rebellion—with an agenda that is not just about protecting the environment but about dismantling things that have been the very fabric of our society and our economy for too long.

That is polarising the debate just at the time when we need our country to come together around this issue. I think we are winning the argument on this. I think more people than ever before in our country recognise the importance of fighting climate change and protecting our environment. However, when we polarise it and fall into the trap of making it an extreme issue, we put people off.

We need to recognise that we have all been on a journey on this matter. The whole country has been on a journey. Different people are on different parts of that journey at this moment in time, but I believe that generally, as a nation, we are all moving in the same direction: towards being world leaders, perhaps even more than we are today, on fighting climate change.

[Anna McMorrin]

The hon. Member is right to say that climate change is a great threat to us, and we must be focused on tackling it right now in our communities and our economies. What he fails to say, though, is that this Government are set to miss every single international target on climate change. We need to make sure that the action is urgent. The action is needed now.

[Steve Double]

I understand and in some ways agree with the hon. Member’s point of view, but the point I am making is that when we when we make this an extreme argument, we put off more people than we win over. That is what I am genuinely concerned about. I have been on this journey too, and I am more passionate now than I have ever been in my life about the need to protect our environment and fight the consequences of climate change.

[Anna McMorrin]

rose—

[Steve Double]

I will not give way again. But I know from my postbag that the events of the last few weeks have actually put off people who were on this journey with us. I am just putting down a marker and saying that I am genuinely worried that unless we stop polarising this debate—unless we stop just attacking and engage constructively—it will be counterproductive to the cause, which I am sure the vast majority of us in this place wholeheartedly agree with.

We should start by acknowledging what our country is doing—what our Government have been doing and are going to continue to do—in a constructive way. Yes, absolutely, there is more to do—none of us would say there is not—but if we can start by acknowledging what has been achieved and the commitments in place, rather than adopting the approach that so often comes from Opposition Members, I believe we would get far more people onboard and make far more progress.

My plea is simply: yes, we want more investment in green technologies; yes, we want more sustainable investment, under whatever model we choose for our economy, but let us do it in a way that is collaborative, seeking the same outcome and stop polarising the debate and giving in to the extremists. That is my plea. There are many things in the Bill that I wholeheartedly support, but I share many of the concerns that the Minister outlined about the unanswered questions. If we are really going to fight climate change in this country, let us do it together and stop attacking each other over it.

--- Later in debate ---

[Anna McMorrin]

I want to thank Members on both sides of the House for their contributions to the debate today. Some really important points were made and I thank Members for the rigorous scrutiny that they provided. In creating legislation, it is so important that a Bill is properly scrutinised and improved upon.

I thank my hon. Friend the Member for Croydon Central (Sarah Jones) for her support for the Bill and her contribution on the vital need for legislation, and most importantly, green legislation that is inclusive, getting communities involved in renewables and retrofitting and ensuring that that helps our economy. My thanks also go to my right hon. Friend the Member for Wolverhampton South East (Mr McFadden), my Front-Bench colleague, who made very important points about making this Bill a reality.

I thank the hon. Member for Berwickshire, Roxburgh and Selkirk (John Lamont) for his warm words on the role of co-operatives and their ability to really help us to deliver sustainability. That goes for many colleagues across the House who echoed those words in their speeches, so I thank Members for that. I also thank the hon. Member for Thirsk and Malton (Kevin Hollinrake) for co-sponsoring the Bill and his warm words today. I thank as well Co-operatives UK, which wants this Bill and its values to go further.

It was really heartening to hear the overall support for the values and aims of the Bill, with one notable exception, the hon. Member for Christchurch (Sir Christopher Chope), who was clear, in his condescending tone and remarks, what he thought. I suppose that that should not come as a surprise from someone who labels climate change as “scaremongering”, but that was the exception, so I thank hon. Members.

I do not attest that my Bill provides all the solutions that we need, but it does provide a legislative blueprint for how communities can work together towards creating a more sustainable green society. While the world’s attention is rightly focused on the coronavirus crisis, the climate crisis rages on and it is my sincere hope that, from this current crisis, we will build a more secure, equal and sustainable future that has transformational change and environmental needs at its heart. That has been highlighted by the scale of the awful covid health crisis that we are currently going through.

We cannot go back to business as usual. That is why I thank the Minister and his officials for their support and all the discussions we have had over the last months, as well as for his words today and his overall support for the values and aims of this Bill. Although it is disappointing that he and the Government will not support it today, I hope that we can continue to work together to thrash something out, including with Members here today who have spoken about the broad general aims of the Bill, and see whether we can get something workable into legislation that can really make a difference.

As it is clear that the Government are not going to support the Bill, I will be withdrawing it. So with the leave of the House, Mr Deputy Speaker, I beg to ask leave to withdraw the motion.

Motion, by leave, withdrawn.

Bill withdrawn.