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

Debate between Anna McMorrin and Gareth Davies

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

[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.

--- Later in debate ---

[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.