Barry Sheerman
Main Page: Barry Sheerman (Labour (Co-op) - Huddersfield)Department Debates - View all Barry Sheerman's debates with the HM Treasury
Co-operative and Mutual Businesses
Barry Sheerman Excerpts(4 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
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.
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.
Mr Steve Baker (Wycombe) (Con)
It is a great pleasure and a privilege to follow the lead of the hon. Member for Harrow West (Gareth Thomas). I sometimes disappoint him in other matters, but I salute his work on furthering the co-operative movement.
I will never forget the moment when I fell in love with the principles and ideas of the co-operative and mutual movement. Shortly after my election, I had been encouraged to study a book called “Working-Class Patients and the Medical Establishment” by David Green, who now runs the Civitas think-tank, and the moment that I mention came when I read this quote—I hope that Members will forgive the old-fashioned language—taken from the Oddfellows Magazine on the eve of the passage of the National Insurance Act 1911:
“Working men are awakening to the fact that this is a subtle attempt to take from the class to which they belong the administration of the great voluntary organisations which they have built up for themselves, and to hand over the future control to the paid servants of the governing class… This is not liberty; this is not development of self-government, but a new form of autocracy and tyranny not less but the more dangerous because it is benevolent in its intentions.”
That speaks to the kind of radicalism that the hon. Member for Huddersfield (Mr Sheerman) introduced to the debate. Perhaps it is a spirit too radical for our age, but it is pretty obvious that, in so many countries around the world, there is a crisis of political economy and a lack of faith not only in the institutions of government but in the institutions of market economy. I am grateful to see Opposition Members nodding, and in that spirit we need to recapture some of that radicalism. It is about free individuals in society standing up not only for themselves but against entrenched interests and entrenched power better to serve their families and their communities. That was the moment when I realised, as a free market Conservative, that I perhaps had something to learn from the traditions of the left.
What is it that make co-operatives different? A briefing supplied by Co-operatives UK states:
“What makes co-ops different is how they allow people to democratically own and control the things that really make a difference—like capital, organisation and scale—so that these create real value for people and planet. They are one of the best tools we have for applying social responsibility, solidarity and democracy in a market setting.”
Perhaps it is that language of solidarity and democracy in the market that frightens off some of my Conservative colleagues, which I very much regret.
The Rochdale principles of the movement’s founding pioneers talk of open membership; democratic control— one person, one vote—not based on share ownership; distribution of surplus in proportion to trade, which is economic participation; payment of limited interest on capital; political and religious neutrality; cash trading, so that people do not get into credit trouble on the basics; and the promotion of education.
Those principles have of course been refined by the International Co-operative Alliance to open and voluntary membership; democratic governance; limited return on equity; surplus belonging to members; the education of members and the public in co-operative principles—my goodness, we could do with more of that; and co-operation between co-operatives.
If we accept, and I am afraid that today it is a question of if, that prices, profit and loss are the only way to co-ordinate a global society of billions of people, and if we accept that we must live in a free market society to best serve one another, it is time to look at civil society—that great panoply of institutions between the individual and the state—and ask how that inclusive spirit of free enterprise shared by mutuals and co-operatives can help to rebuild people’s faith not only in a market economy but in government. We therefore need to recapture the Rochdale principles, and I encourage my colleagues on the Treasury Bench to think carefully about how a Conservative Government can stand for some of these principles in a market economy.
Mr Sheerman
The hon. Gentleman and I are bitter opponents over the UK’s future in Europe, but we sometimes put that to one side. We are working together on a new initiative called FairLife—he knows I agree with the Rochdale principles—to open up the system so that people know they are getting a fair deal on financial services, just as they know they are buying ethical products through Fairtrade.
Mr Baker
I always enjoy my moments of agreement with the hon. Gentleman, and of course regret those moments when we disagree. Hopefully I will persuade him one day of the correctness of my cause in that other matter.
Co-operatives and mutuals, throughout the history of society, have played a really important role in standing against tyranny and monopoly power, whether it was the Rochdale pioneers providing good-quality food for themselves, their families and their children or, as I discovered in my research, the African-American communities that used co-ops and mutuals during the despicable Jim Crow era to provide aid to one another when they were denied it by the state, whether through unjust laws or extra-legally. I am advised that the Mondragon co-operatives were founded in the Basque country partly as a response to the oppression of Franco.
More recently, Taxiapp allows drivers in London to fight back against the competition of Uber. Of course, farmers co-operate through co-operatives in a way that should be expanded.
Mr Baker
I am grateful to the hon. Gentleman for that, as I was not aware of Drive—I shall certainly Google it after this debate.
We need to ask ourselves why, given all the benefits of co-operatives and mutuals, they have not advanced further. They flourish, but why have they not advanced further? I was reflecting on why the Thatcher Government of my youth did not understand the great value that could come through inclusive free market participation with co-ops. They never got as far as embracing mutuality. That language of “solidarity” and “democratic participation” perhaps frightens off Conservatives. For too long, we have been afraid of some of these ideas of the left, and a more communitarian and voluntarist Conservative party should be embracing this idea of equality and market participation, not exclusively but as an important component of our society. I once heard the term “a parastatal”, and I wonder whether the idea of an enormous “The Co-op”—that enormous group of co-operatives—frightened off Conservative Governments in the past. I am encouraged that the “Open Public Services” White Paper of the coalition years makes provision for more mutuality in public services. I very much hope that when we get past our current distractions we might return to some of those ideas.
It has been suggested to me that one reason the Thatcher Government were not very good at embracing co-operatives was the preceding Labour Government’s failed attempts in the ’70s to turn failing companies into co-ops or co-op-like entities. Although I philosophically really embrace the hon. Member for Harrow West’s ideas about turning RBS into a co-op, and he and I have previously discussed the idea of Channel 4 becoming a co-op—
Mr Sheerman
Let me help the hon. Gentleman on the history, because I knew Margaret Thatcher and her attitude to co-ops. We have to remember that she was the daughter of a small shopkeeper and traditionally saw the Co-op as the great competitor. She had an old-fashioned view of co-ops and what they meant, and she would never shop in one; there was a tradition that those on the radical side did not shop in co-ops, because they were the competition. I hope that that bit of history adds to his knowledge.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
It gives me great pleasure to follow that rather enlightened speech by my friend, the hon. Member for Wycombe (Mr Baker). As I said in my earlier intervention, we work together on the FairLife initiative, which shows the children present today that sometimes we work positively across party lines; we do not just disagree over Brexit or other things.
I suppose my admission today is that as a young academic teaching at Swansea University, I got involved in learning about worker co-operatives and wrote an article about them. I got so enthused that I started to set up worker co-operatives. Eventually, someone said to me, “You’re very political and interested in co-operatives; why don’t you join the Co-operative party?”, and I said, “What is the Co-operative party?” The person said to me, “Come down to a Co-operative party meeting at the Elysium buildings”, which were by the railway station in Swansea. It was a pouring wet night—we specialise in those in Swansea—and I got down to this meeting and came out as the secretary. You will understand, Madam Deputy Speaker, how politics works in that sense. I have been a co-operator ever since.
I have also been a bit of a dissonant voice, because I have always called into question the idea of having a single view of co-operation. We all look at Google these days, and when I did I saw this definition of a co-operative:
“A farm, business, or other organization which is owned and run jointly by its members, who share the profits or benefits.”
It is a simple thing, but it is also the most liberating thing I can think of in terms of the politics that I do, because it is absolutely the kind of politics that says, “Politics is not just about general elections, referendums or the big scale; it is about ordinary people deciding that they are going to take control of their own lives and that they are not going to be manipulated.”
I do not want to go too much into the history, but we all know that the industrial revolution pulled people off the rural economy—the farms and the life they knew—and into awful conditions in the factory towns of Britain. They had to shop at the company store: the company not only employed them, but paid them in its own currency so that they could shop only at the company shop. That was called truck. The Truck Acts passed by this House banned the practice of companies having their own currency.
Co-operatives sprung up—one could see at least 50 co-operatives from Castle Hill in Huddersfield. They started as local communities saying, “We are going to be able to buy fresh, good food that isn’t overpriced, and we are going to take control of that by setting up a retail co-operative.” Members will know the old principle: people used to put in a pound and they would have a share, so they were a shareowner in that co-operative. People were then employed to run the co-operative.
I have a criticism of that model. It is a good model, and by the 1950s most people shopped in co-ops. The co-operative retail movement was so powerful that it was the major retailer in our country. Indeed, in 1917, when Lloyd George was Prime Minister and the co-operative shops were not getting their fair share of flour and sugar because the Germans were blockading Britain, people marched down to Westminster Hall and started the Co-operative party. The biggest retail movement in Britain was not getting a fair share. Very soon, the Co-operative party came to an agreement with the Labour party that we would never stand candidates against each other, which is why there is a Labour and Co-operative wing of the labour movement.
That is the history, but let me bring things up to date, because that was an important lesson. People’s lives were in turmoil: the whole social and economic nature of the country changed in the 18th century and into the 19th century. There was radical change, and radical change is now happening again in respect of the assured ways of life. People thought they were going to get a job and probably have it for life, working in the public services or at a big company. In questions this morning there was mention of someone having worked for ICI—Imperial Chemical Industries. I worked for ICI. It is long gone, but many of the people with whom I worked at ICI worked there for life. It was the norm that people joined a company and, although perhaps they would change their job once or twice, by and large the structure of life was stable and secure. That stability and security has largely disappeared for many of the people we represent in this House.
We have to come to terms with things and to change. Human beings are quite good at responding and saying, “This is really difficult; let’s do something to mitigate this and take control of our lives.” What happened during the industrial revolution? Working people set up trade unions to represent them, and housing associations and mutuals—a whole range of things. They set up mutuals and co-ops to make sure that people could have a holiday with their family once a year. They set up mutuals to make sure that people had money for Christmas presents and other big occasions, when they could get their dividend. People set up co-ops for burial, and the Co-op is still today a big player in that sector. They covered holidays, funerals and all those sorts of things. What is the great cause today? It is housing. Young people, and even people on reasonable incomes, cannot get a foothold in the housing market. In the current circumstances, why are we not going back to those mutual and co-operative ideas to meet that need?
All that brings me to the second part of my speech, although I do not want to keep the House’s attention for too long. As life is changing radically, the opportunities are changing. I am a long-term social entrepreneur: since I have been in this business, I have started more than 50 different social enterprises. A lot of social enterprise is about asking people for money, and it is difficult. It is tough. As a member of the court of governors of the London School of Economics, I was befuddled, because every time we hired a fundraiser, they did not even make enough money to pay the wages of the fundraising team. Eventually, we hired a young American woman—I think she was called Sally Blair—who raised tens of millions of pounds. People gave us whole blocks of buildings around the LSC in Holborn. She was the most magnificent fundraiser. I said, “Sally, why is it that you have been so successful? She said, “I am an American. If you’re an English fundraiser, you ask someone for some money, and if they say no, you go and sulk forever. We ask seven times, and put a person on the back burner only after the seventh time.”
As a social entrepreneur and a co-operator, I was in the business of asking people for money for good causes, and it was hard. Then we had the big financial crisis. George Osborne always used to say that the Labour party had caused a worldwide breakdown in modern capitalism. I used to say to him that I wished that we were that powerful. The issue was actually something to do with international banking and the corrupt way that banking had emerged.
The point I want to make is that technology has changed the opportunities for raising money for co-operation. I chair the Westminster Crowdfunding Forum. Social media can achieve immediate results. For example, if someone has an idea for a co-operative, they could raise money worldwide. They could identify a particular need in Yorkshire, in Huddersfield, or even in your own constituency of Doncaster, Madam Deputy Speaker. The technology presents us with an amazing opportunity.
Stephen Doughty
I thank my hon. Friend for giving way. I completely agree with him about those challenges of raising money to get new social enterprises and co-operatives off the ground. In that regard, crowdfunding is a way forward, absolutely, but it also needs leadership from Government. Does he welcome what the Welsh Government have done in the past few days in announcing a new £3 million fund for the Social Business Wales New Start initiative to kick-start hundreds of new social enterprises and co-operatives across Wales? It was, in fact, launched at a restaurant called The Clink, which is next to Cardiff prison and is itself a social enterprise. Does he agree that that is exactly what the Government should be doing—kick-starting the co-operative economy in the UK?
Mr Sheerman
I was amused by that intervention because, of course, my origins in co-operation are in Wales. It is a delight to hear about that initiative. There is also a Clink in London—in Pentonville I think.
The point that I am trying to make is that there are new opportunities. I got fed up talking about co-operation and how wonderful it was. I worked with John Smith, who was a passionate supporter of co-operatives and who started the Co-operative Commission with an international committee on mutuals. We had lots of debates and we set up the Co-operative Development Agency. The problem now is that the co-operative movement is too conservative these days. It clings to the old model, the basics and the values of which are right, but sometimes, I think, we miss the point.
When I went into Co-op shops, I felt that the conditions for the workers were worse than those in Woolworth’s, Asda or Morrisons, which was wrong. I made myself unpopular when I said, “Why don’t we do what John Lewis does?” John Lewis, as I am sure everyone on the Government Benches know, is a workers’ co-operative; it is owned by the workers. They call them partners, but it is a workers’ co-operative; and it works and it is successful. It is still doing relatively well even with all the pressure on the high street. So, we have to be critical about the co-operative model and we have to modify it, but, essentially, we have to energise the workers. Worker co-operation is essential if we are to make an organisation work. That blend of everyone having a share as a consumer along with measures to energise the staff is absolutely the way forward.
Finally, now that we have all these new opportunities— we have not only crowdfunding and crowdsourcing, but blockchain and digital currency—there are real possibilities for transforming the economy big time, not little time. I am not talking about a couple of small shops or a couple of little start-ups; we need massively to change the way that we do things in this country. Most international business people whom I meet believe—partly because of Brexit but not entirely so—that we are heading for another global collapse of the economy, another global meltdown, another major recession. We will need, as never before, co-operatives, new mutuals and new ways of doing business. If those new ways of doing business are rooted in empowering people as individuals and as communities, a brilliant future will lie ahead.
The flag of the co-operative movement worldwide is a rainbow of colours. The United Nations has understood the power of our co-operative ideals to transform people’s lives not only in wealthy countries such as the United Kingdom and in Europe, but across the world. If we are to do something to stop what is happening in central America—the tragic picture of that father and little girl was still in my mind this morning—and if we are to bring wealth and power to people who do not have it at the moment, co-operation must be at the very heart of what we do.
Let me finish by saying that co-operation is wonderful, it must be updated and forward looking, and it has got to be, in the best sense, empowering and revolutionary.
John Glen
Once again, my hon. Friend makes his knowledge clear. We should be looking to replicate the principles behind that model and to examine how we can extend it.
The all-party parliamentary group for mutuals found that mutuals generate over £130 billion of income each year but, of course, the contribution they make is about so much more than the raw numbers. Crucially, the House has also heard about the positive difference that such organisations make to people’s lives across the UK. I have been fortunate in my time as Economic Secretary to witness their impact at first hand. Last year, I visited 1st Class Credit Union in Glasgow, where I saw the effect of its work to help its members save and borrow responsibly. In my constituency, I am delighted to see my local co-operative, Chalke Valley Stores, flourishing as a community hub, providing a shop, café and post office to local people who might otherwise be underserved in this rural location. Various Members made the point about the welcome opportunities that exist, given the changes on the high street.
From fishing and school meals provision in Plymouth to funeral savings in Stoke, we have heard a large number of relevant examples this afternoon. Whether it is a young family able to buy their first home thanks to a mortgage from their local building society, a community that comes together to keep their local pub or lido running, or an individual able to pay off their debts and start building up savings with the support of their community credit union, mutuals and co-operatives bring choice and agility to our financial system and economy, ensuring that it can meet the varied needs of society.
As we have heard, mutuals are diverse organisations, found in almost every sector of the economy, meaning that the opportunities and challenges can be different. Let me first talk about building societies. Earlier this year, I was pleased to attend a reception to mark the 150th anniversary of the Building Societies Association, which has been the keeper of the flame for the building society movement since 1869. Building societies have been around since almost a century before that, with largely the same core purpose as they have now: helping people to buy their own homes. Building societies provide almost a quarter of UK retail mortgages, including one in three of new mortgages approved in the last quarter.
Although the core purpose remains unchanged, building societies have not stood still. Modern branches offer video mortgage advice and banking on iPads. They are also driving some of the most interesting innovations in the mortgage market. For example, the Saffron Building Society has launched a guarantor mortgage, while Marsden is the latest building society to offer a joint borrower, sole proprietor mortgage. Those two schemes take into account the financial circumstances of family members in order to give first-time buyers a leg up on the property ladder. Meanwhile, the Ecology Building Society offers green mortgages for self-build properties and discounted borrowing for home improvements, which is another great example of how the mortgage market can respond to the needs of society and of the generations to come.
As for retirement lending, it is hugely encouraging to see regional building societies, such as those in Leeds, Nottingham and Loughborough, offering retirement interest-only mortgages.
Mr Sheerman
I was a chairing a Committee in another part of the House, so I was out of the Chamber for a little while, but I came back for the winding-up speeches. I think it would be a shame if Nationwide was not mentioned today, and Liverpool Victoria or LV=, which has an office in my constituency, is a great insurance mutual. We have talked a lot about little co-ops, but big co-ops are important, too.
John Glen
As ever, the hon. Gentleman has anticipated my future remarks. I have met representatives from those institutions on several occasions recently.
The examples given today show that regulation and innovation are not mutually exclusive, and that building societies are able to adapt to serve the changing needs in our society. Members have highlighted the need for a proportional regulatory approach, so that building societies can effectively compete with the big banks. The Government are committed to ensuring that capital requirements are implemented proportionately in order to support smaller lenders, such as building societies. The recent updates to the Basel international standards are a clear positive step towards more proportional capital requirements.
The Government have a clear commitment to implementing those standards and refining capital requirements in the UK. That is demonstrated by the inclusion of the capital requirements regulation II in the Financial Services (Implementation of Legislation) Bill. Where we identify other barriers holding building societies back, we have acted to remove them. For example, one of the first pieces of legislation that I brought forward as Economic Secretary was to enable building societies to join central clearing houses.
I know how vital credit unions are for the people and communities they serve, and I am pleased to see the strength of support across the House today. Building up savings with a credit union, or having the opportunity to take out a reasonably priced loan, is one way that we can prevent people from having to turn to high-cost credit or loan sharks. The Government have acted to support credit unions by legislating to increase the common bond from 2 million to 3 million potential members and raising the cap on the interest rate credit unions can charge from 2% to 3%.
The hon. Member for Harrow West asked about insurance mediation and the provision of hire purchase, and my hon. Friend the Member for Stafford referred to the impact of regulation on credit unions. ABCUL, the largest credit union trade body, is currently carrying out a sector-wide consultation on the future of credit unions and will complete its work in September. The consultation will consider the legislative framework and opportunities for further change. I will consider the outcome of that consultation with interest. I visited ABCUL’s conference in March and have had an active dialogue with the organisation while in office. The co-ordination of its requests has been somewhat fragmented over multiple trade organisations, but it has been helpful in conducting the consultation, and I look forward to taking things forward.
In last year’s Budget, we announced an affordable credit package to support social and community lenders. The package included a £2 million affordable credit challenge fund designed to generate innovative FinTech solutions to address challenges faced by social and community lenders, including credit unions, as they try to match the broader innovations in financial services. It also included a measure to make it easier for registered social landlords to refer tenants to credit unions, and a two-year pilot of a new prize-linked savings scheme offered through credit unions. The package is designed to support the credit union sector through increased membership, awareness and deposits, as well as encouraging participants to build up savings to help them cope with financial shocks. We used examples from other jurisdictions —the US in this case—to inform that policy.
I am pleased to announce today that we have selected 15 credit unions from across Great Britain to take part in the prize-linked savings pilot. They are East Sussex, Lewisham Plus, London Capital, Clockwise in Leicester, Nottingham, 1st Alliance, Merthyr Tydfil Borough, Riverside in Liverpool, South Manchester, Central Liverpool, Bradford District, Westcountry in Portishead, Commsave, Police, and Plane Savers. I congratulate the successful credit unions and look forward to seeing the pilot up and running as quickly as possible.