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

Christopher Chope Excerpts

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

[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.

[Anthony Mangnall]

The hon. Member for Cardiff North (Anna McMorrin) does not need me to come to her rescue, but the Bill does clearly refer to sustainable development goals, which covers a broad spectrum of issues that could be addressed on this point.

[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 ---

[Sir Christopher Chope]

Clearly, the hon. Lady disagrees that there is a lack of intellectual rigour. Although we may disagree, it is incumbent upon Members to ensure that this is subject to rigorous scrutiny.

In this extraordinary world in which somebody can have 150 proxy votes in their back pocket, anything could happen if it came to a vote. Perhaps the hon. Lady has a very large number of proxy votes in her back pocket, in which case I congratulate her in advance on her preparedness. Who knows what will happen and whether the Bill will get a Second Reading. It is clear from the debate that, were the Bill to get a Second Reading and go into Committee, it would have to be completely rewritten, taking up hours of valuable and scarce Committee time. As the hon. Lady will know, normally, unless the Government say otherwise, there can be only one private Member’s Bill in Committee at a time, so a Committee that went on for a very long time would deprive other Bills of the opportunity of being subject to scrutiny. That is another reason why a more tightly worded Bill is the solution, rather than struggling on with this one. The hon. Member for Stockton North (Alex Cunningham), who is sitting behind the hon. Lady, said that the Bill may not be fit for purpose currently but that it will be after it has come out of Committee. Frankly, Bills need to be fit for purpose before they go into Committee.

I will not say much more now, because I have other business on the Order Paper that I hope we will be able to reach. I congratulate the hon. Member for Cardiff North on having excited such interest in her Bill among Government Members, even if relatively few Opposition Members seem to be that interested.