Co-operative and Mutual Businesses

Gareth Snell Excerpts

Thursday 27th June 2019 Commons Chamber

[Gareth Thomas]

My hon. Friend is absolutely right. I pay tribute to the work of programmes such as Co-op UK’s Hive programme, the resources that are available from Stir to Action, some of the local measures that we have seen in Manchester and Preston, and Social Investment Business’s mutual Reach Fund, but these are all relatively small-scale and need to be scaled up.

The Minister will not be surprised to hear me—and, I suspect, other hon. Members—urge the introduction of further legislative reform to help credit unions offer more services to their members and enable them to invest their members’ money in an expanded range of ways to generate a return for savers. Credit unions are the most active, responsible lenders to the poorest and most financially vulnerable and excluded people in the UK, but they are held back from doing more by outdated legislation and a digital approach to regulation by the Financial Conduct Authority.

[Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)]

I declare my interest as a former director of the Staffordshire credit union, which sadly went bump because the FCA’s misunderstanding of the difference between the capital reserves we had to hold and the sustainability of our loan book meant that we could never meet its ever increasing targets and thresholds. That has left a number of former consumers unable to access even the basic banking arrangements that we offered, and I wholeheartedly agree with my hon. Friend’s comments about the way in which the FCA regulates. It needs to better understand what credit unions are, and how they differ from commercial high street banks.

[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.

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[Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)]

Like many people, my first interaction with the co-operative movement was going to the local Co-op store with my gran when she was doing her weekly shopping. At the end of the walk around the supermarket, the shop assistant would put the things through the till and say, “What’s your divvy number?” and she would say, “207619”. That was her getting her slice of the dividend back. I did not really understand what that was about until I was a bit older, when she explained to me that every Christmas, she got back her dividend from how much she shopped in the Co-op.

I did not think about it much until I reached my teenage years and went to university, where I remember other people talking about it. That number has always stuck with me. I grew up in a relatively poor household, and the Co-op basically funded our Christmas, because my grandmother used the dividend she accrued throughout the year to buy the nice things we had at Christmas that we did not have for the rest of the year. I am sure I am not the only person who has memories of enjoyable Christmases because of the dividend points that their families received through Co-op shopping. That is not something we should dismiss.

There have been a lot of excellent contributions—including from my fellow west midlands Co-op MP, my hon. Friend the Member for West Bromwich West (Mr Bailey)—about the huge opportunities in the co-operative movement to contribute to our economy and the greater good of the United Kingdom. We should also focus on the small co-ops and the little interactions of co-operative goodness that improve the everyday lives of individuals in our communities.

Labour has made a commitment to “at least” double the size of the co-operative sector—my hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds) on the shadow Front Bench will realise that doubling it is not the end point in itself. Our aspiration in government is to at least double it and then go even further with growth of the co-operative and mutual sector in our economy, and I am sure that, having heard the many great contributions today, the Economic Secretary to the Treasury will seek to replicate that.

There are so many great examples. Much like the one described by the hon. Member for Stafford (Jeremy Lefroy), there is a wonderful building society in Stoke-on-Trent called Hanley Economic, which was formed in 1854 and originally called the Staffordshire Potteries Economic Permanent Benefit building society. Its purpose was to enable people who worked in the pottery industry to own a home, get on the housing ladder, have savings and manage their money better. It still exists today. Much like the Stafford Railway building society, it provides affordable, low-cost, sustainable and secure financial products for a number of people in north Staffordshire who ordinarily may be viewed by high street banks as being a bit too much of a risk. Because they can access suitable finance, they are able to make a better life for themselves. By building societies’ own admission, they are not going to change the world or overturn the economic hegemony of our current banking system, but they are making a difference to my constituents every day through the way that they operate and their business model, which is sustainable, ethical and fundamentally about trying to improve individuals’ lives.

That is where I want to add my contribution. I agree with pretty much everything that has been said by Members on both sides of the House about the opportunities if we were to properly unleash the co-operative movement and harness its economic potential. There are other things that we can do with the co-operative model. Someone—I think it was my hon. Friend the Member for Oldham West and Royton (Jim McMahon), but I do not want to attribute it to him, in case it was not—once talked about drainpipe devolution and the idea that if a decision is made in Westminster and Whitehall by half a dozen people, and then that decision is devolved to half a dozen people in Greater Manchester, the west midlands or north Staffordshire and called devolution for the purpose of devolution, we have not really devolved anything; we have just moved the decision makers to another office. We can harness the co-operative and mutual benefit by expanding the number of people who make the decisions in the first place.

[Jim McMahon]

rose—

[Gareth Snell]

Perhaps my hon. Friend wants to correct me.

[Jim McMahon]

My hon. Friend is right. During the EU referendum, people were talking about feeling powerless and wanting to take back control and have more say over their lives. We need to look at public services, and the Co-operative Councils’ Innovation Network is leading on that.

[Gareth Snell]

I thank my hon. Friend for his intervention, because he takes me neatly to my next point, which is about learning from good practice on a smaller scale that directly benefits our economy. The Co-operative Councils’ Innovation Network, of which he and I were both members when we were council leaders, demonstrates overwhelmingly what can be done if we put a small amount of investment into local projects. Tudor Evans, who leads the council in the constituency of my hon. Friend the Member for Plymouth, Sutton and Devonport (Luke Pollard), and Sharon Taylor in Stevenage are just a few examples of people who are pushing this agenda nationally.

If we put a small amount of investment into a group of people who want to change the way that their town works, we can get huge dividends back. If we move away from a simple contractual relationship for a new business towards profit share for rental purposes or an equity share in lieu of rent, we can suddenly start to sustain our high streets better. We can see empty units revitalised by businesses that can think about long-term business planning, rather than short-term business planning to meet next month’s rent and rates bill. We end up with a greater economic benefit to the local community.

If the Government thought about how they could help local authorities to do the sort of work that the Co-operative Councils’ Innovation Network is doing across the country, they would see an increase in potential tax take, because there would be more thriving small businesses. What do we know about thriving small businesses? We know that the people they employ spend their money in the neighbouring shops, and we have a circular economy, whereby one or two different thought processes about how we include more people in decision making in a community leads to economic benefits for not only the Treasury but local communities. That should surely be looked at by this Government or the next Government or as part of Labour’s commitment to at least double the co-operative sector.

The mutualisation argument extends to not only high streets but things such as public services for buses and trains. There is an argument for utilities to be mutualised, because these are things that we all use. If we mutualise and say that the people who use those services should have a stake in the control of them, those services can be driven to a higher quality and standard. There can be financial dividends for the users, but there can also be improvements in standards of delivery, because the people using the services are in control of how they are used. That is a fundamentally simple model that is not being exploited sufficiently by a number of Government bodies at the moment.

[Jeremy Lefroy]

The hon. Gentleman is making an extremely important point, and I agree with everything he is saying. One body that is, in effect, a mutual and is growing month by month almost under the radar is the National Employment Savings Trust—NEST. It is growing by several hundred million pounds. Last I saw, it had £5 billion, and by the end of the next decade, it will probably be one of the largest financial institutions in the country. It is doing a great job in many ways, yet almost all the top 10 investments of NEST are in overseas companies, not ones in the UK. It may have operations in the UK, but they are overseas investments. Does he agree that, given that it is a mutual, or at least owned with social purpose in the mutual interest, at least some of those investments could be put into precisely the things he is talking about?

[Gareth Snell]

I agree entirely. The hon. Gentleman, as always, has touched on a pragmatic and simple way of fixing something that should not be a problem to start with. He talked about the Staffordshire Credit Union. The reason the Staffordshire Credit Union ended up folding was that we were unable to meet the Prudential Regulation Authority’s 3% threshold rule between capital and assets. With a very small investment that a body like NEST could have provided, we would have been able to continue helping the thousands of people who were members, offering secure, low-return financial products to people who need it the most—people in communities such as Stoke-on-Trent, where payday lenders prey because they know that people want to borrow money quickly. While credit unions do not provide an immediate alternative to payday lending, they are part of the mix that is available. I can immediately think of a number of organisations that would benefit from the sort of investment the hon. Gentleman mentioned, and then the mutual role of NEST would get to grow and become even greater.

I want to go back briefly to my point about railways and buses. I may end up falling out with my Front-Bench colleagues on this issue, as on many others. State ownership is still a monopoly, and if we are talking about ways in which we could open up public services to be democratically controlled by the public, we need to mutualise them. We should allow and facilitate worker and management buy-outs of existing companies that are looking to be sold, and enable places to allow municipal bus companies to come back into the mix. This would help to sustain the market and—again, I go back to this point—make sure that people using those services have some semblance of taking control of those services and delivering them in a way they think is appropriate for their communities and sustainable in the long term.

This goes not just for public services. We have not touched on the potential economic benefits of things such as fan-owned football clubs and how we should do more to push fan-owned stadiums. In many other countries, it is not uncommon for sporting facilities and sports clubs to be owned, operated and managed by the users of those facilities. In this country, we have not particularly got into that model, as far as I can see, with the depth and the courage that others have.

Finally—I am conscious of the time—about 18 months ago, my hon. Friend the Member for Harrow West (Gareth Thomas) ran a very clever social media campaign pointing out that if the 5% profit of some of the largest companies in the country was shared among their employee base, each employee would receive a certain amount of money, emulating the French profit-sharing law. To turn full circle back to my first point, if we had such a law in this country—it is not necessarily a co-operative solution, but it is about profit sharing and sharing the values of co-operation—what would happen to that money? Most people who work in such companies and small-scale industries will spend that money locally: more money in their pockets means more money going into their local high streets, shops and facilities. I am sure the Government have already looked at the circular effect of an economic benefit coming from a co-operative solution, even if it is not a co-operative model, and if they have not already committed to looking at the French profit-sharing law, I would encourage the Minister to do so.

It would be wrong of me not to talk about the Co-operative Group as a whole. As has been mentioned by a number of my colleagues, it is not just about the financial products and services it offers, but the values and ethics it brings to them. The Co-operative Group is leading the way on dealing with modern slavery, food injustice and food hunger, and retail crime. It knows that, at the heart of everything it does, is its staff and its consumers, and those are the values that I am sure the Minister will have heard about in every contribution today and will want to make part of any Government strategy on co-operatives.

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[Dr David Drew (Stroud) (Lab/Co-op)]

It is a great honour to follow the current chair of the Co-operative party, my hon. Friend the Member for Redcar (Anna Turley). I am glad that her predecessor, my hon. Friend the Member for Harrow West (Gareth Thomas), was able to secure the debate. I am grateful to him for all he did, including taking the party through some quite difficult periods. The movement has also suffered, because of some of the well-known controversies that we had to face down. I thank the hon. Member for Wycombe (Mr Baker), who is no longer in his place. It is good that there is at least some support from those on the Government Benches for something that some of us, as proud Labour and Co-operative party MPs, feel is very important. We feel that the co-operative message is not always heard as much as it should be, in this place or, more particularly, in wider society.

I just want to touch on three quick points, but I will just mention what has already been said, which is that we need to see the growth of co-operation. It is an alternative to capitalism and state socialism, and it is important that we see it as an answer to the problems of the 21st century, rather than as purely a historical legacy. I hope the Minister will say some nice things and respond in kind to the suggestions I will make. I am not going to talk about credit unions, but it is important we recognise that they have a part to play in financial arrangements. I was one of those who set up the Stroud co-op union, which is still flourishing. It needs to grow and we need some help to make it grow, but it is an answer for those who find it difficult to access finance in other ways.

My first substantive point is on what I have always felt is a great problem with co-operation: where to get advice to set up a co-operative. State business support organisations, whether local enterprise partnerships or their previous incarnations, have all suffered from the same problem, which is that the people offering advice have either had no experience at all of co-operation, or their experience has been limited to what they have read about it. Co-operators need to be able to advise other potential co-operators. I hope the Government will consider this issue, because too often this is a huge lacuna. There is no one to go to who knows enough about the opportunities that the co-operative movement as a whole can bring. Since the loss of co-operative development agencies, which many of us have sadly witnessed over the past few decades, this issue has become much more acute.

Secondly, co-operative housing can be a solution, particularly in rural areas where community land trusts have now come into their own, but we need a number of things to happen to make them more available than they currently are. First, we need changes to the planning system. I am pleased that the Government have now looked at small sites and made them more accessible to this form of provision, but at the moment the planning system is such that too often communities and neighbourhood planning groups who want to have a small clutch of housing either give up because it is too bureaucratic, or they get turned over and it ends up as executive housing in villages, which is just what they did not want. They want affordable units. Dare I say it, they want social units.

The great benefit of community land trusts is that the land remains held mutually in perpetuity. That is very important, because losing the land means losing control. It would therefore be very helpful if the Government looked at the planning system in that regard and at what financial help they could provide to such groups. It is expensive to go through the rigours of trying to set up a community land trust, so I hope the Government will be generous and consider ways to help such communities solve these problems. They do not want masses of housing; they want 10 to 12 units and they want them to remain affordable in perpetuity. That is why community land trusts, as a form of co-operative housing, are so important.

My final point is on the role of co-operation in farming. The Agriculture Bill will one day come back to this House, but so much of it is predicated on public moneys for public goods and none of us quite knows how that will work. We are waiting to examine the environmental land management trusts in more detail so we can know how they will work in practice, but the simple fact is that farmers are already co-operators. More than half of all farmers belong to some form of co-operative. They may not always recognise that. They may think that NFU Mutual is a pure insurance company, but it is a mutual. It is a co-operative.

[Gareth Snell]

My hon. Friend describes a situation that applies to many people, not just farmers, who are members of a co-operative organisation. I think of the Asian community in Stoke-on-Trent, who have a savings scheme for funding family funerals. They would not think of it as a co-operative, but that is exactly the sort of mutual and co-operative model we are talking about.

[Dr Drew]

Exactly. That is partly the problem of the movement, because it is not overt enough. It does not broadcast the fact that they are mutuals and co-operatives. On farming, the changes that are going to come will, to some extent, demand upscaling. Some of us may worry about that, but the reality is that with the change in the funding mechanism there will be a drive towards larger units. The only alternative to that is some form of greater co-operation among those who practise farming at the moment. We want more people to come on to the land and particularly younger people, because the average age is 59. It will hardly be a burgeoning, growth-inspired movement without younger people coming in to do the exciting things that we all know could happen to provide more of our own food.

I hope we will look at how co-operatives are not only built into the Agriculture Bill, but given encouragement. All the pressure is on selling smaller units, whether that is what is happening to the county farms estate, where they are being gradually cut away one by one—some of us worry about that—or the fact that when land comes up for sale, the big guys come in and buy it.