Co-operatives, Mutuals and Friendly Societies Bill (First sitting)

Gareth Thomas Excerpts

Committee stage
Wednesday 30th November 2022 Public Bill Committees

[Sir Mark Hendrick]

I thank the hon. Member for his intervention. A lot depends on how it is framed at the start when the mutual or co-operative decides to register. Remember that this is an opt-in; therefore, any conditions upon the dissolution of the company will depend very much on its registration and constitution. Those would allow for this, if the organisation were so set up. I am sure that the Minister will comment on that as well.

Returning to the previous intervention, I hope the Minister will give some assurances, because there are obviously none in the Bill. I hope that moving in the direction of the Law Commission setting up a review of the sector and of the two pieces of legislation he wrote to me about that need review will bring the rules and legislation on co-operatives, mutuals, associations and friendly societies up to date with what is seen as best practice across Europe. Italy, France, Spain and Germany are far more advanced in how they help the sector, in terms of both taxation and the way in which organisations are viewed and are able to expand.

[Gareth Thomas (Harrow West) (Lab/Co-op)]

My hon. Friend has done an impressive job of getting his Bill to this stage. He will know that one problem with increasing access to capital for mutuals has been the roadblock of His Majesty’s Revenue and Customs. When the Minister reflects on the question raised by the hon. Member for Gloucester and on the contribution of my hon. Friend, will he clarify whether he has instructed HMRC to co-operate fully with the Law Commission’s work? If it does not, we will still have a roadblock in terms of increasing access to capital for mutuals.

[Sir Mark Hendrick]

I concur totally with my hon. Friend.

Let me close by thanking you, Mr Mundell, and by thanking my colleagues for their contributions and for being present to support the Bill. I also thank everyone who has worked so hard to make it a success, including Peter Hunt and Mutuo, the Co-operative party, the co-operative sector, and the Minister and his Treasury officials. Only by working in a modern and supportive business environment will co-operatives, mutuals and friendly societies be able to make a full contribution to the prosperity of our country by serving the interests of customers, and, indeed, citizens.

[Richard Graham]

I should mention that I once worked for a mutual group and with co-ops, mutuals and friendly societies, Mr Mundell. That is, if you like, a declaration of historic interest.

Today’s Bill is indicative of the huge support for the sector from the hon. Member for Preston. He highlights the fact that co-ops, mutuals and friendly societies can still, and do, play a key role in modern finance. I congratulate him and successive Treasury Ministers on their partnership in bringing the Bill forward. In fact, everyone here is so supportive of the sector that we probably all qualify for the support of the Co-operative party—a recruitment opportunity that I hope it is alert to.

[Gareth Thomas]

Come over and join us.

[Richard Graham]

Thank you.

On the substance of today’s amendments, will the Minister clarify the point I raised in my earlier intervention, about whether the constitutions of the different categories of existing mutuals allow for the distribution of any remaining capital to members where that mutual—and, by application, its members—has decided for whatever reason to wind up?

Will the Minister also clarify that mutuals can use some element of capital, if they wish, for the purposes of merging to create more scalability? As we know, the challenge for mutuals is to raise capital—that has been part of the weaknesses of one or two of the co-ops over the past decade—and, should they no longer be able to go forward, it is important that members do not necessarily lose everything they have put in.

[Gareth Thomas]

Is there not a risk that what the hon. Member is advocating would actually drive a coach and horses through the purpose of the Bill, which is to stop demutualisation and the distribution of assets to members? Any demutualisation is usually driven by the directors, who will benefit enormously from it. What the hon. Member appears to be suggesting risks creating a loophole that actually protects members in terms of demutualisation going forward. Has he not considered that possibility?

[Richard Graham]

Sure, but what I am trying to ensure is that that option is not ruled out where one small co-op could benefit from merging with a couple of others to remain mutual, rather than demutualising. That is the key point.

We have seen that in a slightly different way with credit unions. I helped merge a small credit union in Gloucester with a number of others in Gloucestershire to create one single Gloucestershire Credit Union. That enabled it to survive for another decade, although, sadly, it has now failed.

The key thing is that there are moments when even a mutual can benefit from additional scale by merging with other mutuals—specifically so that it does not need to demutualise. That is really my point, and I am sure the Minister will be able to shed light on the issue.

--- Later in debate ---

[Andrew Griffith]

I thank my hon. Friend for his point. It is a laudable ambition, which I am certainly happy to devote time to. Mutuals with the values of people in the community at their core are genuinely central to the vibrant, competitive and diverse—we are in favour of financial diversity—way in which the UK can serve the whole community. It is right that we look at how we do that, and how we can access capital. There are some technical points—I believe that Opposition Members understand that—in ensuring that we retain the tax advantages of mutuals, and do not inadvertently make them look more and more like corporate entities, which they are not, thereby prejudicing that tax treatment.

[Gareth Thomas]

I take the Minister’s point that there are some technical issues, but there has seemingly not been a great deal of will from HMRC thus far to try to find a way forward on them. Will he set out what instructions he has given to HMRC officials, perhaps to co-operate with the Law Commission, or whether separate work is being done within the Treasury to find a way around those technical issues? One of the things that came out of the LV= story—it was not a particular issue for LV=, but it certainly was for other mutuals—was that access to capital is holding back the development of friendly societies and their ability to offer more wide-ranging products and services.

[Andrew Griffith]

I am sure that my steely-eyed colleagues at HMRC do not need any particular direction, but they will have some challenge from me. I have already started to engage in that space. The hon. Member will appreciate that the corpus of law in this area is substantial, and that we should proceed cautiously. I will come on to the Law Commission, and perhaps that can be—

--- Later in debate ---

[Gareth Thomas]

There has not been a problem with their being cautious; the problem has been getting them to do something.

[The Chair]

Order. We cannot have a conversation. The hon. Member should either intervene or not.

--- Later in debate ---

In response to the hon. Member for Preston and my hon. Friend the Member for North East Bedfordshire, I confirm that my Department is in active discussions with the Law Commission on options to proceed with reviews of the Co-operative and Community Benefit Societies Act 2014 and the Friendly Societies Act 1992, with a view to launching them in the next financial year. As part of the dialogue, officials are working with the commission and with input from the sector to define the scope and framework of such reviews. Many of the ideas raised today, and others, can be revisited as part of a review. I look forward to engaging and hearing how we can move towards the ambition talked about today. The Government believe the Bill to be genuinely helpful.

[Gareth Thomas]

Will there be an opportunity for the House in some way to consider whether the scope of the review is as wide-ranging as those of us who are advocates of the sector across parties think is necessary?

[Andrew Griffith]

I am always happy to engage with the hon. Member. The simple answer is that I do not know whether it is for the House to engage, but I am happy—I hope my actions to date speak as loudly as my words—to engage on what that scope should be. I certainly assure him that, before the launch of a review, the sector will be consulted. If hon. Members have particular points to make, I am keen to hear them.

The future of mutuality looks bright and prosperous. That ambition is supported by the Government. I commend the hon. Member for Preston for his work on the Bill. The Government will support it.