Co-operative and Mutual Businesses

Debate between Gareth Thomas and Adrian Bailey

Thursday 27th June 2019 Commons Chamber

[Gareth Thomas]

I absolutely endorse my hon. Friend’s comments. I know that fisheries co-ops are another part of the sector in which she is interested. They, too, make a huge contribution, and could do a lot more with a little more help.

The economy is not some separate space to be run only by so-called management experts on grotesque levels of pay who can continue to ignore the rest of the country. Why should our neighbours, our friends and those we see at the school gate not have a say in how businesses and services on which they depend are run? They are allowed a say in political decision making, so why should they not be allowed a say in the businesses that they work in or depend on? Co-ops and mutuals can be life-changing and transformative, and the Government and the other Opposition parties should join Labour in committing themselves to double the size of the sector from between 4% and 5% of GDP to 10%.

The Oxo Tower on London’s South Bank was redeveloped by the enterprise Coin Street Community Builders. It now contains five floors of social housing run by Redwood Housing Co-op, subject to some of the lowest rents in the capital while being in one of London’s prime spots. Armed forces credit unions are another powerful example of the difference that co-ops can make. They were established after a long campaign by the Co-operative party, and are helping to combat the problem of payday lenders who prey on our armed forces personnel. Those are two remarkable stories, in my view, but much more is possible. Access to capital, further legislative reform, better Government funding, more Whitehall efforts to raise awareness and more expertise on the sector in the civil service are the key asks of Britain’s co-op and mutual sector.

I appreciate that finance is not an issue or problem reserved to co-ops and mutuals, but because of their different ownership models they often have real difficulty in accessing finance for expansion, and indeed for getting started. Big corporations can access large investment through debt funding or, crucially, can create capital by selling shares. Co-operatives and mutuals cannot at the moment do the latter without demutualising. Clearly we need to protect this unique governance model but also allow mutuals to issue permanent investment shares— that is to say, create indivisible reserves—which cannot be distributed to members even beyond the lifetime of the mutual. The European Union states offer this already in their mutual and co-operative legal set-ups, and a further five EU states have it in a slightly different form, yet in the UK we do not offer this route to raising significant finance for co-ops and mutuals.

Such a form of co-op and mutual share capital would offer stronger protection against demutualisation and therefore maintain and enhance corporate diversity. Above all else it would allow co-ops and mutuals to compete in the marketplace with other big businesses without one hand tied behind their back. In the UK building societies have a version of this already, called core capital deferred shares, which allows them to access capital markets without risking their mutual nature, but other financial mutuals and co-ops in the UK do not have anything like that.

Outside the EU, Desjardins in Quebec has raised more than $4 billion through this route, and Australia passed legislation on 5 April this year allowing its co-ops and mutuals to issue share capital while protecting their co-operative and mutual nature. If the Australians can do it, if most of Europe can do it, and if British building societies have it already, why should not British co-operatives and other mutuals also be allowed to raise finance in this way?

I recognise that the Minister and his officials have looked at this once already in the light of Lord Naseby’s successful Bill in the other place, and indeed my own and mutuals’ representations, but I hope he might be persuaded, particularly given that similar legislation is now on the statute book in Australia, to bring key experts in this area together with officials again to try to find a resolution to the problems that have stopped this method of raising finance being allowed in the UK. The Co-operative Group, other retail co-op societies, Co-operatives UK, friendly insurers and the Building Societies Association all support progress on this issue, and I urge the Minister, who has been sympathetic to co-operatives and mutuals in the past, to be willing to take a fresh look at this.

Britain’s co-op and mutual movement suffers from a lack of dedicated banking funds. Across Europe, dedicated mutual or co-op banks exist, are highly profitable and have been around for ages. I have long thought that the Royal Bank of Scotland could and should be converted into a mutual to help address this gap in the UK and to challenge the continuing big banking monopoly in the City. The Minister may not yet be ready to join me in making that jump, so perhaps I can ask him to explore whether the British Business Bank might begin to have a dedicated mutual growth fund to encourage the setting up of new mutuals.

Responsible Finance, an excellent organisation that champions Britain’s existing community banks, highlights the need for dedicated finance for start-up worker co-ops. There is at present an absence of patient capital or capital blended with grants to reduce investment risk for start-up worker co-ops. A dedicated fund would enable specialist co-op lenders to take a higher level of risk in this area and mean that more capital would be available.

[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

Does my hon. Friend agree that almost all start-up businesses have difficulty in accessing finance but that, ironically, it is more difficult for co-ops, notwithstanding the fact that the survival rate of starter co-ops over five years is almost double that of other businesses? That is an anomaly that we would reasonably expect the financial services market to correct.

[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.

Higher and Further Education

Debate between Gareth Thomas and Adrian Bailey

Tuesday 11th September 2012 Commons Chamber

[Mr Bailey]

The right hon. Gentleman mentions a number of issues that I wish I had sufficient time to deliberate upon. The point I am making is that those from lower-income backgrounds whose local university is not one that higher-aspiration students might wish to attend are suffering a disadvantage. A two-tier system may therefore be emerging. More lower-income students will want to stay at home regardless of the nature of their local university. I should stress that I think Wolverhampton university is excellent, and I would recommend it to prospective students, but it may not be the most appropriate institution for those seeking professional and academic qualifications. Not only will such lower-income students be missing out on the broader university experience of living away from home—although it is debatable how important that is—but they are less likely to have a good home learning environment.

[Mr Thomas]

If there is an increase in the numbers wanting to stay at home and go to their local university, there is also the risk of distortions in respect of choice of subject. In that context, has the hon. Gentleman seen the comments of the languages professor at Southampton university who is worried about the lack of provision of languages courses in the east of England, with the sole exception of Cambridge?

[Mr Bailey]

My hon. Friend makes an important point. I have alluded to the lack of choice such students would have. Their local university may well not offer the appropriate course for them to be able to optimise their educational development. That is a further example of potential disadvantage.

People from lower-income and lower-aspiration backgrounds will also be disproportionately disadvantaged as a result of the further education loans measures. They are more likely to have missed out on their original educational experience. They are also more likely to be in jobs where they need to upskill, so they will have greater need of support to study for enhanced qualifications. The Government are seeking to shrink the public sector in order to benefit the private sector, and the lowest-income areas are often those with the highest proportion of public sector workers, who are most at risk, and most in need of support to acquire the skills to enable them to transfer from the public sector to the private sector, in furtherance of Government policy. This is an example of disjointed government. People who will need to change jobs as a result of Government policy in one area will have the support that they need to fulfil the Government’s objectives kicked away. The end product could well be that their lives are devastated, along with the Government’s economic objectives.

I would like to discuss many other aspects of funding and the economics of this issue, but my great concern is supporting educational aspiration and fulfilment, and the need to do that to benefit our economy. That will not be achieved under these proposals.