Co-operative and Mutual Businesses

Jeremy Lefroy Excerpts

Thursday 27th June 2019 Commons Chamber

[Jeremy Lefroy (Stafford) (Con)]

As always, it is a real pleasure to follow the hon. Member for Huddersfield (Mr Sheerman). I thank the hon. Member for Harrow West (Gareth Thomas) and my hon. Friend the Member for Wycombe (Mr Baker) for bringing forward this really important debate.

Over the years that I have been in business and, indeed, in this House, I have come to see more and more the importance of the co-operative and mutual movement. Perhaps some Members know this, but I wonder how many people know which bank in the world is top of global sustainability rankings. It is Rabobank, a co-operative bank from the Netherlands, which, last year, had a net income of €3 billion and a balance sheet of more than €40 billion. That shows that a co-operative can be a global player. I have had the honour of working with the Rabobank Foundation in Tanzania where they supported a shallow well drilling project, which my wife was helping to run. I also have seen its work in other countries both as a commercial entity and through its magnificent foundation. That is one thing that a co-operative bank on that scale can do; it can give back enormous sums to the communities in which it works, both through better and cheaper services, financial services in this case, and also through supporting community work.

Further afield across Europe in Switzerland, the two biggest retail groups are both co-operatives: the Co-op itself and Migros, which has more than 100,000 employees. They show how co-operatives can work on a major scale and provide great benefit to their communities and to their staff.

On the international scale, I want to draw attention to Fairtrade, which I have been involved in for many, many years. Without the co-operative movement in the United Kingdom and, indeed, across Europe, Fairtrade would simply not be where it is. We need to remember that the UK has the greatest level of sales of Fairtrade goods of any country in the world—more than £2 billion a year—and the co-operative movement deserves huge credit for that.

[Stephen Doughty]

I thank the hon. Gentleman for giving way. Is he also aware of the role that the co-operative movement and co-operative MPs have played, along with MPs from across the House in the all-party group for Fairtrade, in highlighting corporates, such as Sainsbury’s, that are trying to downgrade the role of Fairtrade products? We highlighted the fact that it was selling tea that it called “fairly traded” which was not Fairtrade tea. It is not only about boosting Fairtrade globally, but about defending its position. That is at the very heart of the co-operative principle.

[Jeremy Lefroy]

I welcome what the hon. Gentleman says, and he is absolutely right. I would say that Sainsbury’s has also been a strong supporter of Fairtrade, but we do not want to see any dilution or diminution of those principles. Fairtrade is like a brand. People will pay that bit extra because they know that what they are buying has been reliably sourced from farmers or other producers who have been properly paid for their work. It is a brand like any other brand, but it is more than that; it is something that we have to have trust in, and we do not want to see any diminution of that at all.

I want to talk briefly about the role of co-operatives in financial services, in three specific areas. First, my constituency is home to the excellent Stafford Railway Building Society, which was founded in 1877. It is local and exists to provide mortgages to local people. It was set up, obviously, by the railway workers of Stafford—Stafford is one of the major railway junctions in the whole UK rail network—and it is still there, providing excellent financial services, profitably, to my constituents and the near neighbourhood. I pay tribute to all those who have made it what it is, because people give up a lot of their time to serve on the board or as staff in the building society. Particular credit goes to Mike Heenan, a friend of mine who was very much involved in the building society for many years; Susan Whiting, who took over from him as the chief executive; and the current board and management of the building society.

Stafford Railway Building Society will be around for the next decade, two decades and three decades, because it is run responsibly and its capital is built up every year as it does not have to pay dividends. Where it can help is by providing cheaper and better services to its members through the retention of that capital.

The second area I want to discuss is credit unions, which have already been mentioned by the hon. Member for Stoke-on-Trent Central (Gareth Snell). I declare an interest in that I was a member of the Staffordshire credit union and was very sad indeed when it closed. I have to give credit where it is due; it was closed in a responsible manner and people got their investments back, but it was very sad that it had to happen. I ask the Government to look at why such an important local institution has to close because of regulation. We all know that there has to be regulation, but are there ways in which regulations could be changed so that they would not have such a dramatic effect on a very important and loved local institution? I very much hope that we will see the return of a Staffordshire credit union at some point in the near future.

The third area where the co-operative and mutual movement has a very important role to play is in small business finance, but it is not able to do that enough at the moment. The Co-operative Bank clearly has an excellent record in lending and providing accounts for small business, but the co-operative and mutual movement should have a much greater role to play in the provision of loans to start-ups or equity capital for small businesses. I pay tribute to the Black Country Reinvestment Society, of which I am a member. The society provides lending to businesses in Staffordshire in my constituency and across the Black Country. It is an excellent institution, but we need more such institutions and we need them to play a greater role in the provision of the equity capital that is so often as important—particularly for modern, high-tech businesses—as the loan capital that they more traditionally provide.

I pay tribute to the role that the co-operative and mutual movement has played in the history and economy of the United Kingdom. All speakers, including my hon. Friend the Member for Wycombe have mentioned the fact that it is about not just the money and the business, but the co-operation. It is about building our social fabric—goodness knows we need to bring people together more and more at the moment, in times of quite considerable division. I urge Members on both sides of the House to support mutuals and co-operatives in their constituencies, as I know many do, as much for the fact that they bring people together to work for the benefit of their community as for the undoubted financial and economic benefits that these great movements bring to our country.

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[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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[The Economic Secretary to the Treasury (John Glen)]

It is a privilege to respond to this debate today on behalf of the Government. I would like to thank the hon. Member for Harrow West (Gareth Thomas) and my hon. Friend the Member for Wycombe (Mr Baker) for securing the debate, and the 11 Back-Bench Members who have spoken this afternoon about the enormous positive contributions that co-operatives and mutuals make to our economy and society.

I start by paying particular tribute to the hon. Member for Harrow West for his nearly two decades of leadership of the all-party parliamentary group for mutuals. In my rather more modest tenure of not even 18 months as Economic Secretary to the Treasury, he has lobbied effectively and constructively on these matters, and I will respond to the points he and other hon. Members have made in the course of this debate. I would also like to congratulate the hon. Member for Redcar (Anna Turley) on her recent election as Co-operative party chair and thank her for her contribution today.

The House has heard some impressive figures on the economic contribution made by co-operative and mutual organisations in this country and more widely across the globe. I would like to acknowledge the experience of my hon. Friend the Member for Stafford (Jeremy Lefroy), who brings great insights through his work in this country and also in Tanzania. That came over strongly in his thoughtful contribution and his suggestions.

[Jeremy Lefroy]

I thank the Minister for all the work that he does. Another major co-operative that is important to my farmers is an overseas-based one called Arla. It is based in Denmark, but it is a co-operative that works across borders for the benefit of all farmers—in Britain, Denmark or wherever else.

[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.