Co-operatives and Mutuality

Jesse Norman Excerpts

Thursday 30th June 2011 Westminster Hall

[Mr Bailey]

Yes. My references were specifically to the Rochdale Pioneers. One characteristic of co-operative societies was the way in which they reinvested surpluses in community education, and libraries were, of course, part and parcel of that.

[Jesse Norman (Hereford and South Herefordshire) (Con)]

Further to the comment made by my hon. Friend the Member for Brecon and Radnorshire (Roger Williams), it would be a poor history that did not include the role of Robert Owen in this field. The Robert Owen Society in Herefordshire does an enormous amount of work, representing the wide-ranging approach to human well-being of which, as the hon. Member for West Bromwich West (Mr Bailey) says, the Rochdale Pioneers were acutely aware.

[Mr Bailey]

I am grateful to the hon. Gentleman for raising that matter. Robert Owen was of course the pioneer of these ideas, and although he did not succeed in his own lifetime, many of his ideas were incorporated during the formation of the co-operative movement in the 1840s through the Rochdale Pioneers.

The co-operative movement took a knock in the post-war era. The traditional retail societies lost an enormous amount of their market share to the emerging supermarket chains, and their structure found it difficult to adapt. Equally, in the ’80s and early ’90s, many building societies—the traditional mutual sector—fell prey to the prevailing philosophy of privatisation and the free market economy, and the conventional wisdom was that co-operative principles were somehow anachronistic and inappropriate to survival in what was then a highly capitalistic and business-orientated world.

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[Mr Bailey]

I agree up to a point. Some mutuals certainly embraced or sustained the principles of mutuality more than others, but in the ’80s and ’90s the great majority of the public would have been unable to distinguish between a building society and a bank—indeed, I have occasionally heard Ministers and shadow Ministers confuse them in the Chamber. That was a reflection of the mutual movement’s failure to highlight sufficiently its difference and market it successfully, but much has changed in that respect in the past few years.

The traditional co-operative retail movement has in many ways gone back to its roots, and has successfully reinvented itself as a community-based consumer co-operative. That is reflected in the huge increase in turnover and profitability, with turnover in the sector increasing by 4.4% in the past year. At a time when the economy has grown by only 1.3%, that is a very creditable performance. In 2008, the increase was 21%, and by anyone’s standards that was an incredibly difficult time in retailing. However, the building society movement emerged, not completely unscathed because it took some hits—we unfortunately saw the demise of the Dunfermline building society—but relatively so, compared with the proprietary banks, and in no way was it a contributory factor to the banking problems. A lot of credit for that goes to the largest national co-operative—the Co-operative Group—but credit also goes to a number of other co-operative societies. One of my two local societies, the Midcounties, increased its profits last year from just less than £20 million to £26 million, and the Midlands—I have to be careful not to mention one and not the other—increased its profits from £22 million to £26 million. Such societies have demonstrated that this form of organisation can compete and thrive in even the most difficult of climates.

It is fair to say that the success and potential of that model is now recognised by all political parties. To return to the point that the Minister raised, the areas where co-operatives and mutual organisations are thriving include traditional consumer co-ops; worker co-ops, whether in service delivery, conventional trading or business co-ops; and employee-owned businesses. The John Lewis Partnership is perhaps the most well known, but many others are successful as well. They include agricultural, fishing and housing co-ops and football supporters’ trusts, and rugby supporters’ trusts are being considered as a model for other sporting clubs. Financial co-ops include credit unions, building societies and mutual insurers. I am sure that I have missed quite a few, but no doubt people will remind me of them during the course of this debate. That list is a clear demonstration of the model’s relevance to a range of public services and business activities.

The Government have embraced the approach. The pathfinder programme is designed to encourage co-operative models in the delivery of public services, and we are waiting on the “Open Public Services” White Paper, which will give us an opportunity to debate where Government policy in that area is going.

Although I generally welcome the Government’s recognition of co-operatives and mutuals, I will issue one or two words of warning. First, the essence of mutuals and co-operatives throughout their history is that the individuals forming them must have a desire to make them a success; we cannot just legislate for them, or point to a group of people and say, “You will work in a co-operative manner.” The desire is absolutely essential. Similarly, we cannot just look at a failing business and say, “Become a co-operative and you will succeed.” That will not happen. If the business model is wrong, just putting it into mutual ownership will not do. Particularly in the context of the debate on Post Office and Royal Mail, those issues have not yet been fully explored. We will certainly seek to do so, and other hon. Members here might wish to comment on them.

There are a range of potential opportunities—some might say potential pitfalls—for co-operative development. The obvious and most public one, of course, is the re-mutualisation of Northern Rock. I know that the movement feels that if it can be done, it will be an almost iconic recognition of the renaissance of mutuality and its relevance, and it intends to probe the Government on what they consider the prospects to be. I am disappointed that the previous Government’s commitment to British Waterways has not been upheld. Again, I would welcome hearing the Government thinking on that. The removal of the funds available for the formation of community pubs is also disappointing. However, I do not mention those things in a churlish way. They are matters that we need to debate. Hon. Members from various parties might feel that it is possible to pursue them and join others intent on promoting the co-operative agenda to achieve them.

[Jesse Norman]

I have considered closely the possibility of re-mutualising Northern Rock. I could not get over the question of how to handle an enormous vendor note —the vendor financing from the Government to the employees—to be paid out over 10 or 20 years. That has proven an insuperable practical burden, as far as I can see. I welcome other thoughts on the matter. However, I am sure that we all share the hon. Gentleman’s aspiration that the mutual ethos should return to the financial sector.

[Mr Bailey]

I thank the hon. Gentleman for that intervention. Perhaps I should have recognised earlier the work that he has done as chairman of the all-party group on employee ownership. I held the same position in a previous incarnation. He has done a good job, and I accept that he is intent on resolving some of the problems and issues that arise from the Northern Rock situation.

I will finish, as I know that many people want to raise specific interests during this debate. To return to where I started, co-operatives and mutuals are a form of self-help that is relevant in a range of business activities and public services. It has been clearly demonstrated that their impact on the economy is increasing and that public support for them is improving. Their membership is also rising; I think that nearly 13 million people in this country are now members of one form of co-operative or another. This debate will play a small part in raising awareness, assembling ideas and testing the Government to see how deep their commitment is and how they can take the agenda forward.

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[Chris Evans]

The hon. Gentleman is absolutely right. I was coming to that. This culture is very much engrained in the valleys. My mother, my grandmother and all my aunties and uncles had Provident. However, this is not just about Provident; it is also about paying off the money for the television through the slot in the back. People put a pound in, and they had 10 hours of television. In that way, they could pay off their television. It was always a nightmare, because the pound was guaranteed to run out just at the conclusion of “EastEnders”, and we would never know what the cliffhanger was. The hon. Gentleman is absolutely right that once the television had been paid off, the firms would come round and say, “The carpet’s looking a bit bald. Do you fancy a new one? What about a new washing machine.” They would then sign people up.

This problem of high-cost lending still exists. I cannot believe that I am going to admit this in a Westminster Hall debate, but I actually watch Jeremy Kyle; I am ashamed to admit it, but I have watched his show. As I was waiting for the all-important DNA tests and the lie detector, the adverts came up. One was for a company called Wonga.com. It was wonderful; Wonga was revolutionising same-day lending. I thought, “This is marvellous.” The advert said, “You’re in control.” I thought, “This is brilliant.” Then, however, I looked at the APR, which was 4,125%—pure, utter profiteering.

I did not think any more about the company. Then, however, I got on the tube on Monday morning, and there was an advert for Wonga.com, saying, “You’re in control.” The APR was more than 4,000%. I cannot get away from this company. I was watching “Match of the Day” and the press conference after the match. There were adverts for Barclaycard, but the Blackpool players also had the word “Wonga” right across their chests. Such things give the company the legitimacy that it does not deserve.

There is a way of out this. Yes, we can have legislation, and I pay tribute to my hon. Friend the Member for Walthamstow (Stella Creasy), who has done a lot of work on the issue, and I am sure she will speak about it later. However, there is a more intrinsic way forward, so let me move on to credit unions.

The other day, I went to Islwyn Community Credit Union with my hon. Friend the Member for Harrow West (Mr Thomas)—I will not talk about our earlier visit. We talked about how the credit union had lent a total of £1 million to the most vulnerable people. To pick up the point made by the hon. Member for East Hampshire, the people at the credit union said it was all very well lending money at competitive rates and allowing people to save, but that people did not know about credit unions. Provident, Safeloans and Shopacheck will knock at the door, and people can go to Wonga, Ocean Finance or someone else, but they do not know about credit unions. People are hearing about them by word of mouth and they are hearing about getting more protection points.

The other day, I was proud to visit Trinant school—I must give it a plug. If anybody wants to see a credit union, they should go there to see the children’s enthusiasm. The pupils have formed their own saving scheme, which is run along the lines of the Islwyn Community Credit Union. Those children have saved £600. The scheme has 56 members. One of the wonderful things about the scheme is not only that the children are saving, but that they are so enthusiastic that they are going home to their parents to tell them about credit unions. They are promoting credit unions in that way. This is an excellent project.

When the Minister sums up and talks about credit unions, I hope he will talk about Wales. Everybody in Wales has access to a credit union, and I really think the coalition Government should have that as an aspiration more widely. We should also take legislative obstacles down. I would ask the Minister to lower the minimum age necessary to join a credit union, which is presently 16—the same as the minimum age people need to be to serve as a company director. If we take such steps, we can promote credit unions, good lending and good saving.

I turn now to the mutualisation of the banks. I have been accused of banging on about the banks, but, like many Members, I am disappointed that Northern Rock will be sold privately. I hope the Government can look at introducing a mutual element, because we need that in society. In the middle of the banking crisis, there was one bank that did not need bailing out and which had run its business ethically: the Co-operative bank. When we look at the banking sector again, I hope the Co-operative bank is one of the examples we look to and learn from.

[Jesse Norman]

It is also true that the Nationwide, a mutual building society, did not require a bail-out. In fact, it was like the Rock of Gibraltar throughout the crisis.

[Chris Evans]

I thank the hon. Gentleman for that.

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[Jesse Norman (Hereford and South Herefordshire) (Con)]

It is a pleasure to speak in a debate under your chairmanship, Mr Amess.

I should start by disclosing that I do pro bono work with the John Lewis Partnership, which kindly pays into a charitable fund for local independent charities in my constituency. I am also the chair of the all-party group on employee ownership.

I massively welcome the debate and its excellent timing, coming as it does in co-operatives fortnight. I very much congratulate the hon. Members for West Bromwich West (Mr Bailey) and for Islwyn (Chris Evans), as I know other Members will, for calling this important and timely debate.

I want to celebrate two organisations in my constituency. One is Money Box, which is Herefordshire’s own credit union. The second is Widemarsh Workshop, which I am working to help transform into a co-op. It is a social enterprise that creates excellent furniture and works with disabled local people.

I have been interested and actively involved in co-ops, mutual organisations, employee-owned firms and similar organisations for many years. In that context, I pay tribute to an extraordinary man called Robert Oakeshott, whom many Members will know of and who died about 10 days ago, on 21 June. He was a lifelong friend of the co-operative movement in this country and overseas. He wrote a book, “The Case for Workers’ Co-ops”, many years ago, and helped to set up co-ops. His book “Jobs and Fairness” was, and still is, the seminal contribution to the discussion and debate on employee ownership. Robert was an extraordinarily far-sighted man. I wish that he were here to see the debate and the progress that the Government and their supporters across the third sector and the private and public sectors have made in promoting co-ops. I know that he would be thrilled. He was a great influence on me, and he brought me into Job Ownership Ltd, the predecessor organisation to the Employee Ownership Association.

I am also very pleased to have been able to help so many of my colleagues and to spread the word on the value of co-operative and mutual ideas on the centre right of the political spectrum through what we have called the Conservative Co-operative Movement. I have 37 Conservative colleagues who are members, and the number is growing. So far we have published two publications. One is called “Nuts and Bolts: How to Start a Food Co-op”, and is a detailed guide. It was mentioned earlier that the original form of co-operative organisation was the industrial and provident society, but now, and in many respects thanks to the previous Government, there has been an expansion, and people can use many different routes, including trusts and community interest companies. One thing that this lovely little book does is to set out all the possible different legal and practical approaches to setting up a co-op, and to consider the advantages and disadvantages. Our second publication is a pamphlet that we have recently published, called “Co-ops in the Big Society”, which explores all the different ways in which co-ops can add to the delivery of public and private services, and the role they can play in society.

Co-ops, with the mutual ethos that they derive from and celebrate, their spirit of trust, and their moral embedding in our society and communities, are of profound importance. One is reminded of the Rochdale Pioneers, whose history brings out a truth that some hon. Members may find slightly rebarbative, although I think it is important to remind ourselves of it: co-ops are by their nature rather conservative—with a small “c”— institutions. The first successful co-op, as has been mentioned, was established by the Rochdale Pioneers in 1844. They were 28 poor weavers and tradesmen looking for a better future as the industrial revolution mechanised the cloth trade. They relied on slowly accumulated subscriptions of £1 each from their members and initially made a modest £13 a week in sales. By 1850, just six years later, the co-op had 600 members, nearly £2,300 in capital and sales of £300 a week. In 1861, 11 years on, it diversified into housing for its members. By the end of the 19th century the Rochdale Pioneers had in turn established the Co-operative building society, which is a major provider of mortgages to this day.

We should look again at the Rochdale Pioneers’ experience. That success was the result of self-help, entrepreneurship and community energy. It was not the result of state patronage or official intervention. Those men and women were able to adapt the co-operative form and the broader idea of shared ownership to a variety of social needs—a local food shop, local housing and local mortgages. They were motivated as much by high ideals as by economic necessity—a point that has already been well made. In their first year of operation they established the Rochdale principles, to which all co-ops broadly adhere today. I think we need something similar today if we are to combat the fragmentation of British society.

There is a huge opportunity—I am delighted that it is being seized and developed by the Government—to initiate a great wave of change across society, whether that is through Cabinet Office pathfinders, the mutualisation of the Post Office or some of the work that is being done to create new forms of delivery of public services. Those are all thoroughly important. No less important are the opportunities to stimulate the growth of co-ops, mutuals, employee-owned organisations and the like in the private sector. That is a point that is widely misunderstood and I am thrilled that the Government take the same positive and proactive attitude towards private sector co-ops as they have to public ones.

[Jonathan Evans]

I have been looking for an opportunity to return to the issue of Northern Rock, on which my hon. Friend intervened earlier, and his work on assessing the possibility of remutualisation. Is my hon. Friend disappointed by the fact that United Kingdom Financial Investments appears to have made the recommendation on sale but not published the outcome of its assessment of the option of remutualisation? I respect what my hon. Friend has said about it, but it seems a bit odd that we have not seen the detail, even though UKFI obviously must have looked at that subject.

[Jesse Norman]

It is a disappointment that UKFI has not published its thinking on that even in outline. The calculations are not enormously complex. There is, of course, a further political issue, which has to do with the return of cash to the public Exchequer at a time of extreme economic crisis, but one still hopes that something of the form of the mutual ethos can be retained in the new organisation when it is ultimately sold.

[Stella Creasy (Walthamstow) (Lab/Co-op)]

I wonder whether, like me, the hon. Gentleman is disappointed that the Government have not considered the proposal for a payback to the taxpayer. Perhaps he will join me and other co-operatively-minded MPs to challenge the Chancellor to re-examine the issue, because of the benefits that could accrue from the mutualisation of Northern Rock.

[Jesse Norman]

I am not absolutely sure I understood the thrust of the hon. Lady’s intervention. It seems to me that there is an important issue in relation to the publication of the decision that has been made. It is quite right that there should be a public justification of the decision not to proceed with the mutualisation. One would like further progress to be made on retaining the mutual ethos. I am not sure how much further work there is to be done on it.

[Stella Creasy]

I am afraid I have a foggy head, but my mind is clear on this. The Co-operative party has submitted a proposal to the Government about paying back and the mutualisation of Northern Rock. I ask the hon. Gentleman again whether he will combine with me and other co-operatively-minded MPs to press the Chancellor to respond to that document, which he has not yet done.

[Jesse Norman]

I am afraid I have not the foggiest clue what paying back means. To whom will something be paid back, and out of what, under the proposal?

[Stella Creasy]

Perhaps if the hon. Gentleman agrees that it is worth considering models of remutualisation for Northern Rock, which would examine the payback to the taxpayer through the remutualisation process, he will meet us to look at how to progress that, and not lose the opportunity that mutualising Northern Rock would present.

[Jesse Norman]

I am of course happy—if this is what the hon. Lady is asking—to meet her and other Co-operative MPs to discuss that, so that I can understand the proposal better. I do not know whether the hon. Lady was present when I intervened earlier, but there is a clear financial problem to do with the capital structure, the taxpayer value and the sustainability of a model that has a large vendor note sitting in it from the Government—that is a form of loan—and substitutes public ownership of equity with public ownership of a loan, which may be no more stable for less return. There is a genuine economic issue, and that is what we need to engage with.

I hope that we can come together as a House and a community of MPs, in a bipartisan way, to promote co-ops, change our public culture, develop and spread the co-operative ethos, and encourage the Government to push ahead with all the work they are doing so successfully, so far, in this area.

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[Tracey Crouch]

As the hon. Gentleman mentioned, my hon. Friend said that there are 37 members, but the movement has only just been launched. We are a small but perfectly-formed group. [Interruption.] I may also add, thanks to help from my hon. Friends from a sedentary position, that there are 37 members within Parliament.

[Jesse Norman]

At the risk of intruding, would my hon. Friend, or perhaps the hon. Member for Harrow West (Mr Thomas), like to comment on the difference between the number of members of the Conservative Co-operative Movement and the number of Labour members of the co-operative movement within this House?

[Tracey Crouch]

I am sure that the hon. Member for Harrow West will deal with those questions when he sums up at the end of the debate. I am proud to be a member of the Conservative Co-operative Movement in Parliament, which has only just been established.

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[Tracey Crouch]

I agree completely. It is for that reason that it is right that credit unions receive so much support from across the House and from Government. They are great advocates of financial inclusion and can offer an alternative to high-cost credit that blights many, and submerges them further into debt. I look forward to visiting the Medway Credit Union in the autumn, and to helping to raise its profile.

That leads me on to an observation that many have no doubt already made. Small, particularly localised co-ops such as the Medway Credit Union, rely heavily on volunteers. Unlike private ventures, which have a large amount of start-up capital, they can call on little in the way of reserves. If we are to encourage the co-operative contribution to the economy, the Government must focus their energies and funding on providing start-up capital. It is encouraging therefore that the Government have recognised that and established a fund to help mutuals to meet such costs. I would also like local enterprise partnerships, which are meant to focus on providing localised services and on developing a devolved enterprise strategy, to explore how co-ops can become involved, attract investment and improve membership. The Government have previously committed to reducing the regulatory and administrative burdens so that it is easier to start and run a co-operative. I hope that we see that commitment become reality soon. We must then, with some cross-party zeal, start championing and promoting the co-operative movement.

I feel particularly strongly about the issue because, in the run-up to the general election, a major high street bank decided that its small branch in my constituency, with its over-the-counter service and ATM, was surplus to its global requirements. HSBC decided that Aylesford village did not fit into its strap line of “The world’s local bank.” Despite serving an elderly and local business population, the branch was closed without any concern about the impact on the local community. The village is now bereft of its post office and its bank. Given the thousands of names we had on a petition from Aylesford and the surrounding villages, I wish I had seen the example of villagers coming together to provide their own local counter services and forming a co-op. We could and should have done that, and the village would have been better off for it.

I promised a short contribution, but now I have wittered on about co-op opportunities that passed by. This debate, however, has allowed me to emphasise that the co-operative and mutual movement has cross-party support. Co-ops bring huge benefits to society and the economy, and they can demonstrate entrepreneurial brilliance and deliver rewards to all those involved. There are legal obstacles, which the Government are looking at, but it is hard not to want to get involved in this debate and to encourage the establishment of more co-operatives, to help to deliver what society and the country needs.

[Jesse Norman]

On a point of order, Mr Amess, I want to put on record my sense of the great discourtesy done to this Chamber and to the House by the hon. Member for Walthamstow (Stella Creasy), who came in, did not listen to the opening speeches, asked a series of questions and then left. That ought to be in the record.

[Mr David Amess (in the Chair)]

All I say about hon. Members staying for the debate is that, when I made my announcement about the timing of things, there were 13 possible speakers. I hope I did not scare people off, because we seem to have lost a number of them. I am not referring to our current proceedings but, as far as the specific point made by the hon. Gentleman is concerned, Mr Speaker has said that it is certainly discourteous for a Member to arrive, make an intervention and not return. I cast no aspersions on what is happening at the moment.