Co-operatives and Mutuality

Debate between Jesse Norman and Adrian Bailey

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.

Postal Services Bill

Debate between Jesse Norman and Adrian Bailey

Wednesday 27th October 2010 Commons Chamber

[Mr Bailey]

I do not recall anybody saying that post offices had gone through a halcyon period, but under the last post office reorganisation many sub-postmasters applied for the compensation package that was agreed for them. I very much doubt that that would still be available under a revised and privatised process.

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

The hon. Gentleman says that it is impossible to create mutuals from a transfer, but did not John Spedan Lewis create the John Lewis Partnership by transferring a business into an employee-owned trust? Is not that a great example of an existing business being transformed into a highly successful mutual, if not a co-operative?

[Mr Bailey]

Certainly John Lewis did that, but he did not just hand it over—there was a process by which he ascertained the willingness of others within the business to accept it. That situation has to be created. I could equally point to the situation in the ’70s when co-operatives failed because they did not have that in place.

I oppose the Bill because it is fundamentally flawed. At the Lib Dem conference, the Secretary of State said, “Capitalism takes no prisoners,” but since then he seems to have been on a private journey. That is demonstrated by this Bill, in which he puts forward a solution based on a brand of capitalism that I would describe as cuddly capitalism, whereby shareholders will forgo their private profit in order to embrace a co-operative and mutual solution that mitigates the social impact of their drive for profits.