Co-operative and Mutual Businesses

Debate between Jim McMahon and Adrian Bailey

Thursday 27th June 2019 Commons Chamber

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

What a pleasure it is to contribute to this debate. I congratulate the previous speakers, who have all, in their own particular ways, not only articulated the benefit of co-operatives, mutuals and so on, but played a part in promoting them during their careers. I think my hon. Friend the Member for Huddersfield (Mr Sheerman) is possibly one of the few people, certainly in the Commons Chamber, whose longevity and experience exceeds even that of my own.

I joined the Co-operative party well over 40 years ago. I spent 18 years as a political organiser in the party: first, trying to combat the process of Thatcherism and privatisation; but secondly, I have to say, trying to convince those within my own political party—the Labour party, which is the sister of the Co-operative party—of the benefits of co-operation and mutuality. It is not a fight that has had just one front.

I joined the co-operative movement all those years ago because I saw it as some sort of middle way. It was different from state ownership, which I felt lacked buy-in from both employees and consumers, and which, while it still had a role in our economy, did not satisfy all the values and aspirations that I felt were incorporated within the Labour movement. On the other side was the shareholder proprietary model, under which it seemed to me the benefits of consumers’ purchasing power and employees’ skills were inappropriately spread, with the shareholders getting a far greater benefit from that combination of organisations. Co-operatives, mutuals and employee share ownership companies were, in their own different ways and in their own different sectors, incorporating those values, and locking in the benefit of employees’ skills and consumers’ purchasing power, in a way that reinforced the quality of the businesses they were engaged in.

It is worth reflecting for a few moments on the sheer longevity of some of the businesses involved. As we all know, the co-operative movement started in Rochdale in the 1840s. Even though there is now a much reduced number of co-operative societies—the largest being the Co-operative Group—they all have histories of well over 100 years, with some in excess of 150 years. Building societies similarly started in the middle and later part of the 19th century, and although there has been a process of amalgamation and in some cases privatisation, they are still a huge player in the financial services market. They may be much changed from their origins, but they still incorporate the basic community-based values that we have discussed.

John Lewis is an employee share ownership company that started in the second half of the 19th century. It started giving its employees shares in the 1920s and is still going strong today. When I look at companies being founded nowadays, I wonder how many will still exist in the next 150 or 200 years. The fact that the basic model of co-operation, mutuality and employee share ownership has survived all the social changes and economic vicissitudes over the last 150 to 200 years is a testament to its resilience, adaptability and relevance in the current economy.

Having said all that, there is a recognition that despite the success of some of the major companies in the sector, and the proliferation within the movement of a whole range of co-operatives, we are still not living up to the potential that the model has in our economy. Ironically, the co-operative and mutual sector plays a far greater part in economies such as those of the United States and Germany, which are by no means considered socialist economies. It is reasonable to look at why that is the case and why we have underperformed in our development of this area.

Previous speakers have highlighted some of the barriers that have existed. The raising of finance is a crucial one, although I will not repeat the lucid exposition of that problem by my hon. Friend the Member for Harrow West (Gareth Thomas). Ironically, the economic rationale for the privatisation of the building societies in the 1980s was their inability to raise capital to expand, so we had that process and we know where it ended up. One cannot help but think that if Governments of that time had looked at providing the financial mechanism by which the building societies could have raised more money, that rationale would have been destroyed. I am not saying that human greed would not still have prevailed in some cases, but it would have been far more difficult to prosecute the case for it.

On company law, the submission by Co-operatives UK and the New Economics Foundation has made it clear that one of the obstacles is an outdated industrial and provident society legal framework. There seems to be a disparity between the way the Government approach this—which is basically not to do much about it, notwithstanding the efforts of my hon. Friend through his private Member’s Bill—and the way in which company law legislation is continually looked at and revised. If it is appropriate for that to be done for the corporate, private sector, why is it not appropriate for the co-operative sector?

Partly as a result of all this, lack of understanding is a big barrier. Ironically, co-ops, building societies and organisations like John Lewis have strong brand identities and public faith in them, yet the public do not really understand what makes those companies different from others, and how, if they wished themselves to organise within a co-operative, they might go about it. We have had a huge proliferation in the number of people going self-employed. Many of those people might well feel that if they knew more about co-operation, they would be better at working with like-minded people in a co-operative structure to deploy their skills even more effectively.

The New Economics Foundation has pointed out that there are some 120,000 family businesses with owners of an age that means that they are likely to retire. Of course, those businesses may go to management buy-outs or be passed on to younger members of the family, and so on. But there should be an opportunity for management to understand and get support for a potential co-operative model in the event of a buy-out post the retirement of the existing owners. The report by the New Economics Foundation points out that if only 5% of the businesses where owners retired went on to co-operative management, that would double the number of such companies. That is a staggering statistic.

Local economic partnerships and other bodies set up to promote business in different areas seem to be either unaware or under-aware of the potential that co-operatives will offer to businesses in their area. This comes back to thinking about a co-operative development agency that would provide a centre for advice and contacts for access to finance, and would be proactive in looking for co-operative opportunities. I am encouraged that the Mayors in Manchester, Aberdeen and South Yorkshire are now considering having co-op commissioners with a brief to look at ways in which they can work with their local regeneration agencies to regenerate under co-operative models.

[Jim McMahon (Oldham West and Royton) (Lab/Co-op)]

I congratulate my hon. Friend on outlining the benefits of co-operatives. The Mayor of Greater Manchester has identified that about 160,000 residents of Greater Manchester are members of co-operatives. He says that that offers a huge opportunity, beyond just having a commissioner in place, and has now launched a call for evidence for the people who co-produce whatever model is developed there. That is a good example of working together.

[Mr Bailey]

I thank my hon. Friend for that example, which underlines the point I am making. Given that these local government structures, and the policies that they are adopting, are in their infancy, it demonstrates the potential that might be available in those areas for other local government structures to actively promote co-operation.