Co-operatives

Jim Shannon Excerpts

Thursday 14th July 2016 Westminster Hall

[Hannah Bardell (Livingston) (SNP)]

Thank you very much, Mr Hollobone. I will do my best not to take such an extensive amount of time. I am sure we would all agree that the last few days have felt like something of a marathon, so I will keep my remarks brief.

I congratulate the hon. Member for Cardiff South and Penarth (Stephen Doughty). We have crossed proverbial swords in this Chamber recently, but I think today’s debate will be more conciliatory than previous ones. There have been many important and significant contributions today and I look forward to hearing the answers from the Minister on issues such as the mutualisation of Channel 4 and a public stake in Transport for London. There are many interesting ideas. I hope that we can work across the House on areas of mutual interest and agreement.

I am very happy to be participating today. My family have a great tradition in the co-operative movement. Both my grandmother and my great-grandmother travelled with the co-operative and I still remember some of the artefacts that my grandmother brought back from Russia in the 1920s.

It is particularly important to discuss and focus our attention on the role and benefit of co-operatives in our society at the end of the Co-operatives fortnight because of the Brexit vote and in the light of the Finance Bill. In this time of economic uncertainty, we would do well to highlight the contribution of co-operative, employee-owned businesses in our economy. Those employee-owned businesses contribute an estimated £34 billion a year to the British economy and there are nearly 7,000 independent co-operatives across the UK. I will not take hon. Members on a full tour of my constituency, but I would like to mention a couple: West Lothian Credit Union, of which I am a member, Pentland Garden Services, based in Kirknewton, and Eliburn Tenant Management Co-operative, all of which have an employee-owned structure and make a great contribution to the local and Scottish economy.

Two of the largest co-ops in the UK are the Co-op and John Lewis, of course. All co-operative retailers, including those two, account for £24.3 billion of the sector’s turnover. With the two strongest areas in the co-operative sector being retail and agriculture, Arla Foods and United Oilseeds contribute £5.8 billion. We cannot ignore their contribution to the economy. Nor can we ignore the co-operative sector’s contribution to the job sector. When John Spedan Lewis, the son of the founder John Lewis, handed the business over to his employees in 1928, he was driven by the desire to improve the working lives of his employees, shaking up the old ways of doing business. Today, the John Lewis Partnership is the largest employee-owned business in the UK. Its 91,500 staff members are partners in the business, and together they own 46 John Lewis shops and 349 Waitrose supermarkets across the United Kingdom, manage their respective websites and run a production unit and farm. That is a significant contribution to the United Kingdom.

John Spedan Lewis was ahead of his time. Studies now show that staff members who are also owners of their businesses are more motivated, engaged and productive. They also experience higher levels of wellbeing. In the John Lewis Partnership, absenteeism is at 3.4%, which is less than half the retail sector’s average.

Given the increasing demand placed on workers today and the impact that 24-hour access to work through phones and emails can have on employees’ mental health—I am sure we and our staff are all well aware of that—putting more ownership in the hands of employees is a model with a lot of merit. The numbers speak for themselves. The White Rose Centre for Employee Ownership, based at the universities of Leeds, Sheffield and York, found that 70% of companies that convert to an employee-owned model report an increased quality of goods and services, 57% report better productivity and 55% report better financial performance.

The co-operative sector currently employs 222,000 workers across the United Kingdom, and co-operatives affect even more of the population than they employ. There are 17.5 million members of co-operatives across the UK—about a quarter of the total population.

As my hon. Friend the Member for Glasgow South West (Chris Stephens) said, the co-operative sector has proven resilient during this period of austerity. Figures from the Cass Business School show that, in the recessionary period of 2008-09, job growth dropped 2.7% but rose to 12.9% in employee-owned firms. Their importance has endured among uncertain economic conditions. Given the current economic conditions and the recent Brexit vote, their importance to the economy is even greater. There is evidence that employee-owned businesses are more resilient and are able to create jobs at a faster rate than their non-employee-owned counterparts during periods of economic instability.

Successive Governments have consistently supported employee ownership. I pay tribute to the coalition Government, which in 2014 introduced a series of tax changes to level the playing field for employee-owned businesses. As a result, shares of profits in indirectly owned and employee-owned businesses are now income tax-free up to the value of £3,600. Business owners can also now benefit from capital gains release when they transfer control of their company to their employees.

However, we must ensure that that legislative support continues. Co-operatives are presently expressing legitimate concerns about details in the 2016 Finance Bill, specifically—I have spoken to a number of businesses that have this concern—that the calculation of the apprenticeship levy will leave employee-owned businesses at a disadvantage compared with conventionally owned businesses. Even worse, there is a real fear that that action could disincentivise the creation of employee-owned businesses in the future. I would be grateful if the Minister commented on that. There has been some speculation about the apprenticeship levy. Given the change in Government, he probably will not be able to clarify that, but any insight he can give will be of great help. A number of businesses, not all of them employee-owned co-operatives, have approached me recently with concerns about the apprenticeship levy. The recent example of BHS and the devastating impact that that has had on its workers shows how important co-operatives and employee-owned businesses are to our economy.

The numbers I have cited demonstrate how important co-operatives are to the economy and the job sector. I do not want their contribution to be diminished in any way by the apprenticeship levy. The present wording of the Finance Bill dictates that the apprenticeship levy does not include dividends to shareholders, but does include bonus payments to employee owners. That will affect about 70 employee-owned businesses across the UK, based on the criteria of companies with a payroll bill of £3 million and over.

In Scotland, the Scottish Government have pledged to encourage more challengers to mainstream service providers and to give consumers more options when choosing a loan or savings. In 2013, Alyn Smith MEP, who received a standing ovation in the European Parliament for his speech following the Brexit vote, said:

“Scotland has a long heritage in the cooperative movement.”

He noted that Scotland was home to the first co-operative—the Fenwick Weavers, in Ayrshire. It is a tradition that brings us great pride. Before I finish, I also want to mention the Edinburgh Bicycle Co-operative, which has a proud heritage in Scotland.

The message from both co-operatives and the statistics gathered by academics is clear: that alternative ownership structure makes an important and sustained contribution to the UK economy.

[Jim Shannon (Strangford) (DUP)]

Before the hon. Lady finishes, will she give way?

[Hannah Bardell]

I would be delighted to.

[Jim Shannon]

I congratulate the hon. Member for Cardiff South and Penarth (Stephen Doughty) on bringing this debate to the House. It is not anti-business to suggest that big business needs to change, and co-operatives are one way of doing that. I would like to make a plea for farming co-operatives, if that has not already been done. We have done that in my constituency. A single farmer by himself cannot make a change, but collectively, with a number of other farmers, they can secure contracts, move forward and employ more people. Does the hon. Lady agree that that is an example of how things can improve? Co-operatives can move things forward and make things happen that big businesses cannot. Sometimes a change is good.

[Hannah Bardell]

I could not agree more. I am always interested to hear what the hon. Gentleman has to say. He is such a regular contributor here and in the main Chamber. The point he makes about being small and agile, and being able to respond and do things in a different way, can be applied to co-operatives—it can also be applied to small nations. I will leave that with the House.