Co-operatives and Mutuality

Jonathan Evans Excerpts

Thursday 30th June 2011 Westminster Hall

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

Thank you, Mr Amess, and I welcome you to the Chair. I think that this is the first time that I have spoken in a debate that you have presided over. I suspect that this debate will not be the most difficult debate that you will ever have to adjudicate on. All the same, I am sure that you will handle whatever comes up in your normal equitable and even-handed manner.

Before I go into the substance of my remarks, I should declare an interest. Like other Members here in Westminster Hall today, I am a Labour and Co-operative Member of Parliament. Indeed, prior to entering the House, I was employed for 18 years by the co-operative movement. I will not detain Members today with a résumé of those 18 years working in the movement, but there are obviously a number of things from my past experience that I want to draw on.

Before I do that, I should thank the Backbench Business Committee for allowing this particular debate. My hon. Friend the Member for Islwyn (Chris Evans) and I originally asked for it because we are in co-operatives fortnight, which runs from 27 June to 9 July, and therefore it seemed appropriate that we used this particular window of opportunity to have a debate that would highlight the contribution that the co-operative movement makes at this time, not only to the total economy but to thinking in community and Government policy circles. It is also an opportunity to test and if necessary challenge the Government on those areas of their policy that they say are supportive of co-operatives, to get some idea of what progress is being made.

I will start off with a somewhat philosophical question, “What is a co-op?” Perhaps 30 or 40 years ago, there would have been a fairly simple response to that question—“It is a company registered under the Industrial and Provident Societies Act.” At that time, one’s local Co-op store would immediately come to mind and I suspect that Members of my generation, if not perhaps newer Members, can easily quote their parents’ divvy number. It was something indelibly etched on our memories.

Of late, however, the term “co-operative” has come to embrace a number of corporate structures, including the mutual building society and other structures in the financial mutual sector, friendly societies and in some cases employee share-ownership companies. Not all of those have a traditional co-operative structure but the values that underpin them are very similar in each case to those of the co-operatives and they also have certain basic principles in common with co-operatives. They are, of course, democratic ownership and participation; one member, one vote; and the reinvestment of surpluses. These organisations are intended to make profits, but it is the distribution and allocation of those profits that distinguish them from other forms of proprietary corporate structures. They may also demonstrate a higher commitment to what is measured as “ethical trading”, value for money and a certain level of community involvement, although they do not necessarily demonstrate those things. In general, however, those are the sort of principles and values that underpin the different sorts of corporate models that we loosely term as “co-operative”.

It is probably fair to say that for a long period of time co-operatives were somehow stereotyped as a slightly idealistic and not necessarily appropriate business model to survive in the highly competitive capitalist world that we now have. Crucially, however, if we go back to the roots of both the co-operative and mutual sectors, we realise that these forms of organisations did not arise out of an idealistic or visionary approach. Essentially, they arose out of groups of people trying to get out of a particular problem and realising that it was only through self-help and working together that they could actually do so.

I was particularly struck by two quotes in a pamphlet by Cliff Mills on mutual organisations. The first is:

“The different types of traditional mutual business (co-operative societies, building societies, friendly societies, mutual insurers) operated in different ways, but the underlying reason for existence–self-help–was the common theme.”

[Jonathan Evans (Cardiff North) (Con)]

On that specific point, Members of Parliament will recall the example of the Tredegar Medical Aid Society, in which my grandfather was very proud to serve and which Aneurin Bevan said was the forerunner idea for him in establishing the national health service. It was a programme in which all the miners in Tredegar contributed a sum and then elected the doctors who would offer services to all of that mining community in the absence of any sort of state provision of health care.

[Mr Bailey]

I am grateful to the hon. Member for Cardiff North (Jonathan Evans) for bringing that issue to my attention. I was not familiar with that society but it is a very good example of the values and qualities that I have been describing as the foundation of the co-operative movement and of the subsequent development of our public policy.

In his pamphlet, Cliff Mills goes on to say that mutuality

“was the response of people with often desperate needs”—

as the hon. Gentleman has just demonstrated—

“to find a solution for themselves and others in their community. It was based on self interest (the need to provide for me and my family), not philanthropy or charity; but—”

and now Cliff Mills comes to the crucial point—

“the genius of mutuality was that it captured that self-interest, and by channelling it through collective self-help, was able to produce an economically sustainable business.”

As I say, that is the crucial thing about the co-operative movement and the variety of business models that it incorporates. As Cliff Mills says, the movement is “channelling” self-help, but doing so in a way that enables someone to advance themselves or to deliver the service or product that they want to deliver in a way that can compete with the wider and less idealistic commercial world that they have to exist in.

If we look at the formation of the traditional co-operative movement—via the Rochdale Pioneers in 1844, and the different mutual building societies and insurance companies—all the bodies within it were rooted in that idea of self-help and they all had to survive in a very difficult external commercial environment. Indeed, the co-operative movement, which I have more experience of than other movements, was formed in the 1840s because its members needed good-quality foodstuffs, which they could not get through local private traders, and at the sort of prices that they could afford, which again were often not available. In addition, they needed to be able to use any surpluses that came from trading to reinvest in their own communities and their businesses, both to strengthen those businesses and to provide education and other help for the communities that they lived in.

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[Mr Bailey]

The Minister can rest assured that I was going to come on to demonstrate the range of businesses in the co-operative sector. One problem that the mutual and co-operative sectors had in the ’80s and ’90s was that they failed to highlight sufficiently their difference, and a minority of co-operatives did not appear to be effective business models—being more charitable, for example—with the result that movement as a whole suffered.

[Jonathan Evans]

It would be unwise to leave the subject of the 1980s without saying that there were well run mutuals in the sector, which focused on customers’ experience and recognised their role. Others, such as Equitable Life, might historically have been mutuals, but did not appear to recognise that and behaved, in a sense, like private companies. That was also a factor in some change being necessary.

[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.

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[Chris Evans (Islwyn) (Lab/Co-op)]

I pay tribute to the hon. Member for East Hampshire (Damian Hinds) for his work as chairman of the all-party group on credit unions, of which I am treasurer. I called for this debate, along with my hon. Friend the Member for West Bromwich West (Mr Bailey), because my whole political life is framed by my experiences of where I grew up in the south Wales valleys. We lived in a close-knit community. This speech might be sloppy and sentimental, if you will allow it, Mr Amess, but that is where I grew up.

When I grew up, the Co-op, as we called it colloquially, was always there. My mother told me, “I’ve brought you and your sister, Cara, up on Co-op milk,” and we went down the Co-op shop for our groceries. If you died, you were laid out in a Co-op funeral home and they probably buried you as well. As my great-grandmother said before she died at 104, “Don’t worry, everything’s sorted—I’ve been paying the Co-op for years.” That is where I came across the co-operative movement.

The most iconic moment of my life growing up in the valleys was seeing the proud workers walking back to Tower colliery in the Cynon valley. They had taken over their business and mines after being written off by the previous Conservative Government. They were walking back to run a workers’ co-operative. I have never felt more proud of my community and my people than when I saw them marching together. Those proud men, who had been beaten down by the Government, said, “No, there is a better way.”

[Jonathan Evans]

I come from a similar background, and I pay credit to the workers at Tower. However, they were given the opportunity to turn it into a co-operative by Michael Heseltine, who rejected the private sector bid and accepted their bid. It is therefore slightly churlish to be dismissive of the previous Conservative Government’s position on that.

[Chris Evans]

At the end of the day, I have to get political. As I always say, I am from a mine-working area, and the previous Conservative Government were no friend of the miners. I cannot get away from that; that is what I was born into, that is what I grew up believing and that is what I still believe.

I am extremely proud of those communities, and I am proud to be here as a Labour and Co-operative Member representing them, but there was a dark side. I am perhaps being romantic again, but I remember being out on the street kicking a football against the wall every Monday evening after school. The women would shout at us children and move us on.

At about half-past six, however, we would all rush through our doors and slam them shut. We would see the white XR3i coming down the hill, if anyone remembers those flashy cars. A woman would pull up and get out. I can see her now with her bleached blonde hair. My mother would say, “Caked with make-up, she is. She stinks of Estée Lauder perfume,” not that I knew what Estée Lauder perfume smelled like, but that is exactly what my mother said.

The woman was there with her little book, her little bag and her pen, and everybody would run inside. She would hammer on the doors. She was the woman from Provident, and everybody in our street had Provident. If people did not pay her, she would bang on the door and say, “I know you’re in there, love. You owe me £400.” If people had made the mistake of leaving the door ajar, she would push it open and go, “Where’s my money?”

When I was first elected, I found a chitty from when my mother took out a Provident loan in 1987, and the annual percentage rate was 150%. Years later, I went to work for Lloyds TSB, and I thought there was no way that Provident could still exist, but it does.

When the basic bank account was introduced, I felt the banks often did not want to know about people with a basic account. These people did not have a credit score for loans or credit cards, so when they needed money, they had no access to it. When they were asked how they were getting by, they would say they had Provident or Shopacheck and that someone would come round to their house to pick the payments up.

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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.

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[Jonathan Evans]

I am grateful to my parliamentary neighbour for allowing me to intervene. What has been put forward by the Co-operative party is not the only way in which Northern Rock might still end up with a mutual future. It is known that some mutual building societies are, in fact, interested in bidding, even through the Government’s proposed route. However, that will depend on the recognition of a capital instrument. Does the right hon. Gentleman hope, as I do, that we might hear something along those lines from the Government later this afternoon?

[Alun Michael]

I am not wedded to one particular proposal. The Co-operative party has put forward ideas but, as the hon. Gentleman has suggested, there are other options. A genuine will is needed to find a solution to overcome the problems that have been raised.

It is 10 years since the Co-operative Commission published its report on the co-operative movement, and it has come a long way in that time. If we went back further than that—perhaps 20 years—it would feel almost as if we were living in a different world. Then the retail co-operative movement was struggling, but now it is back in the top ranks; then the building societies were under pressure and were not very popular, but now their value is much more appreciated, as has been mentioned.

The creation of the Co-operative Commission was itself a landmark event that demonstrated the co-operative movement was important enough to be the subject of a Government-initiated commission. Virtually everything in that report, which contained some 60 specific recommendations, has been acted upon, mostly by the movement itself. The introduction of legislation during the past decade has assisted the movement’s development and success. As has been made clear in the debate, the name “co-operative” does not guarantee good governance, but good corporate governance has the capacity for business success and stability. Co-operative principles can also contribute significantly to public service.

Today, I want to celebrate the sheer energy and creativity of the movement, as well as its genuinely positive political impact. Politics is not just about narrow party interests; at its best, it is about people working together to change the world. Certainly, that is what drew our 29 Co-operative MPs into the political front line. It is worth noting that that is the largest group of MPs there has ever been in the history of the Co-operative party. In the past year or two, the co-operative movement has seized the opportunity to deliver on the concept of the co-operative school. In the past few days, Ben Reid has launched Co-operative Energy, and Supporters Direct is nurturing the growth of popular engagement with sport. On that point, I hope that the recent glitch can be overcome, so that Supporters Direct can continue and succeed.

The issue is not just about setting up co-operatives. I want to touch on four important initiatives where the experience of co-operative governance is being applied to a much wider aspect of public policy and organisation. The first initiative relates to how British Waterways is organised. I chair the all-party group on the waterways and I am pleased that the Government have picked up on the Co-operative party proposal to move our canals into the third sector under a non-governmental organisation. That idea found its way into the Budget report before the election and has been described as seeking to create a sort of National Trust for the waterways. It has had a positive response from the public. The main aspect of co-operative governance that needs to be built into that new organisation is public engagement and involvement, so that people feel a genuine degree of ownership in the new organisation and are willing to contribute to it both financially and in terms of volunteering. The all-party group will produce a report shortly on the hearings we held in respect of governance and finance.

The second initiative is the idea of a co-operative council. That is not just about having a council that encourages people to consider setting up co-operatives and includes the co-operative model in options for change; it is about transforming the relationship between leadership and management of the council, those who work for the council and the public that the council exists to serve. The idea is powerful and will enable us to refresh how we do business locally.

The third area of initiative is internet governance. The internet offers enormous potential for co-operative solutions. I chair the UK Internet Governance Forum, which is leading the way in the UK in bringing together Government, business, Parliament and civil society to look for better ways of encouraging creative and positive human activity nationally and internationally. It was part of the 2010 Co-operative party manifesto, but we are co-operating across party. Ministers have been very supportive of delivering that approach, and it will be taken a stage further when the UN’s internet governance forum meets in Kenya in September.

The fourth area of initiative is the partnership approach to reducing local crime and disorder. That idea has flourished since I had the privilege of taking the Crime and Disorder Act 1998 through the House and has proved a success in reducing crime. However, the potential of such an approach has not yet been realised because the governance of local partnerships is not as well developed as it should be. In Cardiff, such an initiative reduced violent crime by about 25% more than in comparable cities. That shows the value of taking that approach to enable local partnerships to succeed. Methodology and governance provides the potential for greater success in that respect. Those are examples of areas where the co-operative model can contribute to the public and private sector.

In 2007, I did a piece of work for the Cabinet Office and the Treasury, which was commissioned by the then Minister for the third sector, who is now the Leader of the Opposition. That work was part of the preparation for the 2007 spending review and involved taking a wider, general look at the contribution that could be made by the third sector to social and economic regeneration. My report concentrated specifically on the evidence of what mutuals and co-operatives could contribute to that. It is fair to say that the Treasury officials in particular were genuinely surprised and impressed by what they saw across the country when we were undertaking that work. I personally found it an invigorating experience.

The report showed the contribution that is already being made in areas such as health, housing, child care, financial services and community cohesion. That potential has not yet been realised, partly because I discovered immediately after we published the report that the people on the team who had gathered all the information and worked with me so positively were sent back to their original places of work. I am not sure why, but some Departments have the capacity for getting rid of expertise as soon as it has been developed. I cannot blame the Minister for that, but I hope that he will have a look at the report and consider how its findings might be used by the current Government, because its proposals cross boundaries.

During that period, we saw how co-operative principles can transform an inner-city hospital—Homerton hospital, Hackney was the example we considered—and how co-operative initiatives, from credit unions to play groups and social groups, were transforming the lives of individuals and communities across the country. The co-operative movement and the application of co-operative principles in a whole range of areas—not necessarily just to things that would be described as an industrial and provident society—are probably one of Britain’s best kept secrets. I am glad that we are having this debate to highlight, however briefly, all the areas on which the movement is having an impact.

Co-operation and mutuality are alive and well in the sphere of political action, and the latest initiatives to create co-op councils will open up a new era of delivery to our communities locally. Change of power through an election should not just change the name plates at the Executive table; the relationships between the people who work for the council and the public they serve should also be changed. I hope very much that all the examples given during the debate will lead to a greater flourishing of the co-operative principle and will perhaps pick up the impetus that was given by the Co-operative Commission 10 years ago to refresh our activities into the next decade.