Co-operative and Mutual Businesses

Jonathan Reynolds Excerpts

Thursday 27th June 2019 Commons Chamber

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

It is a pleasure to close this debate as a proud Labour and Co-operative Member of Parliament and as a member of the Opposition shadow Treasury team. What a good debate we have had to mark Co-operatives Fortnight. We have rightly heard that the co-operative and mutual tradition is one of the most significant in the economic and social history of this country. It is a tradition that was of course begun and built on the east side of Manchester in towns like mine—Stalybridge and Hyde—and Mossley, and I should also mention Ashton as my hon. Friend the Member for Ashton-under-Lyne (Angela Rayner) is sitting beside me. But we have also heard that it is a tradition with much to offer for the future.

I want to be clear about what a co-operative is, because I am always conscious that while there is huge expertise in the Chamber today, there will be people listening to this debate who perhaps do not know exactly what co-operatives or the mutual sector are, and why they are different and why that is important. For the benefit of those people, let me say that co-operatives are enterprises that trade for the common good as opposed to the private benefit of their shareholders.

Legally, there are several differences between a company and a co-operative, but the most important are the following. First, the members of a co-operative are all equal and have one vote each, irrespective of the number of shares they hold. They all have the same right to participate in the affairs of the co-operative, which they democratically control. The members of a company, by contrast, of course hold their rights of control over the company in proportion to the number of shares they own. Greater power and control over the company can be acquired by buying more shares, but that cannot happen in a co-operative. Secondly, it is members, rather than shareholders, who provide the capital to a co-operative, and the distribution of profits is made by way of a dividend to those members based on their annual trade with the co-operative. In a company, profits are distributed in proportion to the shareholding a person has.

These legal differences point to a fundamental difference of purpose. A company carries on business for the private benefit of the shareholders at the time, whereas a co-operative is a trading mechanism for the benefit of its members; it is essentially a self-help mechanism enabling people collectively to meet their shared needs in a broader social context. It has a purpose that goes beyond the immediate business itself. This means looking beyond the personal, private needs of individual members and accepting the importance of collective needs, but also looking outward to wider interests including others affected by the business, wider society and, crucially, future generations—that last point is especially significant.

Parliament has long recognised these differences. In 1852, Parliament passed the first Industrial and Provident Societies Partnership Act, and this provided a formal basis for the establishment of co-operatives, many of which had already been established on the Rochdale model.

The Co-operative party exists as the political wing of the co-operative movement. Established in 1917, we took the decision in 1927 to form an electoral pact with the Labour party and, as a result, members including me and some hon. Friends are elected on ballot papers that say “Labour and Co-operative”, and we represent both parties here in Parliament.

In modern times, we advocate not only for the strict legal definition of co-operatives, but for the whole mutual sector. My hon. Friend the Member for Huddersfield (Mr Sheerman) made the point well about how widely that concept has grown. While we are on the subject, may I also formally offer my thanks to our outgoing general secretary, Claire McCarthy, for her commitment and passion and for what she has delivered for the co-operative movement? We will miss her a great deal.

I know that I speak for all of us when I say that we take great responsibility and honour in continuing to advocate the great co-operative tradition, but in my view, co-operation is a political tradition that appeals to those on all parts of the political spectrum. The thoughtful speech from the hon. Member for Wycombe (Mr Baker) made that point very well. In many ways, it was an intellectual case for a free market economy that goes beyond that straightforward Friedmanite definition of the concept of business, and I would welcome continuing that discussion in more detail.

Many of my hon. Friends also spoke in the debate today. My hon. Friend the Member for Harrow West (Gareth Thomas), who secured the debate, gave an excellent overview of the entire sector. We would expect nothing less from him, and his expertise is widely recognised and respected across the House. He made some specific asks, and I am with him on all of them, particularly on his point that we need to modernise co-operative share capital in order to fulfil the potential of this sector.

I often think of my hon. Friend the Member for Huddersfield as the father of the Co-operative group in Parliament. As ever, he was fizzing with co-operative passion and energy, and that is why we admire him so much. He talked about the insecurity that is a feature of so much of the modern economy and about how the co-operative movement can be an answer to that, as it was in the past. I very much agree with him on that point.

The hon. Member for Stafford (Jeremy Lefroy) made the absolutely excellent point that co-operatives can operate on a significant global scale. They can be significant players. Some people feel that this can be a niche sector of the economy, and it is important to make the point that some of the biggest co-operatives are bigger than some multinational businesses.

My hon. Friend the Member for West Bromwich West (Mr Bailey), who has delivered more as a Co-operative parliamentarian than almost anyone in his time in this place, mentioned the fact that we are still not living up to the potential of the sector. I think we all agree on that. He particularly highlighted how the trend towards self-employment could create more opportunities. That is a crucial point. He also mentioned the work of the northern city Mayors and their Co-operative Commissions, which I agree is very exciting.

My hon. Friend the Member for Stoke-on-Trent Central (Gareth Snell) mentioned his family experience. Mine is similar, except that it was the Northern Rock building society that we used to go to on a Saturday morning. As a child, I certainly did not appreciate or understand demutualisation. It felt like everyone in County Durham was receiving free money overnight. I thought that there must surely be a catch to that, and of course there was. My hon. Friend is a fluent advocate of co-operation, and his points on public services were particularly well made and something we should all take heed of.

The hon. Member for Argyll and Bute (Brendan O’Hara) talked about how the role of co-ops in Scotland continues to expand. He said that the crucial issue is the need for better advice, and that is something that has come across strongly in the debate today.

My hon. Friend the Member for Redcar (Anna Turley), the newly elected chair of the Co-operative party, talked about the powerlessness and frustration that a lot of people feel as a result of their inability to get a say in the world around them when they are buffeted by such strong global economic forces. She is entirely right, and in many ways that is the biggest issue of all facing our economy. She showed why she will be such an effective chair of the Co-operative party.

My hon. Friend the Member for Stroud (Dr Drew), as ever, made some very good points. It was great to hear him mention agriculture, and particularly the need to build on the parts of the mutual sector that already exist there, such as NFU Mutual. My hon. Friend the Member for Plymouth, Sutton and Devonport (Luke Pollard) talked to us about the plans in Plymouth. That level of ambition sounds truly superb. I almost think I should suggest a day trip down to Plymouth for the Co-operative Members of Parliament. He did not offer us many pubs, but perhaps we can see what they have done with the former ones. What an impressive advocate he is for the work going on in Plymouth! I commend him for that.

It was great to get a UK-wide perspective from the hon. Member for Strangford (Jim Shannon), and I could not agree more with his points on credit unions. I take my children to a credit union, which is part of their school, every week, and I want every school in the country to have that kind of practical example. That is relatively easy to do. The hon. Gentleman was right to say that it is in Northern Ireland that credit unions have been most successful, and there is much that we can learn from him and from Northern Ireland.

For my own part, I have always relished my role in promoting co-operative and mutual policy in Parliament. I have tried to legislate for co-operative housing tenure, for example, and I have lobbied for greater powers and resources for credit unions. It is that enthusiasm and conviction that I bring to my work in the shadow Treasury team. I am ambitious about the co-operative sector. I believe that we should not limit the drive for a more co-operative economy to just one Department or just one aspect of public policy, because this debate shows that co-operative ideas and models would benefit a wide range of matters, from railways to housing to energy production and supply, with huge scope for everything in between.

The Labour party and the shadow Chancellor, my right hon. Friend the Member for Hayes and Harlington (John McDonnell), have been clear that in government Labour will work with the co-operative movement to at least double the size of the co-operative sector. That was a pledge in the Labour manifesto that I and other colleagues here helped to secure, and that ambition is not hyperbole, because the opportunity is enormous. The UK’s co-operative sector is currently worth between £35 billion and £60 billion, depending on what estimate you take. That is big, but it is far smaller than the sectors in Germany or the US.

Being a co-operative is not a magic wand. Co-operatives can still succeed or fail like any other business, but it is true to say that twice as many co-operatives survive the crucial first five years as other businesses. Worker-owned companies have a clear productivity advantage over conventional businesses, and that fact should stand out to us when we remember that productivity is the biggest problem in the UK economy today. We should be more ambitious about what can be achieved. Regardless of which side we are on, I think we all want to see more resilient, high-productivity businesses in an economy that is fairer for everyone.

Crucially, we all recognise that although co-operation is a strong bottom-up movement, it can truly thrive only in a supportive regulatory and legislative framework, backed by practical support from both local and national Government. Make no mistake, if we were in government, that support would not be lacking. I want to legislate to give credit unions the power and the regulation they need to considerably expand their activities. I want a degree of employee share ownership to be incentivised and to be the norm in every business. It is the norm for executives, and it could be the norm for every worker. Under our plans for inclusive share ownership, it will be. I also want to ensure that our plans for a national investment bank, which will be organised through a network of regional investment banks, draw on the success of banking sectors and co-operative movements such as Germany’s. There is so much that could be done, and we should welcome the diversity, vibrancy and social purpose that the co-operative sector can bring. It has been a pleasure to respond to this debate today, Madam Deputy Speaker. We are, as ever, yours in co-operation.