Co-operatives and Mutuality

Justin Tomlinson Excerpts

Thursday 30th June 2011 Westminster Hall

[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.

[Justin Tomlinson (North Swindon) (Con)]

It is a pleasure to intervene in the hon. Gentleman’s flowing speech. As I have said in many debates, the other problem with firms such as Provident is that they build relationships. They turn up at people’s doors and suggest ways in which their customers can spend money. They might say, “Christmas is round the corner. Have you sorted your Christmas presents?” They take advantage of the most vulnerable people.

[Chris Evans]

The hon. Gentleman is absolutely right. I was coming to that. This culture is very much engrained in the valleys. My mother, my grandmother and all my aunties and uncles had Provident. However, this is not just about Provident; it is also about paying off the money for the television through the slot in the back. People put a pound in, and they had 10 hours of television. In that way, they could pay off their television. It was always a nightmare, because the pound was guaranteed to run out just at the conclusion of “EastEnders”, and we would never know what the cliffhanger was. The hon. Gentleman is absolutely right that once the television had been paid off, the firms would come round and say, “The carpet’s looking a bit bald. Do you fancy a new one? What about a new washing machine.” They would then sign people up.

This problem of high-cost lending still exists. I cannot believe that I am going to admit this in a Westminster Hall debate, but I actually watch Jeremy Kyle; I am ashamed to admit it, but I have watched his show. As I was waiting for the all-important DNA tests and the lie detector, the adverts came up. One was for a company called Wonga.com. It was wonderful; Wonga was revolutionising same-day lending. I thought, “This is marvellous.” The advert said, “You’re in control.” I thought, “This is brilliant.” Then, however, I looked at the APR, which was 4,125%—pure, utter profiteering.

I did not think any more about the company. Then, however, I got on the tube on Monday morning, and there was an advert for Wonga.com, saying, “You’re in control.” The APR was more than 4,000%. I cannot get away from this company. I was watching “Match of the Day” and the press conference after the match. There were adverts for Barclaycard, but the Blackpool players also had the word “Wonga” right across their chests. Such things give the company the legitimacy that it does not deserve.

There is a way of out this. Yes, we can have legislation, and I pay tribute to my hon. Friend the Member for Walthamstow (Stella Creasy), who has done a lot of work on the issue, and I am sure she will speak about it later. However, there is a more intrinsic way forward, so let me move on to credit unions.

The other day, I went to Islwyn Community Credit Union with my hon. Friend the Member for Harrow West (Mr Thomas)—I will not talk about our earlier visit. We talked about how the credit union had lent a total of £1 million to the most vulnerable people. To pick up the point made by the hon. Member for East Hampshire, the people at the credit union said it was all very well lending money at competitive rates and allowing people to save, but that people did not know about credit unions. Provident, Safeloans and Shopacheck will knock at the door, and people can go to Wonga, Ocean Finance or someone else, but they do not know about credit unions. People are hearing about them by word of mouth and they are hearing about getting more protection points.

The other day, I was proud to visit Trinant school—I must give it a plug. If anybody wants to see a credit union, they should go there to see the children’s enthusiasm. The pupils have formed their own saving scheme, which is run along the lines of the Islwyn Community Credit Union. Those children have saved £600. The scheme has 56 members. One of the wonderful things about the scheme is not only that the children are saving, but that they are so enthusiastic that they are going home to their parents to tell them about credit unions. They are promoting credit unions in that way. This is an excellent project.

When the Minister sums up and talks about credit unions, I hope he will talk about Wales. Everybody in Wales has access to a credit union, and I really think the coalition Government should have that as an aspiration more widely. We should also take legislative obstacles down. I would ask the Minister to lower the minimum age necessary to join a credit union, which is presently 16—the same as the minimum age people need to be to serve as a company director. If we take such steps, we can promote credit unions, good lending and good saving.

I turn now to the mutualisation of the banks. I have been accused of banging on about the banks, but, like many Members, I am disappointed that Northern Rock will be sold privately. I hope the Government can look at introducing a mutual element, because we need that in society. In the middle of the banking crisis, there was one bank that did not need bailing out and which had run its business ethically: the Co-operative bank. When we look at the banking sector again, I hope the Co-operative bank is one of the examples we look to and learn from.

--- Later in debate ---

[Tracey Crouch]

I thank the right hon. Gentleman for his intervention. The issue is under consideration by members of the Conservative Co-operative Movement. I think that we have just ruined any kind of cross-party consensus that we were having on the co-operative movement. The Conservative party should be congratulated on the fact that it has now established this movement in its own party, and I hope that Opposition Members will consider that to be an important step forward.

As I was saying before I was sidetracked, there are many reasons why co-operatives and mutuals are good for growth and for society. Hopefully, I shall cover those reasons in what was supposed to be a very short contribution to the debate. Having spent too much time talking about it recently, one area of co-operative success that I will not focus on this afternoon is football. There have been many debates in the Chamber and on the Floor of the House about football club ownership, so I shall surprise colleagues by avoiding my main non-political passion and concentrate on other issues today.

The co-operative movement has a far greater pedigree than perhaps people give it credit for. The first co-operative was established in 1844, and there has been a steady increase in numbers across the country, with some gaining a foothold and becoming cornerstones of local communities. Examples that have already been referenced this afternoon are, of course, the Co-operative Group and the John Lewis Partnership. Together, they have an impressive combined turnover of approximately £18 billion.

It is often the small co-ops, which do not have the big brand names, that make the biggest and best impact in our communities. As a relative newcomer to the Conservative Co-operative Movement—run impressively, if I may say so, by my hon. Friend the Member for Hereford and South Herefordshire (Jesse Norman)—I have read with interest about the potential for co-operatives. Undoubtedly, they have intrinsic social benefits, promoting ethical, responsible, democratic and equitable ways of doing business. Inclusion, another positive contribution they make to society, ought not to be underestimated, not least at a time when we are asking individuals to do more for their communities. Co-operatives command cross-party support and that is to be welcomed. However, I believe that it is under this Government, with their desire for people to take up responsibility and seize the initiative, that they can really flourish as social enterprises and local providers.

We often hear co-operatives mentioned favourably in reference to their social, ethical and communal benefits, but many people who are not hugely involved in the movement will be surprised to learn of the enormous contribution that they make to the economy. In the south-east region, where my constituency is located, 328 co-ops now employ more than 13,000 people and generate more than £3 billion per annum. They take many guises, and I have read with interest about the coverage that they offer across a range of sectors, including housing, finance, agriculture and retail.

The Minister knows that I am heavily engaged in the debate about high-cost credit lending and debt management companies. I am therefore particularly interested in what co-operatives can offer the financial sector. My hon. Friend the Member for East Hampshire (Damian Hinds) and others who have already spoken have made the point that credit unions demonstrate particularly valuable and welcome traits. They foster a self-help and community ethos, while encouraging financial inclusion, affordable borrowing and prudent saving on a not-for-profit basis.

By law, each credit union must be founded with a common bond, which all applicants must satisfy before they can become members. In the case of the Medway Credit Union, which has a catchment area covering part of my constituency, the common bond is geographical. It restricts membership to those living and working within the union’s prescribed boundaries. It is seeing a steady increase on its 400 members. I appreciate that bonds are being considered as part of the legislative review, but the point is that each member is part of a community that has grouped together to offer a service that is independent of the state and is self-sustaining.

On top of the ability to promote saving and equity in an area such as Medway, where there is a significant personal debt problem, credit unions offer a very different and innovative approach to debt reconciliation, unique to their mutual nature. The advantage a credit union possesses over a high street bank or a loan company, for example, is its personal and flexible nature. Of course, someone can have a rapport with their bank manager, but he is ultimately concerned with generating profit. As part of a credit union, however, each loan that is taken out is given careful consideration by peers and fellow members who have one’s best interests at heart, and any loan taken out incurs a low rate of interest.

[Justin Tomlinson]

The point about the loan being in the best interest is absolutely essential to this. We were talking earlier about the Provident doorstep lending, with their nudge, nudge sales techniques. What a stark contrast the credit unions are, and what a real difference they make to the most vulnerable people.

[Tracey Crouch]

I agree completely. It is for that reason that it is right that credit unions receive so much support from across the House and from Government. They are great advocates of financial inclusion and can offer an alternative to high-cost credit that blights many, and submerges them further into debt. I look forward to visiting the Medway Credit Union in the autumn, and to helping to raise its profile.

That leads me on to an observation that many have no doubt already made. Small, particularly localised co-ops such as the Medway Credit Union, rely heavily on volunteers. Unlike private ventures, which have a large amount of start-up capital, they can call on little in the way of reserves. If we are to encourage the co-operative contribution to the economy, the Government must focus their energies and funding on providing start-up capital. It is encouraging therefore that the Government have recognised that and established a fund to help mutuals to meet such costs. I would also like local enterprise partnerships, which are meant to focus on providing localised services and on developing a devolved enterprise strategy, to explore how co-ops can become involved, attract investment and improve membership. The Government have previously committed to reducing the regulatory and administrative burdens so that it is easier to start and run a co-operative. I hope that we see that commitment become reality soon. We must then, with some cross-party zeal, start championing and promoting the co-operative movement.

I feel particularly strongly about the issue because, in the run-up to the general election, a major high street bank decided that its small branch in my constituency, with its over-the-counter service and ATM, was surplus to its global requirements. HSBC decided that Aylesford village did not fit into its strap line of “The world’s local bank.” Despite serving an elderly and local business population, the branch was closed without any concern about the impact on the local community. The village is now bereft of its post office and its bank. Given the thousands of names we had on a petition from Aylesford and the surrounding villages, I wish I had seen the example of villagers coming together to provide their own local counter services and forming a co-op. We could and should have done that, and the village would have been better off for it.

I promised a short contribution, but now I have wittered on about co-op opportunities that passed by. This debate, however, has allowed me to emphasise that the co-operative and mutual movement has cross-party support. Co-ops bring huge benefits to society and the economy, and they can demonstrate entrepreneurial brilliance and deliver rewards to all those involved. There are legal obstacles, which the Government are looking at, but it is hard not to want to get involved in this debate and to encourage the establishment of more co-operatives, to help to deliver what society and the country needs.

--- Later in debate ---

[Justin Tomlinson (North Swindon) (Con)]

I intend to consolidate some potential interventions in a short and efficient speech, partly in recognition of you, Mr Amess, because your role as chairman of the all-party group on small shops reminded me of a few extra elements that have not been touched on. The first is the impact on the high street. The Government have commissioned Mary Portas to review the high street, and having avidly watched her TV programmes for some years, I know that her main mantra is about customer service. All too often in this great nation of shopkeepers, customer service is appalling at best. Through the principle of co-operatives, employees are directly involved and have a direct incentive to offer far better customer service, and to help to rescue our high streets. That is an element that we should consider.

Some hon. Members have talked about credit unions, and I intervened several times. It is essential to the interests of the most vulnerable consumers that they have access to loans on which their interests are put at the heart of decisions, in stark contrast with the doorstep lenders who prey on people, and encourage them to get into a long-term cycle of expensive debt, and end up buying dodgy-smelling perfume. There is so much consolidation of banking services on the high street that there is less competition, and that is another opportunity for the credit unions to step in. Access to services is key, because vulnerable people often do not know how to access more affordable credit, and the help and advice that come with it.

I want to issue a slight warning to the hon. Member for Islwyn (Chris Evans) for picking on Wonga. It does not lend to vulnerable consumers, who must go through rigorous checks. If the headline interest rate is 4,400% APR, and if someone is two days from their pay day and wants to borrow £100 to tide themselves over, they will be charged a product fee of £5.50 plus 4,400% APR of £1 a day, so they will pay £7.50 for the privilege. If they just go overdrawn at their bank, Lloyds TSB, for example, would charge a flat fee of £10 a day plus £2.50 for the debit card charge, which makes a total of £22.50 so they will be £15 worse off. We must be careful not to fall into the traps of some headlines.

The way to get round the problem is to support my financial education campaign so that more people understand the deals that are put before them. However, I was testing some people on Wonga’s APR yesterday, and not one person was able to calculate the interest rate, including a Treasury manager.

[Chris Evans]

I agree with some of the hon. Gentleman’s sentiments about APR. I have always said that people should be quoted a flat rate of interest, which is simpler and easier to understand than APR. As the hon. Member for Chatham and Aylesford (Tracey Crouch) said, I used to work for Lloyds TSB, and I have regretted it every day since, but I have always said that a flat rate is simple.

[Justin Tomlinson]

I thank the hon. Gentleman for his intervention. In an ideal world, we would have cash-for-cash comparisons if people wanted to borrow money. I echo the comments about doorstep lending. The Minister feels strongly about it, and it really needs to be dealt with. The sales techniques are nothing short of disgraceful.

[Damian Hinds]

Does my hon. Friend agree that despite the apparent attraction of straightforward interest charges being disclosed, they lack something because they do not cover any of the behavioural charges. There is no perfect way, but it would perhaps be slightly closer to perfect to have disclosure of both the set-up costs for the loan, and the interest rate on top. That twin-rate approach is much more reflective of lenders’ cost structures.

[Justin Tomlinson]

I absolutely agree. The key message is that the Government are reviewing the matter, and they should do so with time and patience to make sure that it is delivered in the right way that people can understand. We do not want to fall into the trap of obvious headlines, because that would just make the situation a lot worse.

On public services, I spent 10 enjoyable years in local government, four of them as a cabinet member making key decisions. I fully support the principle of allowing staff with front-line experience, and who are fuelled by their direct passion, to make a difference and have a greater say in how services are delivered, instead of remote politicians—this applies to all of us—without that experience.

I pay credit to the Co-operative shops—my local shop is a Co-op and its cheesy tasty bread is very good—for the way they conduct the elections to their board. Every member—I am a proud member of my local Co-op—is sent a clear booklet, and as we consider creating elected police commissioners and having other elections, that may be a model to consider, especially if we manage to ban political parties from being involved in such things.

[Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship, Mr Amess. As many other hon. Members have done, I declare an interest as a Labour and Co-operative Member of Parliament. I also join other hon. Members in congratulating my hon. Friends the Members for West Bromwich West (Mr Bailey) and for Islwyn (Chris Evans) on securing this debate as we come to the start of co-operatives fortnight. I want to highlight the contribution of the mutual sector in many areas of life, and then to comment specifically about one sector, leaving the Minister with plenty of opportunity to respond to the issues that hon. Members have raised this afternoon.

As other hon. Members have said, one of the challenges facing the mutual sector has been to explain what a co-operative is, how it works, and why it is relevant in the present and the future. My family’s experience of co-operatives is slightly different from that of my hon. Friend the Member for Islwyn. My grandparents were dairy farmers in east Kent, and were part of a co-operative that fed into a retail co-operative, so there is a long and varied history of what co-operatives are. There is huge potential for their future, and I am glad that in recent years we have started to go beyond the common misapprehensions and the occasional suspicion or dubiousness on this side of what co-operatives are about and how they fit into the wider Labour movement. It is gratifying that we have got over that in recent years, and I hope that we are now starting to see not just the value of co-operatives, but the potential for future co-operatives and how we can develop them in future.

I want to speak about one form of mutual ownership that is particularly close to my heart. Unlike the hon. Member for Chatham and Aylesford (Tracey Crouch), I will not apologise for talking about football supporters’ trusts yet again, because it would be remiss of me in this debate not to refer to them in a little more detail than others have been able to do. My personal involvement in the co-operative movement and Co-operative party comes from having helped to establish the Fulham Supporters’ Trust just over 10 years ago. If anyone is at a loose end this evening, Fulham start their European adventure at Craven Cottage, and hon. Members would be more than welcome to join me in attending the game to watch Fulham play the team that finished third in the Faroe Islands Premier League.

It seems an apposite time to raise the issue of supporters’ trusts, because of the problems surrounding Supporters Direct to which I want to refer this afternoon. Supporters Direct is a matter of concern to hon. Members from all parties—early-day motion 1909 on the funding of Supporters Direct has been signed by 66 hon. Members from all parties except the Scottish National party, although that is not necessarily a good way to measure levels of concern.

Many hon. Members will be aware of and familiar with the work of supporters’ trusts in their constituencies, and there will be clubs—rugby league clubs as well as football clubs—in which they have either a constituency interest or a direct supporter interest.

[Justin Tomlinson]

On that point, I am a proud member of Swindon Town supporters club, which I joined when it first formed. One challenge it faces is that it often meets in moments of crisis—Swindon Town lurched from one crisis to another until the new owners transformed it. We need to encourage supporters’ trusts to set up and work in the long term, especially when the sun is shining on a football club.

[Tom Greatrex]

The hon. Gentleman anticipates the point I was about to make. My experience—and that of many others involved in supporters’ trusts—has been that at a moment of crisis, when owners walk away from a club because they have lost interest, or are unable to continue because it is more challenging than they thought it would be, they leave clubs in the lurch. One thing that can be said about football clubs is that players, managers and chairmen may come and go, but the fans remain constant. They have a huge amount of concern for and emotional attachment to their clubs, and they will step in. In the past, fans have stepped in very successfully—we could all give examples of trusts that have become involved in running a club, and done it well. The hon. Gentleman’s point is right. I desire to see supporters’ trusts not only getting involved in times of crisis when no one else steps in, but also getting involved in representation and the running of the club, so that there is a direct link to the supporters and communities.

That is why I am concerned about the situation with Supporters Direct. As I know from personal experience, Supporters Direct has provided huge support in getting trusts established, and it has campaigned on some wider issues concerning the ownership of football clubs and other sporting clubs. We need such a body to help co-ordinate that work. I raised that point with the Minister for Sport and the Olympics during questions to the Department for Culture, Media and Sport a couple of weeks ago. He recognised the issue and said that talks would be taking place on Friday. I am not sure which Friday he was referring to, but there have been a couple of Fridays since then and the issue is as yet unresolved. If Supporters Direct, or an organisation of that type, does not take that role, there is the danger that supporters’ trusts that need to be developed will not get the opportunity to learn from others and proceed with development. Instead, the funding will be fragmented and, as hon. Members will be aware, it is a relatively small amount of money given the wealth that swirls around football, particularly at top level.

As I understand, part of the Premier League’s reasoning concerns comments made by the former chief executive of Supporters Direct. I know that the individual concerned regrets those comments; he has apologised fully and since resigned. I hope therefore, that that issue is not still an impediment to the continuation of Supporters Direct. I realise that that is not the Minister’s direct responsibility, but I hope that he will mention the issue to his colleagues in the Government. It is an important aspect of co-operatives and mutuals and there is a great degree of concern about it.

I also wish to raise a couple of specific issues about credit unions. The hon. Member for East Hampshire (Damian Hinds) and my hon. Friend the Member for Islwyn spoke eloquently and passionately about the role of credit unions. I am fortunate in having a number of credit unions in my constituency, and everybody is covered by the bond for credit unions. Blantyre and South Lanarkshire credit union means that the whole of South Lanarkshire is covered, and there are a number of smaller credit unions in Rutherglen, Cambuslang and Hamilton.

On Friday I met representatives from the WHEB credit union—Whitehill, Hillhouse, Earnock and Burnbank—which operates in a small part of Hamilton in my constituency. I raised a couple of issues with them that refer back to the comments made by the hon. Member for East Hampshire, particularly in relation to the potential for credit unions in the future. The ambitious and appropriate programme for future development will do a huge amount of good to the credit union movement and to consumers, but we must be aware of the concerns felt by smaller credit unions that they do not get lost in a drive that could end up with larger credit unions effectively taking them over. I say that because WHEB credit union, for example, is tied to a specific, but quite small geographical area and has a relatively small number of members in comparison with other credit unions. WHEB is trusted in that area because it is seen by members of the community as a sound source of credit and a reliable organisation. I am slightly concerned that in the drive to develop credit unions, some of the smaller and community credit unions could be left behind. I do not want that to happen.

I have a further point, which is relevant to the Minister’s responsibilities. WHEB told me last week that one problem that happens more and more frequently is where people join the credit union and save the minimum amount needed to have access to a small loan. They then take out that small loan and almost immediately apply to become bankrupt, which they use as an opportunity to get over the repayments. I appreciate that insolvency is a devolved issue, and that accountancy and bankruptcy are devolved responsibilities in Scotland, but part of the problem I have described is because of radio adverts, for example, that say to people “We can help you get rid of your debts by you becoming bankrupt”, without explaining some of the consequences. We hear about such things more and more frequently, and we heard during earlier contributions about some of the other advertising that goes on. There are examples of people using credit unions to save enough to be able to borrow money, and they then default on their debts.

That issue was raised with me because, as I have already said, WHEB is a small, community credit union—I am sure there are many others—and it is not well placed to absorb the number of insolvencies that are taking place. I was told that there were seven such cases over the past month. That might not sound like a lot, but for a small credit union in that area it is starting to have a significant impact and causing concern. Perhaps when the Minister responds, he will address the issue of advertising for such services, which, given the way the adverts seem to suggest to people that all their problems could be over, borders on irresponsible. The effect on smaller credit unions is an unintended consequence of that.