Co-operative Purchase of Companies

Paul Scully Excerpts

Wednesday 8th September 2021 Westminster Hall

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)]

It is a pleasure to serve under your chairmanship, Mr Davies. It is a privilege to respond to the hon. Member for Neath (Christina Rees) and I congratulate her on securing the debate. She asked about a Minister for the co-operative movement. That is indeed the Economic Secretary to the Treasury, my hon. Friend the Member for Salisbury (John Glen). I believe he is the longest-serving Economic Secretary to the Treasury. The reason for that is partly because he is magnanimous and looks at the economy as a whole, beyond the macro down to the human level. That includes the value that he and the Government place on the co-operative movement. Co-operatives bring something different from other forms of businesses to the landscape and communities of the country. They have a clear focus on serving their communities’ needs. As I speak, Members will hear about the work that he and the Government are doing.

To answer the specific question about an assessment, we have not done one and do not plan to do so, but we do value co-operatives and have done much to support them. I will cover that in my speech, so that the hon. Member for Neath can hear of the work that we have been doing. She has raised the issue a number of times with the Economic Secretary, and it is right that we are here today to listen to her points about the movement that she supports. There are clearly staunch advocates of workers’ co-operatives across the House.

We want to see the co-operative sector grow. We see co-operatives in the employee-ownership model as being good for workers, local communities and businesses. That is why we have introduced a series of measures in recent years to support and promote the sector. One example is the Co-operative and Community Benefit Societies Act 2014, which cut the legal complexity involved in running a co-operative. Alongside that legislation, we increased the amount of withdrawable share capital a member can invest in a co-operative from £20,000 to £100,000, which has given a number of societies greater flexibility to raise capital from individual members.

The hon. Lady asked about reviewing the legislation. We do not plan to undertake a review of the 2014 Act, but the Government are open to receiving credible proposals for its reform. I encourage the sector to ensure that it continues to engage with officials from Her Majesty’s Treasury on suggestions in that area. We have also rolled out a variety of tax reliefs to support organisations that choose an employee-ownership structure. Like any other business, co-operatives have been able to benefit from the Government’s support during the pandemic, including the furlough scheme and business loans.

I turn now to the hon. Lady’s proposal that we introduce a policy similar to Italy’s Marcora law. Although there are currently no plans to introduce legislation of that type, we are always open to receiving proposals that support co-operatives and employee-owned firms. The Economic Secretary and community representatives, along with the hon. Members for Harrow West (Gareth Thomas) and for Cardiff North (Anna McMorrin), are looking to discover what more can be done to boost the sector’s ability to raise capital, following the green shares Bill last year.

In June, the Economic Secretary spoke about a wide range of issues relating to co-operatives and mutuals with the hon. Member for Neath and other members of the all-party parliamentary group for mutuals. As I understand it, the Marcora law was mentioned during those discussions. It is only right, however, that we acknowledge the need to take a pragmatic approach to the issue. First, there are clear differences between the Italian and UK economies, which could mean that the positive impacts of a Marcora law might not be as strongly felt in this country. The unemployment rate is one of those differences. The most recent UK unemployment figure from the OECD was 4.7%; by contrast, the Italian unemployment level stood at 9.3%. There is clear disparity between those numbers.

That is not all. In addition to the UK’s comparatively low unemployment rate, we are rolling out unprecedented levels of job support to get even more people into work. The upshot, according to the latest OECD data, is that UK workers are less likely than Italian workers to be unemployed for sustained periods of time, so it is far from clear that a Marcora-style policy here would deliver the same levels of welfare savings for the taxpayer as it does in Italy. As Members may be aware, those savings are sometimes cited as a reason to introduce the policy in this country, as we have heard.

Secondly, we need to learn more about the productivity implications of such a policy. In short, we have to be sure that employee-led buyouts under the Marcora law really are long-term solutions. That means gaining a deeper understanding of what is causing the companies to fail in the first place and of whether transforming them into worker co-operatives would really resolve those structural issues. That knowledge is really important, because providing funding to businesses that are unsustainable is a poor use of taxpayer money.

It is clear from this debate, however, that we are united in our desire to protect jobs and employers from the impact of the pandemic long into the future, so I will briefly touch on our work in this area. First of all, let me remind Members that the Government are providing extraordinary levels of financial support to individuals and businesses affected by covid-19. In fact, by the end of this month, the furlough scheme will have helped to pay workers’ wages for a year and a half, supporting over 1 million employers and more than 11 million jobs. In addition, at last year’s spending review, the Government built on the Chancellor’s plan for jobs by giving the Department for Work and Pensions an extra £3.6 billion to deliver labour market support. That includes funding for the Government’s new three-year restart programme, which will provide intensive and tailored assistance to over 1 million unemployed people to help them find work.

Last year, the Government launched the £2 billion kickstart scheme, which is rolling out hundreds of thousands of new, fully subsidised jobs for young people across the country. Over 50,000 positions have already been created, and the number of young people supported by the scheme will continue to rise as we approve more bids and as more employers recruit kickstart participants. We also recognise that large-scale layoffs can pose enormous challenges to affected communities, which is why in such circumstances we deploy the rapid response service of the Department for Work and Pensions, which provides immediate and personalised support to mitigate the impact of redundances.

Undoubtedly, the failure of large businesses can have very significant consequences for local economies. However, it is equally true that the closure of a much-loved pub or long-established village shop can be a major blow to areas, with the loss of jobs and vital community assets. For that reason, at the Budget, the Government announced the £150 million community ownership fund. The scheme operates in a similar way to the Marcora law. It allows community groups to bid for up to £250,000 of match funding from the Government, enabling them to take over valuable and viable local assets at risk of closure. We are currently assessing first-round bids, and we believe that this money will save jobs, protect services and help to keep the spirit of co-operative entrepreneurship alive around the country. Successful bids will be announced later this autumn.

I will end by reiterating my thanks to the hon. Member for Neath for her thoughtful contributions today and to the co-operative movement as a whole for its work. I hope that I have illustrated that the Government are both committed to supporting worker co-operatives and determined to protect those at risk of unemployment as a result of company failure. My ministerial colleagues and I are keen to continue the conversation with co-operative representatives as we work together to secure these vibrant and innovative organisations’ future success.

Question put and agreed to.