Co-operatives

Philip Hollobone Excerpts

Wednesday 3rd July 2013 Westminster Hall

[Mr Philip Hollobone (in the Chair)]

I have a wealth of talent before me to debate the effect of co-operatives on the economy, and I call Chris Evans.

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

Thank you, Mr Hollobone; you are too kind. It is a pleasure to serve under your chairmanship once again.

It gives me great pleasure to have secured the debate right in the middle of co-operatives fortnight. I am a proud member of the Co-operative party and take great pride in sitting as a Co-operative Member of Parliament. The Westminster group of Co-operative MPs is the largest that it has been for 95 years. I am pleased to work alongside colleagues in the Scottish Parliament and the National Assembly for Wales, together with thousands of councillors around the country.

The purpose of this year’s co-operatives fortnight campaign is to focus on helping people to find co-operatives they love, whether they are providing sparkling wines or energy, and whether they are online or in-store. The campaign also gives Members from all parties in the House an opportunity to learn more about what is happening co-operatively in their constituencies.

Co-operation runs through the fabric of the south Wales valleys, where I was born and brought up, and which I am proud to call home. Indeed, family legend states that the last words of my great-grandmother, before she passed away at the age of 104, were, “It’s okay; I’m with the Co-op.” From Tower colliery in Cynon Valley to local corner shops, co-operatives permeate every strand of our society.

The debate affords me the opportunity to speak about the Islwyn community credit union, which offers saving accounts and small loans to members who, after a few months, become eligible for a loan at low interest rates. The great thing about the credit union is that its methods are working. In the past few days, the coalition has announced its intention to crack down on payday lenders. I am pleased that it is credit unions such as the Islwyn community credit union that have been at the forefront of the fight to turn households away from doorstep lenders and payday loan companies, which for too long have had a stranglehold on the type of valley community that I represent.

I feel extremely privileged to have been able to share a number of milestones with the Islwyn community credit union, most notably when it celebrated lending £1 million to families across my constituency of Islwyn. The credit union is an example of the impact that co-operative organisations can have on a local economy, which is why I am pleased that the co-operative sector has outperformed the rest of the UK economy since the financial crisis began.

With every pound spent in a co-operative generating an additional 40p for the local economy, the success of co-operatives can only be a good thing for the communities that we represent. Co-operatives are popping up all over the country, even in areas that do not have the history of co-operatives enjoyed by areas such as mine in the south Wales valleys. Since 2008, the UK co-operative sector has grown by more than 20%, and co-operative businesses in the UK now have a turnover of more than £36 billion a year.

As other industries and sectors feel the impact of the recession and the economic crisis, the number of co-operatives has increased in each of the past five years. There are now 6,169 co-operatives nationwide, 446 of which are based in Wales. Last year alone, the number of co-operatives throughout the country increased by 236, which was a rise of 4%. Membership of co-operatives is also growing month by month and now stands at more than 15 million, which is a 36% increase in membership since 2008.

The co-operative sector has also diversified over the past five years. More and more people understand that co-operatives are not just supermarkets or—as my great-grandmother understood—providers of funeral services. They also operate in other parts of the economy, from health care to housing, from farms to football clubs, and from credit unions to community-owned shops.

While preparing for the debate, I read about the increase in community-run shops. With more and more commercial shops struggling in the recession, communities are coming together to preserve stores that offer valuable services to a town or village, such as a local bakery. Food stores that can no longer cope with high rents or costs and therefore have to leave the local high street are being replaced not by new commercial businesses buying vacant units on the high street, but by local people who know at first hand how valuable local stores are to the communities in which they live. Some 6% of commercial village shops are being taken on by groups of residents who are determined to ensure that shop closures do not leave a gap in their community. These stores are not only having an effect on local life, but making a significant contribution to the UK economy.

The Co-operative Group has a work force of almost 100,000 people, which makes it one of the largest private employers in the UK. In 2012, community shops had a combined turnover of £49 million and more than 50,000 people were involved in some way in a community-run enterprise. The Plunkett Foundation reports that there are more volunteers working across co-operative community shops in the UK than there are helping national charities. Such co-ops are having a long-term impact on the economy; they are not a short-term fix to keep a store open temporarily before a commercial company can come in and take it over. Research by the Co-operative Group indicates that while only 65% of conventional businesses survive for their first three years, more than 90% of co-ops are still in business after their first three years. Those co-ops are local enterprises that create jobs and employ people on local high streets. In turn, those people are walking up the same high street and spending their wages in local shops. Co-ops and their staff are putting money straight back into the economy and the small businesses that make up our communities.

I was especially interested to read the results of a recent YouGov poll that asked people for their thoughts on co-operative businesses. Some 52% of respondents described co-operative organisations as “trusted”, compared with a figure of just 7% for plcs. We see that though the work done by societies all around the country. The top three words that came to people’s minds when they were asked their views on co-operatives were “fair”, “democratic” and “trusted”. That tells me that, unlike almost every other profession and institution in the UK, co-operatives still have one thing that the rest do not seem to have: that simple word “trust”.

Every Member will have felt the distrust that the public have developed for politicians, but we all know that it does not stop there. The police, journalists and bank managers—all good professions—have been damaged in the past decade, and the trust that people once had in them has all but gone. When I hear about community-run co-operatives, it says to me that they can fill the gap. Quite simply, people have to trust something, and if they do not trust businesses, banks or whatever, they can trust local co-operative organisations. In society, even outside co-operatives, it is important that people have trust, because without trust, people cannot believe in anything, and that brings about anarchy. However, if trust is still there for co-ops, it shows that they can fill the void so, quite simply, we have an opportunity.

I am saddened that the opportunity to promote co-operatives and mutuals as an alternative is not being exploited by the Government. I have spoken about the impact of co-operatives on the economy, but I am worried about how seriously the Government are taking them. We have a heard in the past few weeks from Government Members about the place of the Co-operative party in Westminster, but I know that a Conservative co-operative movement was recently established, and its members will appreciate some of the points that I am about to make.

Let us take the example of the Energy Bill. When the Secretary of State for Energy and Climate Change was appointed, we were promised a “community energy revolution”. My Labour and Co-operative colleagues on Labour’s shadow Energy and Climate Change team worked hard to make sure that he stuck to that commitment. Co-operative energy companies, such as the one created by the Midcounties co-operative, have an important role to play in the energy market. We all want to see large community projects such as the Westmill wind farm co-operative in Oxfordshire, but there will be less and less chance of such projects popping up across the country if the Government do not give co-operatives proper support.

I do not have to tell you, Mr Hollobone, that the energy industry faces a lot of challenges. There is widespread opposition to projects such as wind farms, which will become more and more of a reality in the coming years whether we like it or not. What frustrates me is that a lot of that opposition is completely unnecessary; it could be avoided if the Government further supported co-operatives and did not overlook them ahead of scrutiny in this place.

Research commissioned by the Co-operative party has shown that two thirds of people who would oppose wind turbines near their home would change their mind if the turbines belonged to the community. When people were surveyed on their perception of energy companies, the results showed that the public were 4.5 times more likely to “completely trust” a co-operative energy supplier than another energy supplier. This was what I was getting at when I spoke about trust: people instinctively trust co-operative projects. However, more has to be done if we want co-operatives to continue to stimulate the economy in sectors such as energy.

I have spoken numerous times in the House about housing, because we are facing a genuine housing crisis. There can be little doubt that investing in infrastructure is the way to stimulate and grow the economy, and the prime way of doing that is house building. If the Government are building new homes, it means that people are in work and that building firms can bid for contracts, and it also helps to bridge the gap that is starting to develop between supply and demand. I see that in my constituency surgery each week. When people affected by the bedroom tax ask me, “Where am I going to live? The council do not have any homes and I cannot stay where I am,” I am sorry to say that I do not have an answer for them.

The majority of social tenants in Caerphilly county borough council are in two or three-bedroom homes, and there are no one or two-bedroom homes for them to move into. In parts of my constituency such as Crumlin, 70% of tenants are thought to be in under-occupation. In Newbridge, the figure is 60%. Everyone in the borough knows that there are no homes to move into, but what choice does the council have but to implement the policy? These families are victims of legislation—that is why they are suffering—yet the Government still do not build homes. That frustrates me, because the Government could look to co-operative housing to fill the gap.

Throughout Europe, 10% of people are in housing co-operatives, but the figure for the UK is only 0.6%. In Sweden, co-operative housing tenure has existed since 1920 and nearly one fifth of all housing is provided in this way. In Poland, 3.5 million homes, which account for almost 30% of the total housing stock, are managed by a housing co-operative.

Co-op housing works in different ways in different countries, but the basic principle is no different from that of credit unions or community-owned shops. Such housing providers are jointly owned and democratically controlled by their members. Community co-operatives have rescued pubs and shops in the UK, but we do not seem to think of the impact that they could have on the housing market and, subsequently, our economy, so an opportunity is being missed. David Rodgers, the current president of the International Co-operative Alliance, said:

“Britain has stood still for two and a half years and has failed to recognise the contribution co-operative housing can make”.

Such opportunities are not receiving the support that they should get.

My hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds) introduced the Co-operative Housing Tenure Bill last year, which would have had a real impact and improved the legislative framework for co-operative tenure. The Bill would have given people an alternative to owning and renting, but the Government did not support it. They like to talk about house building as a way of driving economic growth, and they went as far as explicitly saying in the coalition agreement:

“We will promote shared ownership schemes and help social tenants and others to own or part-own their home”.

However, it seems that co-operative housing is another area in which the Government talk a good game but fail to deliver.

In respect of financial mutuals, the Government could look at co-operative examples to help to stimulate the economy. After three years in this House, talking about the economy month after month, I have discovered a few things. First, it is fashionable to blame the bankers for everything. I admit that when I first came to the House, I was guilty of doing the same thing, like everybody else, even though I used to be one. Secondly, nobody seems to be coming up with any real alternatives to our financial system to avoid scandals such as Lehman Brothers in 2008 and more recently involving LIBOR.

It seems a while since the Prime Minister and Deputy Prime Minister stood together in the rose garden of No. 10, but it was only three years ago. Once again, the coalition offered high hopes to reform our banking sector, pledging to

“bring forward detailed proposals to foster diversity in financial services, promote mutuals and create a more competitive banking industry.”

Yet when the Government had an opportunity to put these words into action, what did we see? Absolutely nothing. If the coalition had been serious about promoting mutuals in our financial sector, they could have re-mutualised Northern Rock. Instead, the Treasury sold the bank to Virgin in a deal that the National Audit Office has subsequently suggested did not give the taxpayer good value for money. Co-operative colleagues tabled a raft of amendments to the Financial Services Bill earlier this year that would have forced the Government to make good on their pledge by introducing financial inclusion, education and transparency, but once again the amendments were chucked out and the Government ploughed on with the same old approach.

Last year, I tabled a private Member’s Bill, the Banking (Disclosure, Responsibility and Education) Bill. It is based on the Dodd-Frank Act in America, which enables every bank transaction to be monitored. My Bill would require banks to produce a report specifying who they are lending to, to find out about those excluded from financial products from mainstream banks.

When we talk about people excluded from financial products, we are not just talking about those without complex bank accounts. We are talking about the 9 million people without access to any credit whatsoever from banks. These households have serious difficulty getting access to essential services such as energy, water, land lines and the internet. A situation like that creates a breeding ground for loan sharks and high-interest lenders.

Where I grew up in the south Wales valleys, we lived on an L-shaped street. On Monday nights we would see a white car come over the top—an XR3i, for hon. Members who remember those souped-up cars. I can remember a woman getting out of the car, and all the doors were slammed shut. All the kids were pulled in from the street. It was the woman from the Provident. My mother claimed that she smelled of cheap Estée Lauder perfume. I do not know what Estée Lauder smells like, but my mother said it was cheap. That woman would knock on someone’s door and shout, “You owe me £400”. That was wrong, but everybody in our street thought that person owed £400. “I’ll get you next week, love”, she used to say.

I remember my mother panicking about whether we had enough money for the Provident. We would get our hands down behind the settees, looking for spare change to get it together to pay the woman, because we did not want her shouting down at us. We felt that climate of fear at 6pm every week, on a Monday. The saddest thing is that I know that is still going on, not just in communities like mine, but in communities throughout the country.

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[Several hon. Members]

rose—

[Mr Philip Hollobone (in the Chair)]

Order. I will call Members in the order on my list. I do not want to call Front-Bench Members any later than 3.40 pm, but I would prefer to call them before. I have four people on my list, and I will take them in this order: Simon Danczuk, Jonathan Reynolds, Tom Greatrex and Andy Sawford. If they are all fair to each other in a co-operative way, everyone should be able to speak.

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

It is a pleasure to serve under your chairmanship again, Mr Hollobone. I declare my interest as a Labour and Co-operative Member of Parliament. As I will speak about football co-operatives and mutuals, I should put on record that I am the founding chair of the Fulham Supporters Trust.

I congratulate my hon. Friend the Member for Islwyn (Chris Evans) on securing this debate during co-operatives fortnight, as my hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds) said, and on giving a good and comprehensive summary of a range of current co-operative and mutual issues. I will not repeat the points that my hon. Friend the Member for Islwyn made, but I will touch on a couple of the issues that he raised.

First, my hon. Friend rightly highlighted what the Secretary of State for Energy and Climate Change said about the need for a co-operative energy revolution. It was a cause of some frustration during consideration of the Energy Bill that we were unable to convince him to turn his words into action on a community energy strategy and regarding the threshold for the feed-in tariff for community energy projects. My hon. Friend talked about the extent to which people have an interest in energy, and feel a sense of ownership towards it, as a result of community energy projects. There are a number of such projects across the country, but most are relatively small, and if we are to develop them further, we need to change the threshold.

When the Secretary of State was asked about that during the Bill’s pre-legislative scrutiny, he said, “There aren’t any community energy projects above 5 MW.” Well, that is because that is the threshold, so his argument is self-defeating. Earlier in the debate, I was looking at the amendments that the Government have tabled to the Energy Bill in the House of Lords—obviously, I was listening intently to what everybody was saying, but I was multitasking—and I am pleased to say that there is one that will increase the threshold for community energy projects from 5 MW to 10 MW. Those of us who sought to persuade them can reflect on the fact that our argument was well made and will have an impact, unless the Government decide to vote against their own amendment. The change will be a significant step towards helping to meet the challenge that was rightly identified earlier in the debate.

I also want to touch briefly on housing and housing co-operatives. I am pleased and proud to have the West Whitlawburn housing co-operative in my constituency. Obviously the Minister is familiar with Rochdale, but I would not necessarily expect him to be familiar with parts of Cambuslang, in my constituency. On all the neighbourhood statistics available, Whitlawburn is among the most economically deprived neighbourhoods in Scotland. Figures on health conditions, educational attainment, employment and income are collected slightly differently in England—and, I presume, in Wales—but Whitlawburn would probably also come pretty high up any list measuring those things across the UK.

Several years ago, the West Whitlawburn bit of the housing estate in Whitlawburn became a co-operative, and there is a striking contrast between the standard of the housing in that co-operative, given the capital and energy-efficiency improvements that have been made, and the standard of the other housing, which is literally across the road. That is partly because of the real impetus that has come from those who came together to form the co-operative, which is about not only the mechanisms involved in driving investment but, just as importantly, the attitude and ethos that have become apparent. Just last week, along with a colleague from the Scottish Parliament, the local MSP James Kelly, I was pleased to be able to talk to the members of the very engaged management committee, who are all tenants and members of the co-operative. They take their work very seriously, and their attitude is all about what they can do to improve housing in their co-operative and to maintain that improvement, as opposed to expecting somebody else to do things for them. That makes an important point about the ethos of co-operatives.

The area is relatively small, however, and the co-operative is not immune from the impact of Government policies. The bedroom tax or the spare room subsidy—whatever label the Minister uses—is having a considerable impact in West Whitlawburn, where 67% of tenants are on housing benefit. The housing association has found—it has been able to do so because it is relatively small— that 30% of its tenants, or 200 people, are affected by that measure. Its housing stock consists mostly of accommodation with two or three bedrooms, and there is a problem of people needing to move from three bedrooms to two, or from two bedrooms to one. People of pensionable age are not impacted, however, so we have the bizarre situation of the housing association almost considering seeing whether people who are in receipt of state pension and live in one or two-bedroom accommodation will swap with working-age tenants living three or two-bedroom accommodation. The policy will have a significant impact on the housing co-operative as a result of rent arrears. The co-operative does not want to evict its members—nobody wants that—but the financial effects of the policy could have a significant impact on what it is trying to do.

The third issue I want to touch on is football supporters’ trusts, which are an important form of mutual activity. People will be aware that the trusts were born out of the co-operative movement with the support of Supporters Direct. There are now several supporters’ trusts throughout the country, and there are good examples of trusts that are completely or partly in control of running clubs in Wimbledon, Portsmouth, Swansea and Manchester. In other cases, football supporters’ trusts are trying to take a role in running clubs, including Heart of Midlothian in Scotland. In every case, supporters’ trusts have tried to take a role in the ownership and running of clubs when those clubs have been in crisis and everyone else has walked away.

However, I want to draw the Minister’s attention to the example of the trust in Swansea, given its economic impact. Swansea was basically a bankrupt club, and it was sold on for £1. The supporters’ trust was formed and took a role in the club’s ownership, and it has been an integral part of the club since then. Over a couple of seasons, the club has gone from 90th out of 92 in the league to being an established premiership club. It has won the league cup, and it will be playing in Europe next season. All that involved a role for supporter ownership and supporter control, which is a form of co-op.

There have been many debates about football governance—I have spoken in most of them—so I do not want to repeat any points about that, but I do want to talk about clubs’ economic impact. Football clubs have a significant local economic impact—directly and indirectly. When Hull was first promoted to the premiership, people there would have talked about the impact on the city of visiting supporters and the attention that comes with having a top-level club. The same happened when Blackpool was in the premiership, and the same has happened with Swansea. However, when clubs are driven and run by people who are involved in the local community, they are more inclined to ensure that some of their spending power and economic activity benefits that community. Trusts reinforce local economic activity, so they should be encouraged, treasured and nurtured.

Although this is not part of the Economic Secretary’s brief, he will know that the coalition agreement included a commitment to encourage and foster fan involvement in, and ownership of, football clubs. The Minister for Sport, the right hon. Member for Faversham and Mid Kent (Hugh Robertson), has mentioned that commitment a number of times, and he has tried to persuade football authorities to act on it, although I think we are getting towards the end of that road, given the intransigence of the authorities. If the coalition wants that commitment to come to fruition, it might have to take action by forcing the football authorities to do what they seem not to want to do. The coalition should encourage fan involvement for the good reason that it will not only sustain football clubs, but encourage the economic activity that happens when trusts are involved in the management structure, as we can see from the examples I cited. I hope that the Economic Secretary will reflect on that, even though it is not his direct responsibility.

[Mr Philip Hollobone (in the Chair)]

Our next speaker might be dangerously overqualified because he comes from Desborough, one of the famous co-operative towns in Northamptonshire, which now lies in the Kettering constituency.

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[Stella Creasy]

rose—

[Mr Philip Hollobone (in the Chair)]

A last-minute entry from Stella Creasy—I thought you would not be able to resist as soon as payday loans were mentioned.

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[Sajid Javid]

The hon. Lady will know that we have rightly given the power to an independent regulator to set capped rates, if it thinks that is appropriate in future. That is the correct way to deal with the issue.

In the interests of time, I must plough on. If we are to consider the wider mutuals sector, we should also consider building societies, which remain another key focus for the Government. We set out our approach to applying the recommendations of the Independent Commission on Banking on building societies in “The future of building societies” consultation paper. The consultation closed last year, and we are now considering how best to treat building societies in line with our aims. We will set out our proposed approach in due course.

Several other questions were asked, and before I conclude, I will try to answer some of them as best I can. A number of hon. Members raised the issue of co-ops in the energy sector. The Department of Energy and Climate Change published a call for evidence on community energy in June 2013, and it will publish a community energy strategy for autumn 2013. That highlights the Government’s commitment to supporting community energy projects.

A number of hon. Members raised the issue of housing. I agree that the co-operative sector has an important role to play in housing, particularly because, between 1997 and 2010, we saw a decline in social housing in our country of more than 421,000 units. I think that the co-operative sector can make a contribution to turning that around, and it will benefit from Government funds that have already been made available, in particular, for affordable housing.

The hon. Member for Islwyn raised the issue of Northern Rock. We believe that the sale was in the best interests of the taxpayer, securing the long-term future of Northern Rock plc and increasing competition in the banking sector. The decision to proceed with the sale was based on the advice that the Government received from United Kingdom Financial Investments Ltd and independent advisers, having considered all bids and all other potential options.

Finally, in the interests of time, I will just address one more issue about the use of the name “co-op”, which was a good point made by the hon. Member for Rochdale. That is something, as he rightly identified, that is being looked at by the Department for Business, Innovation and Skills. I am aware that very strong representations have been made to the Secretary of State for Business, Innovation and Skills, not least by Ed Mayo of Co-operatives UK. The Business Secretary has committed to looking into the matter further and to making an announcement shortly.

In conclusion, I reiterate the Government’s support for the co-operative sector, and I thank all hon. Members who have taken part in today’s debate, especially the hon. Member for Islwyn for making his case so well.

[Mr Philip Hollobone (in the Chair)]

Order. All good things must come to an end. I thank all hon. Members who took part in the debate and I ask those who are not staying for the next debate to leave quickly and quietly, because we are moving on to the important topic of selective licensing of landlords on the basis of poor housing standards.