Co-operative Sector: Government Support

Rachel Blake Excerpts

Tuesday 21st October 2025 Westminster Hall

[Rachel Blake (Cities of London and Westminster) (Lab/Co-op)]

It is a pleasure to serve under your chairship, Mr Turner. I thank my hon. Friend the Member for Oldham West, Chadderton and Royton (Jim McMahon), who has been a shining light of the co-operative movement for a long time. He has been a Co-op councillor, a Co-op leader, a Co-op MP and a Co-op Minister. We are incredibly lucky and proud to have him as such a shining light in our movement, and I thank him very much. I give thanks also to Joe Fortune and his team at the Co-op party. We talk about doubling the sector, but I think the Co-op party team might have doubled in the last few years. We are proud of that, and grateful for the hard work.

This Saturday I had the honour of speaking at the Confederation of Co-operative Housing. I was welcomed there by the statement, “Welcome, you’re here with the doers.” That is who co-operators are: we are the doers. We put getting on with practical solutions at the heart of our mission. This year is the International Year of Co-operatives, and I am happy to talk about our proud values, celebrating our co-operation throughout the years. Our values are practical, compassionate, community-driven and absolutely grounded in the principle of sharing power and wealth, in the knowledge that if we can share power and wealth in the organisations that we create, we can rebuild trust and confidence in democracy and rebuild and restore confidence in our communities as well. If someone has a stake in a place or an organisation, that makes a difference to how they feel, and to the strength of that organisation and its ability to make a difference.

My constituency is home to Nationwide, John Lewis and more co-ops than I can count. I wish to talk about two particular sectors, housing and energy, and about what more the Government can do to support them. On the housing sector, we know that communities can identify opportunities for genuinely affordable homes in the new homes coming forward. I welcome the work that community and co-operative housing organisations do to bring forward new homes. We should also recognise the importance of having communities involved in the governance of small and medium-sized housing associations, and celebrate the £20 million that the Government have put into co-operative housing and the small sites aggregator, which will make such a big difference to increasing the size of co-operative housing in this country.

On the energy sector, I am proud to have the Aldgate community energy scheme and the Ebury Edge energy garden in my constituency. They bring people together and make sure that they all share in the benefits of renewable energy. We should celebrate the investment that GB Energy is determined to put into community energy schemes and make sure we do everything we can, practically, to deliver more of them.

We should also talk about the finance needed, the access to capital and the changes the Government can make to help us grow the sector. I know how determined the Government are to double the size of the sector. As a member of the Treasury Committee, I had the chance to speak to Treasury officials about the Treasury’s role in that. It is brilliant that we now have a Mutual and Co-operative Sector Business Council—it is a great step—but there are further practical steps we should consider to increase the benefits of co-ops.

Can the British Business Bank’s ENABLE scheme extend to co-ops? What more can the Government do to support co-operative development agencies in every community across the country? I look forward to the Minister’s response on those topics, and I am grateful for this chance—in the International Year of Cooperatives —to discuss this issue with all the co-operators here today.

--- Later in debate ---

[Mark Garnier (Wyre Forest) (Con)]

It is a great pleasure to serve under your leadership, Mr Turner. I add my congratulations to the hon. Member for Oldham West, Chadderton and Royton (Jim McMahon) on securing this important debate, in which there seems to have been an outbreak of unanimity around the Chamber. As I start my remarks, I am conscious of the expression “everything that needs to have been said has been said but not everybody has said it.” My apologies if I repeat some of the points that have been made.

As colleagues all know, this was all started in Toad Lane, Rochdale in 1844 by a group of 27—or was it 28?—men known as the Rochdale pioneers. The pioneers would not have been constituents of the hon. Gentleman, but it is important to recognise that the roots of the movement can be found not just in Rochdale, but in surrounding areas, including his constituency. At a time when living conditions were particularly tough, these men decided to do something for their community by balancing the profitability of their shop and its members with the social impact on the community and the wider membership. That meant that essential, good-quality ingredients—flour, butter and others—became affordable for the community.

The co-operative movement that was founded in Rochdale in 1844 continues to thrive today. It has grown to become an international movement; co-operatives operate in 109 countries. In the UK alone, we have 7,400 co-operatives, but if we incorporate organisations that operate in the co-operative spirit, such as employee-owned businesses, building societies, friendly societies, credit unions and mutually owned banks, the number comes to over 10,000. That represents around 0.2% of businesses in the UK.

According to a recent report by Co-operatives UK, there are 66 million members across the sector, with around 16.6 million people solely in co-operatives. I have to say that just in the last hour I have become a member myself, having signed up to the Co-operative on the app. [Hon. Members: “Hear, hear.”] Thank you very much. The exciting point about the last statistic that I referred to is that that number has increased by 1.4 million in one year, showing that the sector is truly on an upward trajectory. Additionally, it is suggested that the combined annual income of the sector is around £179 billion, with WPI Economics estimating that the sector has contributed £35 billion in gross value added, which is equivalent to about 1.5% of the total UK economy.

It is obvious, therefore, that the co-operative sector plays an important part in the health and growth of the UK’s economy. Co-operatives help to provide a diverse range of business models, which I believe is a good thing. Any healthy economy needs a variety of business models, and it is really important that we have things like co-operatives.

I agree with the premise of the debate, which is about Government support for the co-operative sector. A perfect example of such support is the introduction under the last Government of employee ownership trusts and the tax incentives surrounding them. Offering 100% relief on capital gains tax when a business owner transfers their company to an employee ownership trust has helped to empower communities, and we have seen a strong rise in employee-owned businesses, from 600 in 2020 to 2,500 this year.

However, let me express a slight reservation. It is important in a competitive market not to incentivise one part of the economy, or one business model, over another, in the way that the Building Societies Act 1986 opened the way for demutualisation and incentivised building societies to convert into investor-owned commercial companies. Some have said that that was a bad thing, and in retrospect I probably agree. We need to be careful that we do not encourage excessive mutualisation and disincentivise investment in our equity markets. Fundamentally, a balance needs to be struck.

I believe—possibly unsurprisingly—that that was done successfully under the last Government through the Co-operative and Community Benefit Societies Act 2014. The last Government introduced measures to increase transparency and facilitate growth, while maintaining the core principles of member benefit and community focus; for example, by increasing the maximum withdrawable shareholding from £20,000 to £100,000 per individual investor, they allowed for broader capital participation.

Although the 2014 Act was positive for the sector, I think that there is widespread agreement that it needs to be updated to help support the growth and modernisation of the sector today. It was good, therefore, that the last Government and now this Government have asked the Law Commission to review the legislation, and I look forward to seeing its proposals when they are brought forward, hopefully at the end of this year.

I am also glad that the private Member’s Bill now known as the Co-operatives, Mutuals and Friendly Societies Act 2023 supported the co-operative sector to protect its capital and assets, and to discourage mutualisation. Introducing an asset lock mechanism could mean that organisations are able to lock their capital surpluses, ensuring that assets are non-distributable among members and must instead be preserved for the community and the purposes of the organisation.

It is understandably disappointing that although the 2023 Act received cross-party support when it went through Parliament, over two years later the regulations specified in the Act have not yet been announced by the Government and co-operatives are still unable to utilise the statutory protection that it provides. I note, however, that the Law Commission has proposed to put those powers into primary legislation through reform of the 2014 Act. Are the Government considering that? If not, what alternatives are being pursued?

It is worth adding that the last Government introduced the community ownership fund. Although that was not directly targeted at co-operatives, some, such as the Calder Valley Community Land Trust, which seeks to reduce energy use and costs at Fielden Hall, have made successful bids. That is positive, but I would be interested to know whether the Government are considering a fund specifically for those in co-operatives and mutuals. In fact, we heard earlier from one Member about the potential for the British Business Bank to be opened up in order to support co-operatives and mutuals.

I turn now to what this Government are doing. First, it is important to recognise the commitment in their manifesto to double the size of the co-operatives and mutuals sector. That is a positive direction of travel that the Government want to follow. However, Chris Bose of the Nationwide asked what the Government meant by that and wrote:

“Precisely what was to be doubled was unclear, as was the means to achieve that.”

This is an important point for the Minister to clarify. Do the Government want to double the number of mutuals, the number of members or the size of mutual balance sheets? What specifically are they seeking to achieve?

The measures announced at the Mansion House in 2024—specifically, the creation of the mutuals and co-operatives business council and the commissioning of a report by the FCA and the Prudential Regulation Authority on the mutuals landscape—will help to lay the groundwork for that, but I hope the Minister will be able to provide the clarity the sector is looking for. Like the hon. Member for Oldham West, Chadderton and Royton, I also welcome the creation of a co-operative development unit in the Ministry of Housing, Communities and Local Government.

Those are all good things, but it feels like we are still waiting for some meat on the bone, so let me raise a few points with the Minister. First, the issue that is raised time and time again by those in the sector is their ability to access cash. By their very nature, co-operatives are member-run organisations, so they are more limited than companies when it comes to issuing shares that attract external investors.

It is also worth highlighting concerns related to the rumours about what the cash ISA allowance will be following the Budget. There is talk that it will be slashed from £20,000 to £10,000. Cash ISAs are a really important way for building societies to access finances. The Building Societies Association estimates that around 40% of all cash ISA balances are held with building societies, which turn those cash balances into mortgages for our constituents to go and buy homes. It is really important that we get some clarity on that.

Returning to the issue of incentivising certain sectors of the economy over others, I am very much in favour of encouraging investment in the UK equity market, but we must be careful that, in trying to achieve the good, we do not get rid of the best. By trying to incentivise cash ISAs to move into equity markets, we are effectively taking cash away from the mutuals and putting it into normal equity. I am worried that, if this policy comes forward, the Budget could cause a problem for the mutual sector. I know the Minister will not be able to comment on the contents of the Budget right now, and we have to wait only another month, but I hope that the Economic Secretary to the Treasury takes note of this important point and feeds it back.

I also encourage the Minister to look into the Credit Unions Act 1979, and specifically the regulations on geographical area and the total number of members in common bonds. The last Government made positive steps to increase the total number of potential members of credit unions from 2 million to 3 million, and at the start of this year the Government ran a call for evidence about common bond reform, which I welcome. However, we are still waiting on the findings and for the Government’s response to be published, even though there seems to be a consensus that the regulations are still stifling growth in the sector. It is important to get the credit union sector to grow. Government Members know exactly how important it is, and so do Opposition Members. We need to get on with this. Doing so would only support the goals of the Government’s financial inclusion strategy, as well as their manifesto commitment to double the size of the sector.

Let me put a few final points to the Minister. I had the honour to go to Iceland and meet representatives of the country’s trade unions, which, by any other standard, behave as friendly societies. It is invigorating to see that from something as fundamental as a trade union, funded by both members and employers. Something like 97% of employees are members of those unions, because they act as friendly societies and provide insurance, holidays and all sorts of things. That is a really good example of how friendly societies can work.

We should be debating more the mutualisation of other utilities. We heard from the hon. Member for Cities of London and Westminster (Rachel Blake) about an energy company in her constituency that does this, but has she considered the possibility of mutualising Thames Water? It is a very ambitious project—

[Rachel Blake]

It is not in my gift.

[Mark Garnier]

It is not in her gift, as she says from a sedentary position, but it is quite interesting. Notwithstanding the £17 billion black hole in Thames Water’s balance sheet, the water utilities are very geographically prescribed and millions of people use them, so they have a built-in membership. The most important issue that people are talking about is the pollution of waterways such as the River Thames. By mutualising an institution like Thames Water—by the way, this is not Conservative policy, but—[Laughter.] But it is a debate we must have, Mr Turner. With mutualisation, members could have a proper debate about what investment they want to make in the purity of the waters.

My final point is about skills. I do not want to bring up the ugliness of the debate over the former chairman of the Co-op bank, the Rev. Paul Flowers, back in 2011 or 2012, I think, but he came before the Treasury Committee when I was a member of it and made a very good point. He said that his election as chairman of the Co-operative bank was because he was a member of it, not because he was good at finance. It is incredibly important, particularly with things like corporate governance, that we ensure there is training for corporate governors. Running a bank or a big chain of supermarkets is an incredibly difficult job, so we must make sure that that training includes not only people who work in the bank but those responsible for the corporate governance that looks after the organisations.

My experience of the Co-operative in Kidderminster has been absolutely fantastic. A few years ago we were trying to stop a 4G telephone mast. This was several Governments back—perhaps around 2007 or 2008—when 4G masts were first going up, and there was a proposal to put one opposite the Co-op. I had a conversation with the managers there and they said, “We will buy the site in order to prevent the telephone mast from going up.” So I have always been a huge fan of them, and I cannot imagine why it has taken me 20 years to actually join the Co-op.

I thank the hon. Member for Oldham West, Chadderton and Royton for securing the debate. As I said, there has been an outbreak of unanimity, which is fantastic to see. I am only sorry that I did not bring more of my friends with me.