Co-operatives

Rebecca Long Bailey Excerpts

Thursday 14th July 2016 Westminster Hall

[Rebecca Long Bailey (Salford and Eccles) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Hollobone, and to serve opposite the Minister in our first debate together. I thank my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty) for bringing this debate to the House and for his eloquent contribution. I thank all hon. Members for their contributions and their pertinent questions, which I hope the Minister will address in his response.

As a Co-operative party Member and the MP for Salford and Eccles, I am proud that the seeds of this radical movement began in my city, before the Rochdale pioneers set up shop. However, I will concentrate not on history, important though it is, but on our co-operative sector’s contribution to the economy.

The vote to leave the EU was a stark confirmation that too many people in our country have been excluded from the fruits of economic growth for too long. Britain’s relationships with the rest of the world are now open for renegotiation, but so is our previous economic model, which was not working in the interests of many communities up and down the country. Labour’s red lines on the economy, which the shadow Chancellor, my hon. Friend the Member for Hayes and Harlington (John McDonnell), set out last week, made it clear that we will not allow any future renegotiation to damage the interests of people here. Equally, we should no longer think it is acceptable for the wealth of our society to pile up in the hands of just a few people or in just one corner of our country. We need an economic model that can deliver shared prosperity across the whole country. Business as usual is not an option any more.

Labour Members are clear that co-operatives must be a critical part of rebuilding a new, fairer and more prosperous economy. As we have heard today, the opportunity for co-operatives is huge. Our co-operative sector is currently worth £37 billion. That is substantial, but far smaller than that of similar economies such as Germany and the US. Our co-operative sector is just 20% the size of Germany’s, but it has grown by 15% since 2010—faster than the rest of the economy—and 15 million people now own a share in a co-operative, up 16% since 2010.

Growth is also occurring across different sectors. Co-operatives UK reports that large numbers of tech co-ops are now being established. The logic of supporting collaborative tech development with a collaborative business model is clear. Platform co-ops, which are online tools that provide collaborative working spaces, are spreading rapidly, especially connected to the work that is carried out in my constituency. Although it is still in its infancy, the co-operative internet is becoming a reality.

Community ownership of energy has boomed in the past five years. The number of community share offers per year increased fivefold between 2010 and 2015, and £60.8 million was invested last year alone. The expansion has been particularly striking in the renewables sector. One study by Cardiff University found that each megawatt of community-owned, small-scale hydrogenation created 10 full-time equivalent jobs. For rural communities with access to natural resources but isolated from other economic activity, that represents a huge boost.

Given the rise of precarious employment and the so-called gig economy, co-operatives have a clear role to play, as my hon. Friend the Member for Cardiff South and Penarth eloquently illustrated. Earlier this year, Co-operatives UK published an excellent paper making that case convincingly. By sharing the costs of necessary administration, co-operatives set up to support the self-employed and micro-businesses can play a vital role in reducing the risks of self-employment. For example, as we have heard, the Musicians Union organising music teachers into co-operatives, rather than letting them sink or swim as individual freelancers, is a fantastic idea.

On the economic case for co-operatives, the vote to leave has clearly brought some of the UK’s economic difficulties into stark, full view. The vote was about more than just the impact of six years of needless austerity. Too many places felt that they had been left to languish in economic and industrial decline, starved of resources and investment. Britain has worse regional inequality than any other EU member, and our economy has become far too dependent on poorly paid, insecure work. In fact, the stagnation in productivity since 2007 is clear macroeconomic evidence of a failing national economic model.

Britain’s output per hour now lags far behind comparable economies in the G7. Every hour worked in the UK produces about a third less, on average, than the typical hour worked in Germany, the US or France. The productivity gap, frankly, is now the worst it has been for a generation. That matters, because productivity growth is the engine of economic growth in a developed economy; without it, economic growth is harder to come by. A major part of the productivity problem is that investment in the UK is simply too low, and it has been for a long time. Boosting investment by both Government and business will be essential. Changing business models, however, can also boost productivity, and that is where co-operatives can play an important role.

Worker-owned companies have a clear productivity advantage over conventional businesses. Recent research by the Institute for Public Policy Research has highlighted the potential importance of co-operative business models in driving productivity in otherwise low-paid parts of the economy, such as retail. If we want a secure economy, we need businesses that can grow and succeed. Evidence also suggests that co-operatives are more resilient than conventional businesses. Twice as many co-operatives than other businesses survive the crucial first five years.

I hope the Minister is listening, because we should be more ambitious about what can be achieved through policy. We want to see resilient, high-productivity businesses in an economy that is fairer for everyone. My hon. Friend the shadow Chancellor has previously expressed his ambition to at least double the size of the co-operative economy, which would be a £40 billion boost to the economy, but too much existing Government policy works against that. Cuts to renewable energy, and community generation in particular, make little economic sense. The damage done to genuine community-owned energy schemes through the withdrawals of incentives to investment, such as the seed enterprise investment scheme, has been significant.

The consolidation Act—the Co-operative and Community Benefit Societies Act 2014—was welcome recognition of the importance of the sector, but it did not go far enough in actively promoting co-operative ownership. Opposition Members would like to see greater support for co-operative forms of financing in particular, and we would welcome the Minister commenting on that in his response. Our financial system is simply not delivering as it should be for small businesses. By pooling resources and risks for small business borrowing, mutual guarantee societies could help ambitious small and medium-sized enterprises access the funding they need. Helpful legislation to assist with the formation of such societies would be along the lines of enabling the mobilisation of funds for small businesses through them clubbing together to raise credit.

Another major challenge that has been touched on today is business succession. Large numbers of small business owners are coming up to retirement over the next few years. Family businesses in particular face what the press has described as a succession crisis. Preston City Council, in Lancashire, inspired by the example of Cleveland, Ohio, developed an extensive programme of work to support its growing co-operative economy. It is actively seeking opportunities to create local co-operatives as part of local business succession, working with the local chamber of commerce to inform local businesses. I point the Minister in the direction of that council if he is looking for ideas.

Labour’s firm belief is that the co-operative sector in general should, and will, continue to make a critical contribution to Britain’s future economic success. We face a period of uncertainty, and the renegotiation of the UK’s relationship with the world is one part of that, but so is the widely admitted failure of the previous six years of austerity policy. A future economic direction has not been set, so the opportunity is there to make a clear break with the failures of the past. Co-operatives, by helping spread the wealth and providing better incentives for investment in capital and in the skills we need for the future, will be an essential part of our new economic direction. What is needed now from the Government is a clear commitment to make that happen. I would appreciate it if the Minister outlined the Government’s future policy direction and tell us his thoughts on my comments and those of other hon. Members.