Co-operatives and Mutuals

Stephen Doughty Excerpts

Tuesday 10th December 2013 Commons Chamber

[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

At the outset, let me declare that I am one of the 6 million ordinary members of the Co-op Group. I have accounts with Nationwide, and belong to the M for Money credit union in Harrow and the Rainbow Saver credit union. I am privileged to chair the Co-operative party and to be one of its MPs in this great House.

Unusually, the co-operative movement has been in the news on a sustained basis of late. Absent from much of the coverage has been any sense of the powerful contribution co-operatives and mutuals make in our communities. They could and should, with the right support, make even more of a difference, and it is on that point that I shall focus.

It would be wrong not to acknowledge the challenges faced by the biggest UK co-operative, the Co-op Group. I welcome the progress the group board and its new management team, led by Euan Sutherland, have made in addressing the problems the Co-op bank faces. There are, no doubt, long-term lessons to be drawn, not least on the checks necessary for those in key positions and on how mutuals raise finance. Other reviews and inquiries will focus on those issues, so I will not dwell on them.

The co-operative movement has had its challenges: wartime discrimination by the Government in the first world war over call-up arrangements; Neville Chamberlain’s efforts to get the Co-op divis axed in the 1930s; and, more latterly, the Thatcherite demutualisation of building societies and friendly insurers, the majority of which have not turned out well. The movement survived all those challenges and continued to grow. I have no doubt that it will survive and prosper after facing its current challenges.

The co-op sector in Britain grew by 20% between 2008 and 2012, while the economy as a whole shrank by 2%. Co-operative businesses in the UK together have a turnover of more than £37 billion a year. Those headline economic figures are striking, but it is the often unheralded work that co-operatives and mutuals do in our local communities that deserve a much greater focus. From the first store set up by the Rochdale Pioneers to the more than 6,000 co-operatives in the UK today, co-operative businesses have been at the heart of our communities for more than 150 years. Today, we have co-operative schools, farms, credit unions and shops; and co-operative housing, co-operative energy and even co-operative pubs. In London, if the Minister will forgive me for being parochial for a moment, co-operatives employ more than 8,000 people and have a collective turnover of more than £750 million.

Of the nearly 700 registered co-operatives in London, I draw particular inspiration from the four housing co-operatives established by Coin Street Community Builders to help to meet Londoners’ need for affordable housing; part of an ambitious refurbishment plan for London’s South Bank, including the famous Oxo tower. With the dream of home ownership out of reach for too many people, housing co-operatives could provide a new and innovative solution for a new generation. About 10% of the citizens of some European countries live in housing co-operatives, compared with just 0.6% of people in the UK. I gently suggest to the House, therefore, that housing co-operatives could make a much greater contribution to tackling our housing problems.

Perhaps the Minister, like me, might draw inspiration from the example of Brixton Energy, also in London, which comprises three energy co-operatives—community-owned solar power schemes taking inspiration perhaps from the better known Baywind and Westmill energy co-operatives in Cumbria and Oxfordshire. The Brixton solar-power initiative has created co-operatively and community-owned renewable energy, the revenues from which stay within the local community. It is an innovative energy solution leading the way in generating sustainable sources of energy and it is jointly owned and operated by people in the community for their mutual benefit. As democratic enterprises, they operate with a one member, one vote policy and are surely a great example of the kind of mixed economy of energy ownership that we need to challenge the big six and move on from today’s problems in our energy market.

The Minister and the House might also draw inspiration from the success of credit unions, which in many of our communities are increasingly taking on the Wongas of this world. They provide affordable credit, empowering many of the poorest people in our communities and helping to retain funds in the local economy. In Leeds, for example, Salford university found a £10 benefit for the local economy for every £1 invested in the credit union, and indeed the Department for Work and Pensions independent evaluation of the financial inclusion growth fund established by the previous Government found that the total loans made by credit unions under the scheme between 2006 and 2011 totalled £175 million and saved loan recipients between £119 million and £135 million in interest, which they would have had to pay had they taken out a high-cost alternative.

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

For the record, I am a Labour and Co-operative MP and a member of several co-operatives and the Cardiff and Vale credit union.

My hon. Friend is making a strong speech about the value that co-operatives and mutuals play in local communities. That is certainly what I have seen in Cardiff, whether in the work of the credit union or organisations such as the Wales Co-operative Centre, which is doing much to support the growth of co-operatives and mutuals across Wales. Is it not sad, then, that the wider co-operative and mutual sector has been swept up, unfairly smeared and mixed up in some of the media coverage and commentary around the concerning and disturbing events at the Co-op bank?

[Mr Thomas]

That is an unfortunate consequence of some of the coverage, but I have no doubt that co-operatives can rise above it and continue to demonstrate strong support from their local communities. As I indicated earlier, I have no doubt that the co-op movement as a whole, be it in Wales, England, Scotland or Northern Ireland, will continue to prosper.

The London mutual credit union provides loans, savings and current accounts and insurance. It recognises that there is a market for short-term loans, but charges an interest rate of only 27% for a 30-day loan—a world away from the 5,600% annual percentage rate typical of the payday loan sharks against whom my hon. Friend the Member for Walthamstow (Stella Creasy) has rightly led the charge. Crucially, it also offers access to basic financial education and services, helping people to gain greater long-term control over their personal finances. Co-operatives and mutuals offer to local communities a crucial part of the mixed economy that our country surely needs. Of course we need a vibrant private sector and certainly a strong third sector, but surely we also need continued growth in the number of co-operatives and mutuals and their economic success.

To be fair to the Government, they have continued to support the strengthening and expansion of the credit union sector, although I hope they can be persuaded to be bolder on the idea of a military credit union. I draw the Minister’s attention to the example of the United States, where the biggest credit union in the world is Navy Federal Credit Union, the credit union for the American military. It has 4 million members and over $55 billion in assets. I gently suggest to the House that it is surely time to consider again how a British armed forces credit union could be made a reality to help our soldiers, sailors and air force personnel in our own communities. A British equivalent could help to protect service families from the scourge of payday loan companies and begin to tackle the worrying levels of financial difficulties experienced by some of our veterans.

The co-operative movement itself in the UK continues to support and encourage the development of new co-operatives and mutuals as part of the response to the needs of particular local communities. The excellent Co-ops UK—the “trade association” of the co-op movement in the UK—and the Co-op Group support the co-op enterprise hub. Examples of co-operatives that have been established and are running well thanks to their support including from—the Minister may be aware of this—Bristol ferry boats. In 2012, the previous operators went into administration and a group of determined locals approached the enterprise hub for support to launch a community share issue to raise the £250,000 needed to bring the ferries into community ownership. The share offer closed in July of this year having exceeded its target. Some 850 local people invested, therefore enabling the ferry service to continue, providing—crucially—employment for 20 local people.