Co-operative and Mutual Businesses

Stephen Doughty Excerpts

Thursday 27th June 2019 Commons Chamber

[Mr Baker]

I always enjoy my moments of agreement with the hon. Gentleman, and of course regret those moments when we disagree. Hopefully I will persuade him one day of the correctness of my cause in that other matter.

Co-operatives and mutuals, throughout the history of society, have played a really important role in standing against tyranny and monopoly power, whether it was the Rochdale pioneers providing good-quality food for themselves, their families and their children or, as I discovered in my research, the African-American communities that used co-ops and mutuals during the despicable Jim Crow era to provide aid to one another when they were denied it by the state, whether through unjust laws or extra-legally. I am advised that the Mondragon co-operatives were founded in the Basque country partly as a response to the oppression of Franco.

More recently, Taxiapp allows drivers in London to fight back against the competition of Uber. Of course, farmers co-operate through co-operatives in a way that should be expanded.

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

Is the hon. Gentleman aware of the fantastic work of Drive, the new taxi co-operative in Cardiff? In Wales we call on Drive to take us somewhere, which is exactly what it does. The co-operative is a response to some of the practices of the private-hire sector, the influence of Uber and others. It is doing fantastic work, supported by the Wales Co-operative Centre.

[Mr Baker]

I am grateful to the hon. Gentleman for that, as I was not aware of Drive—I shall certainly Google it after this debate.

We need to ask ourselves why, given all the benefits of co-operatives and mutuals, they have not advanced further. They flourish, but why have they not advanced further? I was reflecting on why the Thatcher Government of my youth did not understand the great value that could come through inclusive free market participation with co-ops. They never got as far as embracing mutuality. That language of “solidarity” and “democratic participation” perhaps frightens off Conservatives. For too long, we have been afraid of some of these ideas of the left, and a more communitarian and voluntarist Conservative party should be embracing this idea of equality and market participation, not exclusively but as an important component of our society. I once heard the term “a parastatal”, and I wonder whether the idea of an enormous “The Co-op”—that enormous group of co-operatives—frightened off Conservative Governments in the past. I am encouraged that the “Open Public Services” White Paper of the coalition years makes provision for more mutuality in public services. I very much hope that when we get past our current distractions we might return to some of those ideas.

It has been suggested to me that one reason the Thatcher Government were not very good at embracing co-operatives was the preceding Labour Government’s failed attempts in the ’70s to turn failing companies into co-ops or co-op-like entities. Although I philosophically really embrace the hon. Member for Harrow West’s ideas about turning RBS into a co-op, and he and I have previously discussed the idea of Channel 4 becoming a co-op—

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[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

It gives me great pleasure to follow that rather enlightened speech by my friend, the hon. Member for Wycombe (Mr Baker). As I said in my earlier intervention, we work together on the FairLife initiative, which shows the children present today that sometimes we work positively across party lines; we do not just disagree over Brexit or other things.

I suppose my admission today is that as a young academic teaching at Swansea University, I got involved in learning about worker co-operatives and wrote an article about them. I got so enthused that I started to set up worker co-operatives. Eventually, someone said to me, “You’re very political and interested in co-operatives; why don’t you join the Co-operative party?”, and I said, “What is the Co-operative party?” The person said to me, “Come down to a Co-operative party meeting at the Elysium buildings”, which were by the railway station in Swansea. It was a pouring wet night—we specialise in those in Swansea—and I got down to this meeting and came out as the secretary. You will understand, Madam Deputy Speaker, how politics works in that sense. I have been a co-operator ever since.

I have also been a bit of a dissonant voice, because I have always called into question the idea of having a single view of co-operation. We all look at Google these days, and when I did I saw this definition of a co-operative:

“A farm, business, or other organization which is owned and run jointly by its members, who share the profits or benefits.”

It is a simple thing, but it is also the most liberating thing I can think of in terms of the politics that I do, because it is absolutely the kind of politics that says, “Politics is not just about general elections, referendums or the big scale; it is about ordinary people deciding that they are going to take control of their own lives and that they are not going to be manipulated.”

I do not want to go too much into the history, but we all know that the industrial revolution pulled people off the rural economy—the farms and the life they knew—and into awful conditions in the factory towns of Britain. They had to shop at the company store: the company not only employed them, but paid them in its own currency so that they could shop only at the company shop. That was called truck. The Truck Acts passed by this House banned the practice of companies having their own currency.

Co-operatives sprung up—one could see at least 50 co-operatives from Castle Hill in Huddersfield. They started as local communities saying, “We are going to be able to buy fresh, good food that isn’t overpriced, and we are going to take control of that by setting up a retail co-operative.” Members will know the old principle: people used to put in a pound and they would have a share, so they were a shareowner in that co-operative. People were then employed to run the co-operative.

I have a criticism of that model. It is a good model, and by the 1950s most people shopped in co-ops. The co-operative retail movement was so powerful that it was the major retailer in our country. Indeed, in 1917, when Lloyd George was Prime Minister and the co-operative shops were not getting their fair share of flour and sugar because the Germans were blockading Britain, people marched down to Westminster Hall and started the Co-operative party. The biggest retail movement in Britain was not getting a fair share. Very soon, the Co-operative party came to an agreement with the Labour party that we would never stand candidates against each other, which is why there is a Labour and Co-operative wing of the labour movement.

That is the history, but let me bring things up to date, because that was an important lesson. People’s lives were in turmoil: the whole social and economic nature of the country changed in the 18th century and into the 19th century. There was radical change, and radical change is now happening again in respect of the assured ways of life. People thought they were going to get a job and probably have it for life, working in the public services or at a big company. In questions this morning there was mention of someone having worked for ICI—Imperial Chemical Industries. I worked for ICI. It is long gone, but many of the people with whom I worked at ICI worked there for life. It was the norm that people joined a company and, although perhaps they would change their job once or twice, by and large the structure of life was stable and secure. That stability and security has largely disappeared for many of the people we represent in this House.

We have to come to terms with things and to change. Human beings are quite good at responding and saying, “This is really difficult; let’s do something to mitigate this and take control of our lives.” What happened during the industrial revolution? Working people set up trade unions to represent them, and housing associations and mutuals—a whole range of things. They set up mutuals and co-ops to make sure that people could have a holiday with their family once a year. They set up mutuals to make sure that people had money for Christmas presents and other big occasions, when they could get their dividend. People set up co-ops for burial, and the Co-op is still today a big player in that sector. They covered holidays, funerals and all those sorts of things. What is the great cause today? It is housing. Young people, and even people on reasonable incomes, cannot get a foothold in the housing market. In the current circumstances, why are we not going back to those mutual and co-operative ideas to meet that need?

All that brings me to the second part of my speech, although I do not want to keep the House’s attention for too long. As life is changing radically, the opportunities are changing. I am a long-term social entrepreneur: since I have been in this business, I have started more than 50 different social enterprises. A lot of social enterprise is about asking people for money, and it is difficult. It is tough. As a member of the court of governors of the London School of Economics, I was befuddled, because every time we hired a fundraiser, they did not even make enough money to pay the wages of the fundraising team. Eventually, we hired a young American woman—I think she was called Sally Blair—who raised tens of millions of pounds. People gave us whole blocks of buildings around the LSC in Holborn. She was the most magnificent fundraiser. I said, “Sally, why is it that you have been so successful? She said, “I am an American. If you’re an English fundraiser, you ask someone for some money, and if they say no, you go and sulk forever. We ask seven times, and put a person on the back burner only after the seventh time.”

As a social entrepreneur and a co-operator, I was in the business of asking people for money for good causes, and it was hard. Then we had the big financial crisis. George Osborne always used to say that the Labour party had caused a worldwide breakdown in modern capitalism. I used to say to him that I wished that we were that powerful. The issue was actually something to do with international banking and the corrupt way that banking had emerged.

The point I want to make is that technology has changed the opportunities for raising money for co-operation. I chair the Westminster Crowdfunding Forum. Social media can achieve immediate results. For example, if someone has an idea for a co-operative, they could raise money worldwide. They could identify a particular need in Yorkshire, in Huddersfield, or even in your own constituency of Doncaster, Madam Deputy Speaker. The technology presents us with an amazing opportunity.

[Stephen Doughty]

I thank my hon. Friend for giving way. I completely agree with him about those challenges of raising money to get new social enterprises and co-operatives off the ground. In that regard, crowdfunding is a way forward, absolutely, but it also needs leadership from Government. Does he welcome what the Welsh Government have done in the past few days in announcing a new £3 million fund for the Social Business Wales New Start initiative to kick-start hundreds of new social enterprises and co-operatives across Wales? It was, in fact, launched at a restaurant called The Clink, which is next to Cardiff prison and is itself a social enterprise. Does he agree that that is exactly what the Government should be doing—kick-starting the co-operative economy in the UK?

[Mr Sheerman]

I was amused by that intervention because, of course, my origins in co-operation are in Wales. It is a delight to hear about that initiative. There is also a Clink in London—in Pentonville I think.

The point that I am trying to make is that there are new opportunities. I got fed up talking about co-operation and how wonderful it was. I worked with John Smith, who was a passionate supporter of co-operatives and who started the Co-operative Commission with an international committee on mutuals. We had lots of debates and we set up the Co-operative Development Agency. The problem now is that the co-operative movement is too conservative these days. It clings to the old model, the basics and the values of which are right, but sometimes, I think, we miss the point.

When I went into Co-op shops, I felt that the conditions for the workers were worse than those in Woolworth’s, Asda or Morrisons, which was wrong. I made myself unpopular when I said, “Why don’t we do what John Lewis does?” John Lewis, as I am sure everyone on the Government Benches know, is a workers’ co-operative; it is owned by the workers. They call them partners, but it is a workers’ co-operative; and it works and it is successful. It is still doing relatively well even with all the pressure on the high street. So, we have to be critical about the co-operative model and we have to modify it, but, essentially, we have to energise the workers. Worker co-operation is essential if we are to make an organisation work. That blend of everyone having a share as a consumer along with measures to energise the staff is absolutely the way forward.

Finally, now that we have all these new opportunities— we have not only crowdfunding and crowdsourcing, but blockchain and digital currency—there are real possibilities for transforming the economy big time, not little time. I am not talking about a couple of small shops or a couple of little start-ups; we need massively to change the way that we do things in this country. Most international business people whom I meet believe—partly because of Brexit but not entirely so—that we are heading for another global collapse of the economy, another global meltdown, another major recession. We will need, as never before, co-operatives, new mutuals and new ways of doing business. If those new ways of doing business are rooted in empowering people as individuals and as communities, a brilliant future will lie ahead.

The flag of the co-operative movement worldwide is a rainbow of colours. The United Nations has understood the power of our co-operative ideals to transform people’s lives not only in wealthy countries such as the United Kingdom and in Europe, but across the world. If we are to do something to stop what is happening in central America—the tragic picture of that father and little girl was still in my mind this morning—and if we are to bring wealth and power to people who do not have it at the moment, co-operation must be at the very heart of what we do.

Let me finish by saying that co-operation is wonderful, it must be updated and forward looking, and it has got to be, in the best sense, empowering and revolutionary.

[Jeremy Lefroy (Stafford) (Con)]

As always, it is a real pleasure to follow the hon. Member for Huddersfield (Mr Sheerman). I thank the hon. Member for Harrow West (Gareth Thomas) and my hon. Friend the Member for Wycombe (Mr Baker) for bringing forward this really important debate.

Over the years that I have been in business and, indeed, in this House, I have come to see more and more the importance of the co-operative and mutual movement. Perhaps some Members know this, but I wonder how many people know which bank in the world is top of global sustainability rankings. It is Rabobank, a co-operative bank from the Netherlands, which, last year, had a net income of €3 billion and a balance sheet of more than €40 billion. That shows that a co-operative can be a global player. I have had the honour of working with the Rabobank Foundation in Tanzania where they supported a shallow well drilling project, which my wife was helping to run. I also have seen its work in other countries both as a commercial entity and through its magnificent foundation. That is one thing that a co-operative bank on that scale can do; it can give back enormous sums to the communities in which it works, both through better and cheaper services, financial services in this case, and also through supporting community work.

Further afield across Europe in Switzerland, the two biggest retail groups are both co-operatives: the Co-op itself and Migros, which has more than 100,000 employees. They show how co-operatives can work on a major scale and provide great benefit to their communities and to their staff.

On the international scale, I want to draw attention to Fairtrade, which I have been involved in for many, many years. Without the co-operative movement in the United Kingdom and, indeed, across Europe, Fairtrade would simply not be where it is. We need to remember that the UK has the greatest level of sales of Fairtrade goods of any country in the world—more than £2 billion a year—and the co-operative movement deserves huge credit for that.

[Stephen Doughty]

I thank the hon. Gentleman for giving way. Is he also aware of the role that the co-operative movement and co-operative MPs have played, along with MPs from across the House in the all-party group for Fairtrade, in highlighting corporates, such as Sainsbury’s, that are trying to downgrade the role of Fairtrade products? We highlighted the fact that it was selling tea that it called “fairly traded” which was not Fairtrade tea. It is not only about boosting Fairtrade globally, but about defending its position. That is at the very heart of the co-operative principle.

[Jeremy Lefroy]

I welcome what the hon. Gentleman says, and he is absolutely right. I would say that Sainsbury’s has also been a strong supporter of Fairtrade, but we do not want to see any dilution or diminution of those principles. Fairtrade is like a brand. People will pay that bit extra because they know that what they are buying has been reliably sourced from farmers or other producers who have been properly paid for their work. It is a brand like any other brand, but it is more than that; it is something that we have to have trust in, and we do not want to see any diminution of that at all.

I want to talk briefly about the role of co-operatives in financial services, in three specific areas. First, my constituency is home to the excellent Stafford Railway Building Society, which was founded in 1877. It is local and exists to provide mortgages to local people. It was set up, obviously, by the railway workers of Stafford—Stafford is one of the major railway junctions in the whole UK rail network—and it is still there, providing excellent financial services, profitably, to my constituents and the near neighbourhood. I pay tribute to all those who have made it what it is, because people give up a lot of their time to serve on the board or as staff in the building society. Particular credit goes to Mike Heenan, a friend of mine who was very much involved in the building society for many years; Susan Whiting, who took over from him as the chief executive; and the current board and management of the building society.

Stafford Railway Building Society will be around for the next decade, two decades and three decades, because it is run responsibly and its capital is built up every year as it does not have to pay dividends. Where it can help is by providing cheaper and better services to its members through the retention of that capital.

The second area I want to discuss is credit unions, which have already been mentioned by the hon. Member for Stoke-on-Trent Central (Gareth Snell). I declare an interest in that I was a member of the Staffordshire credit union and was very sad indeed when it closed. I have to give credit where it is due; it was closed in a responsible manner and people got their investments back, but it was very sad that it had to happen. I ask the Government to look at why such an important local institution has to close because of regulation. We all know that there has to be regulation, but are there ways in which regulations could be changed so that they would not have such a dramatic effect on a very important and loved local institution? I very much hope that we will see the return of a Staffordshire credit union at some point in the near future.

The third area where the co-operative and mutual movement has a very important role to play is in small business finance, but it is not able to do that enough at the moment. The Co-operative Bank clearly has an excellent record in lending and providing accounts for small business, but the co-operative and mutual movement should have a much greater role to play in the provision of loans to start-ups or equity capital for small businesses. I pay tribute to the Black Country Reinvestment Society, of which I am a member. The society provides lending to businesses in Staffordshire in my constituency and across the Black Country. It is an excellent institution, but we need more such institutions and we need them to play a greater role in the provision of the equity capital that is so often as important—particularly for modern, high-tech businesses—as the loan capital that they more traditionally provide.

I pay tribute to the role that the co-operative and mutual movement has played in the history and economy of the United Kingdom. All speakers, including my hon. Friend the Member for Wycombe have mentioned the fact that it is about not just the money and the business, but the co-operation. It is about building our social fabric—goodness knows we need to bring people together more and more at the moment, in times of quite considerable division. I urge Members on both sides of the House to support mutuals and co-operatives in their constituencies, as I know many do, as much for the fact that they bring people together to work for the benefit of their community as for the undoubted financial and economic benefits that these great movements bring to our country.

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[Anna Turley (Redcar) (Lab/Co-op)]

I pay tribute to the hon. Member for Argyll and Bute (Brendan O’Hara) for his powerful speech. There is always much to learn from our colleagues north of the border, and we have much in common on this agenda. I pay tribute to my hon. Friend the Member for Harrow West (Gareth Thomas) for securing this debate, and I put on record my thanks, and that of all co-operators in this place and across the movement, for his service as chair of the Co-operative party for 19 years. He has been a passionate and loyal advocate and champion of co-operation in this country and across the world. We thank him for his service, and know he will continue to champion co-operatives in any future role. It gives me great pleasure to succeed him as the new chair of the Co-operative party. That is a huge privilege and responsibility, and I am proud to add my contribution to this debate.

This has been a fascinating debate with values shared across the Chamber between people who have taken differing positions on other issues. It is fascinating to see how co-operation has led to many shared views, and I found myself in agreement with the hon. Members for Wycombe (Mr Baker) and for Stafford (Jeremy Lefroy). We may disagree on other things, but we agree about much of what drove some of the anger, frustration and despair that we have seen in our communities over the past few years, and which expressed itself in the Brexit referendum in 2016. Whatever we think about how to fix things, there has been a sense of powerlessness, and a lack of agency and control over people’s ability to influence and shape their lives and the economy in which they live and work.

In my area, SSI, a Thai company, was able to pull the plug on the steelworks, with 3,000 job losses overnight. People have the sense that their lives are being buffeted by global forces over which they have very little control. It is no surprise that the “take back control” mantra that was used by those on the other side of the debate from me held such sway, and it was a huge driving force. For me, the co-operative agenda is all about taking back control, self-responsibility, democracy, ownership, and having agency in one’s life, and it is rare that people feel that about public services or about the wider economy. I think that the co-operative values and principles we have heard so much about today are the solution, and provide many of the answers to the challenges we face in our society and across our world. I am excited to help champion that agenda as we develop our policy thinking in the House.

I wish to focus specifically on the expansion of the co-operative sector, which I believe is necessary for us as a country. Labour Members have committed to at least doubling the size of the co-operative sector, and I am proud of that commitment. The Labour party’s boilerplate is “sharing power and wealth”, which points to why I do not believe the radical growth of the co-operative sector is an end in itself, but rather the beginning of the different kind of economy we seek—an economy that puts people at its heart. To support our growth we are lucky to find strength and solidarity from our movement, values and principles, but there is more to be done. The Co-operative party, working with the co-operative movement more widely, has taken a serious look at our infrastructure needs, and at the supportive environment required to grow the co-operative sector.

I pay tribute to the fantastic report recently published by the New Economics Foundation, “Co-operatives unleashed”, and I recommend it to the Minister as a good read. It sets out a series of steps that a supportive Government could take to support the co-operative sector. We must also consider what legislation we could pass, and we have heard fantastic examples of co-operative action around the world. We must reflect on the fact that our own sector and movement is not at the scale of those inspirational examples, because of this country’s legislative environment.

In many countries across Europe and beyond there is a basic legislative duty on the Government to promote the co-operative model. That will not be a panacea or cure all our issues, but it could signal intent and be a key driver of change to stimulate the co-operative economy. The framework in which co-operatives operate is not subject to constant review and updating in the way that company law is, for example. We have already heard about the Law Commission’s tidy-up job on co-operative and community benefit society law in 2015, which brought many disparate parts of the law together. The situation needs to be corrected, and a more visionary and forward-looking legislative framework should be sought—something we have not seen in this country’s legislative process for many decades.

There are also technical deficiencies in our current arrangements. For example, company law allows companies to act in the way they see fit where the law is silent and there is no guidance. When co-operative law is silent and has no guidance, it reverts to company law, and we could liberate our co-operative movement from that basic inequality. We should take more risks, and take more control of the environment in which the movement operates.

[Stephen Doughty]

I congratulate my hon. Friend on her election as chair of the Co-operative party. It is fantastic to have her in that role. I also pay tribute to my hon. Friend the Member for Harrow West (Gareth Thomas). Does my hon. Friend recognise the issue with devolution? We heard examples from Scotland but there are also some from Wales. Scotland and Wales have wanted to lead the way on much co-operative thinking, but they have sometimes been hampered by the devolution —or not—of powers. When we considered the new rail franchise, in Wales and the borders there was a lot of appetite for putting that in a co-operative or mutual model, but we were unable to do so because those powers had not been devolved by the UK Government. With Welsh Water we have the example of at least a semi-mutual. That shows the advantages of devolution in driving forward co-operatives, but perhaps we need some changes to allow innovation to take place.

[Anna Turley]

I completely concur with my hon. Friend. We see a lot of passion and commitment for the co-operative sector and its values and principles in Wales, and we should be doing everything we can to allow people the freedom to develop those ideals with a supportive and co-operative approach from the Government.

I pay tribute to my hon. Friend the Member for West Bromwich West (Mr Bailey) who has worked with Ministers to try to persuade them of the need to lift unfair and unnecessary regulatory burdens on small and medium sized co-ops—we heard a great deal of detail about that today. Such burdens should not exist in the first place, and we should endeavour to remove them. One aspect of the co-operative growth agenda that comes up repeatedly within the Co-operative party and the co-operative movement is the need for access to capital, which many other types of businesses can access in a routine way, while co-operatives cannot.

Of course there is a difference in the way the co-operative business model operates, but I encourage the Minister to listen carefully to ideas for new capital instruments as they come forward. In some countries around the world we can see that new capital instruments have been put in place relatively easily, and they are both attractive and maintain the integrity of the co-operative model. For example, I recommend that the Minister look at the developments in Australia, which is leading the way on this issue.

A second aspect of assisting the co-operative sector to grow and develop concerns the development of co-operatives themselves. We often look at small and medium-sized business development and support, and regional and local infrastructures are in place to facilitate that activity. The amount and type of bank lending is often scrutinised, which helps, and specialist support is available for entrepreneurs. It is evident, however, that such support is focused on just one type of private business. There are great co-operative development professionals around the country, but sadly there are not enough, and nor is the infrastructure in place to focus on how to grow more co-operatives around the country. It is clear that we would benefit from a more rigorous and systematic approach to co-operative development.

The wider benefit of co-operatives and mutuals to our economy is clear, and new co-operatives are more likely to last into their second and third years than private small businesses. Too often, those giving professional business advice know too little about the co-operative model, and as a first point of call for advice and mentoring they are highly unlikely to suggest a co-operative approach. All that needs to change.

One route to achieving that, which has already been mentioned today, is through a co-operative development agency for England. Such an agency could be a starting point for advice or grants, and advise Governments on the type of public policy that would help to create an enabling environment for co-operatives. I hope the Minister will take that idea from this debate and work with the co-operative movement to ascertain the best shape and form for such an organisation.