Co-operatives and Mutual Societies

Steve Baker Excerpts

Tuesday 14th December 2021 Westminster Hall

[Dame Angela Eagle (in the Chair)]

Before we begin, I remind Members that they are expected to wear face coverings when they are not speaking in the debate. This is in line with current Government and House of Commons Commission guidance. I remind Members that they are asked by the House to have a covid lateral flow test twice a week if coming on to the parliamentary estate. This can be done either at the testing centre in the House or at home. Colleagues may wish to know that I have just had a negative one, so I think I, at least, am safe for now. Please also give each other and members of staff space when seated and when entering and leaving the room.

[Mr Steve Baker (Wycombe) (Con)]

I beg to move,

That this House has considered the contribution of co-operatives and mutual societies to the economy and public life.

I am delighted to serve with you in the Chair, Dame Angela, and I am very grateful to everybody who has attended. I am slightly conscious that today’s other business might have distracted some of my Conservative colleagues who signed up to the application. I lament the fact that they are not here, but there we are—I cannot think what else is going on at the moment. I am very grateful to Co-operatives UK for inspiring this debate and for providing an excellent brief, on which I will rely closely.

A free society—one based on a market economy—really must have within it a place for co-operatives, and the Conservative party might not always have embraced that idea as tightly as I might have liked. Given the length of time for which we have been in power, and given how long we will have been in power by the next general election, I hope that the Conservative party can champion and not merely embrace co-operatives as a really important part of a free society. Co-operatives can be harnessed as tools to expand opportunity, wealth, liberty, pride and aspiration more fairly in the UK, both geographically and socially. They are a powerful tool for funding and implementing the UK’s new net zero strategy.

The co-operative economy is diverse, resilient and growing. There are now more than 7,000 independent co-operative businesses in the UK, with a combined annual turnover of almost £40 billion and more than 250,000 employees. They trade in sectors as diverse as agriculture, renewable energy, retrofitting, the creative industries, manufacturing, distribution, wholesale, retail and finance. In 2020, the turnover of the co-operative economy grew by £1.1 billion, and twice as many co-operatives were created as dissolved. Most co-operatives in the UK are consumer-owned, but in recent years we have seen a marked growth in community ownership, worker co-operatives and freelancer co-operatives. Many of the UK’s largest co-operatives comprise other businesses, such as farmers co-operatives.

By international comparison, though, the UK co-operative economy is small and growing slowly. Less than 1% of businesses in the UK are co-operatives. Germany’s co-operative economy is four times bigger than the UK’s, and France’s is six times larger. That might well derive from history, but I say to the Government that now is a moment when we can choose positively to take a path that makes it more possible for co-operatives in the UK to grow. The UK’s co-operative start-up rate is also comparatively low. In recent years, South Koreans have created 12 times more co-operatives per head of population than we in the UK have. Perhaps the co-operative model is underused and is something of a best-kept secret in our society and economy.

Co-operatives are great vehicles for creating and sustaining decent, rewarding and empowering livelihoods. For example, after five years of trading, the average worker co-operative in the UK supports six times more livelihoods and is almost twice as likely still to be trading as start-ups generally. According to a multi-country study, although they are currently far fewer in number than businesses generally, worker co-operatives are on average larger and employ more people. There are examples of co-operative entrepreneurship, for example the taxi drivers in Cardiff who clubbed together to set up their taxi-hailing co-operative, and of participation in existing freelancer co-operatives, such as the new co-operative mutual aid platform, We-Guild, or the creatives’ co-operative Chapel Street Studio.

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

The hon. Gentleman mentioned the taxi co-operative in Cardiff. I was delighted to work with a number of local drivers who were dissatisfied with their working conditions in other firms and who got together, worked with the Wales Co-operative Centre—to whom I pay tribute—and set up the remarkable co-operative, Drive, which references the Welsh phrase “Thank you, Drive!” at the end of a journey. I wholeheartedly agree with what the hon. Gentleman said.

[Mr Baker]

Marvellous. I am looking forward to the hon. Gentleman’s contribution later, when I hope he will tell us all about that. It is wonderful to have cross-party agreement on some of these subjects, and I hope we can drive forward the agenda.

Large co-operative employers are at the forefront of good business behaviour when it comes to investing in people. I think that follows directly from the ethos of the co-operative movement—the idea of valuing everybody equally and having open and inclusive membership, for example. I will not go through all the details, because we will be here for an hour, but co-operative models can be used as tools for community-led economic development. There is a wide range of examples from right across the country—I hope Members will share some—which show how co-operatives can be at the heart of bringing people together.

What can co-operatives achieve? They can expand wealth and well-being. The efficacy of the model can lead to a proliferation of co-operatives that can help to strengthen the private sector, including in places that need it the most. That is because co-operatives are distributive by design. Value, wealth and well-being are shared more broadly through day-to-day activity.

A growing body of data shows that co-operatives are especially resilient businesses. At a time like this, resilience could not be more important. Official data in our country shows that co-operative start-ups are twice as likely as start-ups generally to survive the first five years of trading, for example, with similar findings in other countries. Separate research shows that co-operatives in the UK that raise equity via community shares—a crowdfunding model unique to co-operatives—are more resilient still, with a 92% survival rate.

Official data also shows that co-operatives were four times less likely to permanently close in 2020 than UK businesses generally. Research published by Scottish Enterprise shows resilience among employee-owned businesses in Scotland throughout the pandemic. The fact that twice as many co-operatives were created as dissolved in the UK in 2020, when there was a net reduction in the number of businesses in the UK overall, suggests that co-operative entrepreneurship was a comparatively resilient force during the economic and psychological shocks of the pandemic.

Why are co-operatives so resilient? They have purpose, and their ownership and governance dictate long-termism. In an economic shock, it is the members making the tough decisions in their collective, long-term interests; it is not investors demanding lay-offs to protect short-term returns. Co-operatives also patiently build up and re-invest reserves and use members’ capital wherever possible, rather than piling on debt to achieve faster growth. My hon. Friend the Minister knows some of my views about excess debt creation.

I am conscious of time, and I want to give way to other Members, but I will say that at a time like this, when we need to recover to from coronavirus, co-operatives can be an ever more important part of our society in bringing people together and giving them a shared purpose and an equal stake in the business in which they work.

[Mr Gregory Campbell (East Londonderry) (DUP)]

The hon. Gentleman is speaking about co-operatives now, but I am sure he will come on to mutuals, which are also included in the heading of the debate. Does he agree that it has been remarkable and refreshing to see the members of the mutual society LV= use their power in the past few weeks to demonstrate exactly what he has referred to? They wanted power to go to the membership, as opposed to going to shareholders for a fast buck.

[Mr Baker]

I am grateful to the hon. Gentleman for his intervention. I hope to make a few remarks about mutuals, but I am focusing first on co-operatives. I have been involved in the inquiry into LV= by the all-party parliamentary group for mutuals. LV= made quite a compelling case, but the point is that, as he said, it is up to the members what they do. In a free society, we make progress through trial and error. It might well be that that members have made a mistake in rejecting the bid, but it is their right to do so; it is their right to choose.

I am a huge fan of mutuals, because I can see that they are bound to create a set of incentives that support the people whom the business serves. I remember in my youth being very disappointed that so much carpetbagging was going on, with people taking £500 in exchange for demutualising. I was very disappointed at the time, and even as a teenager I could see that it was not a good idea. In the case of LV=, I fear that things are not going where they should. I very much hope that my hon. Friend the Minister will ensure there is a good quality inquiry into what is going on, and into how regulation can better support people’s desire to support the mutual spirit in the future. I think he would agree that we cannot afford to be romantic and exempt co-operatives and mutuals from the realities of commercial life, or the exigencies of things such as competition law.

I turn to performance and efficacy. The principle of mutual purpose and democratic governance is found in all co-operatives, and it has significant advantages. It is a proven way for people with a shared interest to collaborate effectively, achieving things together that they could not on their own. That is a great way to expand liberty.

Liberty is something that should be exercised in community. One of my favourite scholars said:

“Society is cooperation; it is community in action.”

We should remember that entrepreneurship is a great search to help other people; that is what entrepreneurs seek to do. If people make a profit justly, without breaking the rules or exploiting others, that is a good thing. It shows that those people have served others, according to their assessment of what has been produced. I believe that that combination of mutual interest and service to others through a market means that co-operatives should be a crucial part of our society.

I am conscious of time, so I will wrap up. The Co-operatives UK brief makes a number of suggestions to the Government, including that there could be more co-operatives, and some particular policy suggestions. There are three themes: to have better tailored business support and enterprise finance for existing co-operatives, co-operative entrepreneurs and the conversion of existing businesses to become co-operatives; to have legislative and non-legislative action to provide a more enabling corporate framework, through law, regulation and processes; and to have tax support for investment in co-operatives and co-operative development. I will not go through the full brief, but Co-operatives UK intends to publish it after the debate.

I appreciate this opportunity to hear from Members from all parts of the House about co-operatives. We can all enthuse about co-operatives, even as we remain, as I am sure the Treasury will do, robustly pragmatic rather than romantic. As the Conservative party softens and become more inclusive and society minded in the 21st century, we ought to say that co-operatives and mutual societies are an important part of our society that should be fostered in everyone’s interests, particularly as we come back from coronavirus. We need to build up the mutual relations of interdependence on which we all rely.

[Dame Angela Eagle (in the Chair)]

It is my intention to call the Front-Bench speakers from 10.30 am, so you can do the maths yourselves in order for everybody to get the chance to speak.

--- Later in debate ---

[Luke Pollard (Plymouth, Sutton and Devonport) (Lab/Co-op)]

Thank you, Dame Angela. You will be pleased to hear that I will not inflict 20 minutes of Plymouth co-operatives on everyone. However, I would like to thank the hon. Member for Wycombe (Mr Baker) for introducing this debate. It is really important that co-operatives and mutuals have a voice in Parliament; that is why, for the past many decades, we have had a Labour and Co-operative group of MPs that has been making the case for co-operatives. I am proud to be a Co-operative party MP; those are not just some extra syllables in my job title. Being a Co-operative MP is not just a label; it is an instruction to campaign for mutuals, fairness, co-operation, doing business in a fairer way and sharing wealth and power. Those of us in the Co-operative party take every opportunity to put forward the huge advantages of co-operative and mutual business models.

We have seen huge changes and progress in recent years, both under the last Labour Government and, where campaigns have been successful, under the current Government. However, we are seeing the context change; we are seeing a hollowing out of our communities and a more precarious environment for businesses. However, we are seeing no less entrepreneurism and no less drive and creativity from our businesses. People are now looking at alternative models to organise their business to make a difference.

When businesses fail, it is often because those in charge have become removed from the realities of the shop floor. That is where mutuals and co-operatives have an advantage over other business models. When workers have a stake in their own business, they can contribute to the decisions that are made; they can see that businesses can be better run, more sustainable and better focused on not only the product and service they offer to their customers, but the people who work in that business to make it better every day.

Co-operatives provide an opportunity to renew our high streets and villages and to give everyday people a say in how their local community works. The opportunity to expand the co-operative and mutual sector is immense. I would like to see the Government adopt Labour’s policy of doubling the size of the co-operative sector. It is a bold, challenging ambition; however, if Ministers put in place the right conditions to make it happen, it is also achievable.

Doubling the size of the co-operative sector would lead to more sustainable, greener and better jobs in all our communities, more people having a stake in the businesses they work for and, as we heard from the hon. Member for Wycombe, better productivity and better outcomes at the end of it. It is a win-win-win situation. There are only two things that hold it back: a view that the market will provide for itself—in which case, let us remove the legislative blocks that sometimes discriminate against co-operative and mutual businesses—or a view that it will not provide the type of future we need. I do not see a future that does not include more mutual and co-operative businesses. That is what we heard from the hon. Member for Wycombe, and I hope that is what we will hear from the Minister when he gets to his feet.

In the south-west, we have long believed in the power of co-operatives to strengthen our economy. In Plymouth, we have co-operatives such as Nudge Community Builders, which works to transform life chances in one of our poorest communities—not just in Plymouth, but in Britain—by rebuilding and refurbishing buildings along Union Street and Stonehouse. It is transforming that community by not only improving the buildings, but creating spaces for start-ups, social enterprises and community services. It is helping to restore pride in something by allowing people to invest in their own community through that effort.

I bought shares in Nudge’s co-operative share issue to help reopen the notorious pub The Clipper, on Union Street, taking it from a 24-hour boozer to an amazing community space. It has transformed that community just by changing one pub. I have also bought shares in its latest effort, to reopen the Millennium building—a former nightclub and cinema, and the scene of far too many antics to discuss in polite company—as a new hub for live music, with a brewery, a shop and restaurants, and a place for people to come together. That building has stood derelict for decades, and it is a co-operative and community venture that is bringing it back to life. That share issue is still open, if the hon. Member for Wycombe wants to show his support. I know that Nudge would welcome a final push to help get it over the line.

However, it is not just Nudge that has done brilliant things using co-operative share issues. I also praise Plymouth Energy Community.

[Mr Steve Baker]

The hon. Gentleman has spoken with such passion and enthusiasm—he could not see, under my mask, the enormous smile he put on my face. If he sends me a link to Nudge’s site, I will have a look at investing. I would be delighted to consider it.

[Luke Pollard]

I thank the hon. Gentleman for his enthusiasm. I am really passionate about this issue, and people in Plymouth that have invested are passionate too. It is not just about investing. Co-operative share issues have not had the press they deserve, because it is not just that putting that 50 quid in a co-operative share issue or a mutual will return more financial benefit than leaving it in a bank where interest rates are low. It is about the social purpose—the social multiplier—and the economic multiplier that will come from that investment. It is taking place not only in Plymouth, but right around the country.

Plymouth Energy Community has funded solar panels on the roofs of our city’s primary schools and our largest leisure centre, as well as on the top floor of all our car parks. It has opened Plymouth’s first solar farm in Ernesettle and it is about to apply for planning permission for a second solar farm at Chelson Meadow—next to Saltram House—which is the scene of Plymouth’s largest landfill. I will support that share issue when it opens, too.

CATERed is another superb example of a co-operative in Plymouth. Faced with the challenge of poor school food, the Labour council brought together food provision into a co-operative, which our primary schools and some secondary schools have now bought into. That provides not only healthy, nutritious food but an investment in the staff who provide that food—in the kitchen and serving—which is unbelievable. What is important is that those staff feel valued, the food is healthier, the profits are reinvested and there is not a turkey twizzler in sight. It really is a model for others to follow.

--- Later in debate ---

[Mr Baker]

I have immensely enjoyed this debate and everybody’s contributions to it. It is an honour to be the person who happened to have their name on the top of the application, so it is with some humility that I speak last. I particularly want to say how much I enjoyed the remarks of my hon. Friend—and on this issue, he certainly is my hon. Friend—the Member for Plymouth, Sutton and Devonport (Luke Pollard). The sheer enthusiasm he has for the contribution of co-operatives to his community said more than any number of statistics that any of us might have cited. That is the reality of co-operatives and mutuals in our society. They are deeply loved institutions, precisely because their members feel part of them: “It is my mutual. It is my co-operative. I am part of it.” I only hope that all of us might aspire to the degree of earnest and heartfelt support for those institutions that the hon. Gentleman has put on record, and I hope he will not mind me embarrassing him by expressing such gushing support.

I am very grateful to my hon. Friend the Minister for what he has said. He has been very clear that the Government want to support mutuals and co-operatives. I will write to him later today with the Co-operatives UK brief, which is quite extensive, and will specifically draw its recommendations to his attention, in the hope that he might be able to take up some that do not conflict with his justified pragmatism and his desire not to be too romantic. I know that my hon. Friend would not want to be accused of an excess of romanticism.

I am extremely grateful for this opportunity to sum up the debate, and to all hon. Members who have spoken. On a day like today, it is a treat to have spoken in unity rather than in division.

[Dame Angela Eagle (in the Chair)]

I think romance is always required in politics.

Question put and agreed to.

Resolved,

That this House has considered the contribution of co-operatives and mutual societies to the economy and public life.