My hon. Friend shows his usual grasp of these matters. He is right to say that the lack of clarity about the promotions regime and the regulation of the underlying instruments poses some real challenges. Alongside Dame Elizabeth Gloster’s review, which will report in November, we are looking carefully at the right joined-up response to deal with the risks that we have seen in the recent unfortunate situation arising from these mini-bonds.
Alongside protecting consumers, it is right that the Government consider the impact of any proposed changes to the shares issued by co-operatives on the sector. We have seen clear examples in other policy areas of legal forms being used to deliver investor benefits other than for the purpose they were intended, such as tax-advantaged venture capital schemes in energy generation. The FCA noted in response to its 2015 consultation that it had taken the decision not to register a number of energy societies as co-operatives. Those decisions were taken on a case-by-case basis, when it was determined that the conditions for registration as a co-operative were not met. In those cases, the relevant condition for registration was that the society must be a bona fide co-operative society.
Key to what makes mutuals distinct from other legal forms is their purpose-driven nature—one that the hon. Member for Cardiff North set out clearly in her opening speech and to which others have referred. I am concerned that the type of share proposed in the Bill may incentivise investors to inappropriately use the co-operative legal form as a vehicle to attract investment rather than to act for the benefit of its members or community, as co-operatives are intended to. Let me be clear: we are not opposed to community energy schemes, or for that matter any other business seeking to incorporate in the mutual model. However, it is right for the Government to be cautious in proceeding without the possibility for appropriate consultation and consideration, because we have seen real examples of where the model has been used in the wrong way, to considerable consumer detriment.
Finally, I note that there does not appear to be a clear consensus from the co-operative sector in support of the Bill as it stands. I will set out the position plainly as I understand it. In a briefing to MPs, the trade body Co-operatives UK noted that the Bill would be “impractical and counterproductive” and
“would restrict rather than expand the scope for societies to take on mission-aligned investment for environmental and social purposes.”
Co-operatives UK’s preferred approach, as the hon. Lady acknowledged, is to make amendments in Committee to remove the links to environmentally sustainable investment from most of the Bill. However, I believe that would fundamentally contradict the hon. Member’s intentions in drawing the scope of the Bill and is therefore not a viable way forward.
To conclude, let me reiterate my sincere gratitude to the hon. Member for Cardiff North for bringing forward this Bill. There has been a constructive discussion today, and it is important to highlight the value of the co-operative and mutual sector, both to the House and the public. I thank her for the way that she has engaged with me and my officials in recent months. Her passion to support the sector and tackle climate change has been clear throughout. As I have indicated to her previously, I will be happy to continue to work with her and representatives from the sector, of which there are a number across the House, to understand what more can be done. I will continue to champion the work of the co-operative sector more generally and address some of the themes of today’s debate, which have been very valid and worth while.