Thank you, Mr Amess, and I welcome you to the Chair. I think that this is the first time that I have spoken in a debate that you have presided over. I suspect that this debate will not be the most difficult debate that you will ever have to adjudicate on. All the same, I am sure that you will handle whatever comes up in your normal equitable and even-handed manner.
Before I go into the substance of my remarks, I should declare an interest. Like other Members here in Westminster Hall today, I am a Labour and Co-operative Member of Parliament. Indeed, prior to entering the House, I was employed for 18 years by the co-operative movement. I will not detain Members today with a résumé of those 18 years working in the movement, but there are obviously a number of things from my past experience that I want to draw on.
Before I do that, I should thank the Backbench Business Committee for allowing this particular debate. My hon. Friend Chris Evans and I originally asked for it because we are in co-operatives fortnight, which runs from
I will start off with a somewhat philosophical question, “What is a co-op?” Perhaps 30 or 40 years ago, there would have been a fairly simple response to that question—“It is a company registered under the Industrial and Provident Societies Act.” At that time, one’s local Co-op store would immediately come to mind and I suspect that Members of my generation, if not perhaps newer Members, can easily quote their parents’ divvy number. It was something indelibly etched on our memories.
Of late, however, the term “co-operative” has come to embrace a number of corporate structures, including the mutual building society and other structures in the financial mutual sector, friendly societies and in some cases employee share-ownership companies. Not all of those have a traditional co-operative structure but the values that underpin them are very similar in each case to those of the co-operatives and they also have certain basic principles in common with co-operatives. They are, of course, democratic ownership and participation; one member, one vote; and the reinvestment of surpluses. These organisations are intended to make profits, but it is the distribution and allocation of those profits that distinguish them from other forms of proprietary corporate structures. They may also demonstrate a higher commitment to what is measured as “ethical trading”, value for money and a certain level of community involvement, although they do not necessarily demonstrate those things. In general, however, those are the sort of principles and values that underpin the different sorts of corporate models that we loosely term as “co-operative”.
It is probably fair to say that for a long period of time co-operatives were somehow stereotyped as a slightly idealistic and not necessarily appropriate business model to survive in the highly competitive capitalist world that we now have. Crucially, however, if we go back to the roots of both the co-operative and mutual sectors, we realise that these forms of organisations did not arise out of an idealistic or visionary approach. Essentially, they arose out of groups of people trying to get out of a particular problem and realising that it was only through self-help and working together that they could actually do so.
I was particularly struck by two quotes in a pamphlet by Cliff Mills on mutual organisations. The first is:
“The different types of traditional mutual business (co-operative societies, building societies, friendly societies, mutual insurers) operated in different ways, but the underlying reason for existence–self-help–was the common theme.”
On that specific point, Members of Parliament will recall the example of the Tredegar Medical Aid Society, in which my grandfather was very proud to serve and which Aneurin Bevan said was the forerunner idea for him in establishing the national health service. It was a programme in which all the miners in Tredegar contributed a sum and then elected the doctors who would offer services to all of that mining community in the absence of any sort of state provision of health care.
I am grateful to Jonathan Evans for bringing that issue to my attention. I was not familiar with that society but it is a very good example of the values and qualities that I have been describing as the foundation of the co-operative movement and of the subsequent development of our public policy.
In his pamphlet, Cliff Mills goes on to say that mutuality
“was the response of people with often desperate needs”— as the hon. Gentleman has just demonstrated—
“to find a solution for themselves and others in their community. It was based on self interest (the need to provide for me and my family), not philanthropy or charity; but—” and now Cliff Mills comes to the crucial point—
“the genius of mutuality was that it captured that self-interest, and by channelling it through collective self-help, was able to produce an economically sustainable business.”
As I say, that is the crucial thing about the co-operative movement and the variety of business models that it incorporates. As Cliff Mills says, the movement is “channelling” self-help, but doing so in a way that enables someone to advance themselves or to deliver the service or product that they want to deliver in a way that can compete with the wider and less idealistic commercial world that they have to exist in.
If we look at the formation of the traditional co-operative movement—via the Rochdale Pioneers in 1844, and the different mutual building societies and insurance companies—all the bodies within it were rooted in that idea of self-help and they all had to survive in a very difficult external commercial environment. Indeed, the co-operative movement, which I have more experience of than other movements, was formed in the 1840s because its members needed good-quality foodstuffs, which they could not get through local private traders, and at the sort of prices that they could afford, which again were often not available. In addition, they needed to be able to use any surpluses that came from trading to reinvest in their own communities and their businesses, both to strengthen those businesses and to provide education and other help for the communities that they lived in.
I congratulate the hon. Gentleman on securing this debate. The setting up of the co-operative movements was perhaps not as utilitarian as he suggests. A key aspect of the miners’ welfare halls in my constituency was libraries and the ambition of self-advancement, and we might have to return to a similar system in the future.
Yes. My references were specifically to the Rochdale Pioneers. One characteristic of co-operative societies was the way in which they reinvested surpluses in community education, and libraries were, of course, part and parcel of that.
Further to the comment made by my hon. Friend Roger Williams, it would be a poor history that did not include the role of Robert Owen in this field. The Robert Owen Society in Herefordshire does an enormous amount of work, representing the wide-ranging approach to human well-being of which, as Mr Bailey says, the Rochdale Pioneers were acutely aware.
I am grateful to the hon. Gentleman for raising that matter. Robert Owen was of course the pioneer of these ideas, and although he did not succeed in his own lifetime, many of his ideas were incorporated during the formation of the co-operative movement in the 1840s through the Rochdale Pioneers.
The co-operative movement took a knock in the post-war era. The traditional retail societies lost an enormous amount of their market share to the emerging supermarket chains, and their structure found it difficult to adapt. Equally, in the ’80s and early ’90s, many building societies—the traditional mutual sector—fell prey to the prevailing philosophy of privatisation and the free market economy, and the conventional wisdom was that co-operative principles were somehow anachronistic and inappropriate to survival in what was then a highly capitalistic and business-orientated world.
The crucial difference is that the co-operative and mutual movement exists for the benefit of the participating consumer-members or worker-members. In the free market, the wider movement is the proprietary sector, with outside investors investing in, taking profits out of, and controlling the businesses. That is the crucial structural distinction, and there is also a huge difference in values and ethos.
I am sure that my hon. Friend agrees that for many years there was confusion about what “the third sector” meant. It was often taken to mean the voluntary sector, but the third sector of the economy was always seen as the co-operative sector, a business sector aiming to be profitable but having, as he has indicated, a wider set of values than merely profit as the driver behind its engagement and success.
One thing that attracted me to work in the co-operative movement for so many years was that as a believer both in the market and the need to succeed in it, and in certain values, I felt that it was a model in which successful businesses could reconcile the two. That is clearly demonstrated, and is part and parcel of the reasons for today’s debate.
I hope that we are not bracketing co-operatives in the third sector; they work in the private and public sectors as well. They speak to all of our economy, and if we see them in that way we are much more likely to have an ambitious agenda for them.
The Minister can rest assured that I was going to come on to demonstrate the range of businesses in the co-operative sector. One problem that the mutual and co-operative sectors had in the ’80s and ’90s was that they failed to sufficiently highlight their difference, and a minority of co-operatives did not appear to be effective business models—being more charitable, for example—with the result that movement as a whole suffered.
It would be unwise to leave the subject of the 1980s without saying that there were well run mutuals in the sector, which focused on customers’ experience and recognised their role. Others, such as Equitable Life, might historically have been mutuals, but did not appear to recognise that and behaved, in a sense, like private companies. That was also a factor in some change being necessary.
I agree up to a point. Some mutuals certainly embraced or sustained the principles of mutuality more than others, but in the ’80s and ’90s the great majority of the public would have been unable to distinguish between a building society and a bank—indeed, I have occasionally heard Ministers and shadow Ministers confuse them in the Chamber. That was a reflection of the mutual movement’s failure to sufficiently highlight its difference and market it successfully, but much has changed in that respect in the past few years.
The traditional co-operative retail movement has in many ways gone back to its roots, and has successfully reinvented itself as a community-based consumer co-operative. That is reflected in the huge increase in turnover and profitability, with turnover in the sector increasing by 4.4% in the past year. At a time when the economy has grown by only 1.3%, that is a very creditable performance. In 2008, the increase was 21%, and by anyone’s standards that was an incredibly difficult time in retailing. However, the building society movement emerged, not completely unscathed because it took some hits—we unfortunately saw the demise of the Dunfermline building society—but relatively so, compared with the proprietary banks, and in no way was it a contributory factor to the banking problems. A lot of credit for that goes to the largest national co-operative—the Co-operative Group—but credit also goes to a number of other co-operative societies. One of my two local societies, the Midcounties, increased its profits last year from just less than £20 million to £26 million, and the Midlands—I have to be careful not to mention one and not the other—increased its profits from £22 million to £26 million. Such societies have demonstrated that this form of organisation can compete and thrive in even the most difficult of climates.
It is fair to say that the success and potential of that model is now recognised by all political parties. To return to the point that the Minister raised, the areas where co-operatives and mutual organisations are thriving include traditional consumer co-ops; worker co-ops, whether in service delivery, conventional trading or business co-ops; and employee-owned businesses. The John Lewis Partnership is perhaps the most well known, but many others are successful as well. They include agricultural, fishing and housing co-ops and football supporters’ trusts, and rugby supporters’ trusts are being considered as a model for other sporting clubs. Financial co-ops include credit unions, building societies and mutual insurers. I am sure that I have missed quite a few, but no doubt people will remind me of them during the course of this debate. That list is a clear demonstration of the model’s relevance to a range of public services and business activities.
The Government have embraced the approach. The pathfinder programme is designed to encourage co-operative models in the delivery of public services, and we are waiting on the “Open Public Services” White Paper, which will give us an opportunity to debate where Government policy in that area is going.
Although I generally welcome the Government’s recognition of co-operatives and mutuals, I will issue one or two words of warning. First, the essence of mutuals and co-operatives throughout their history is that the individuals forming them must have a desire to make them a success; we cannot just legislate for them, or point to a group of people and say, “You will work in a co-operative manner.” The desire is absolutely essential. Similarly, we cannot just look at a failing business and say, “Become a co-operative and you will succeed.” That will not happen. If the business model is wrong, just putting it into mutual ownership will not do. Particularly in the context of the debate on Post Office and Royal
Mail, those issues have not yet been fully explored. We will certainly seek to do so, and other hon. Members here might wish to comment on them.
There are a range of potential opportunities—some might say potential pitfalls—for co-operative development. The obvious and most public one, of course, is the re-mutualisation of Northern Rock. I know that the movement feels that if it can be done, it will be an almost iconic recognition of the renaissance of mutuality and its relevance, and it intends to probe the Government on what they consider the prospects to be. I am disappointed that the previous Government’s commitment to British Waterways has not been upheld. Again, I would welcome hearing the Government thinking on that. The removal of the funds available for the formation of community pubs is also disappointing. However, I do not mention those things in a churlish way. They are matters that we need to debate. Hon. Members from various parties might feel that it is possible to pursue them and join others intent on promoting the co-operative agenda to achieve them.
I have considered closely the possibility of re-mutualising Northern Rock. I could not get over the question of how to handle an enormous vendor note —the vendor financing from the Government to the employees—to be paid out over 10 or 20 years. That has proven an insuperable practical burden, as far as I can see. I welcome other thoughts on the matter. However, I am sure that we all share the hon. Gentleman’s aspiration that the mutual ethos should return to the financial sector.
I thank the hon. Gentleman for that intervention. Perhaps I should have recognised earlier the work that he has done as chairman of the all-party group on employee ownership. I held the same position in a previous incarnation. He has done a good job, and I accept that he is intent on resolving some of the problems and issues that arise from the Northern Rock situation.
I will finish, as I know that many people want to raise specific interests during this debate. To return to where I started, co-operatives and mutuals are a form of self-help that is relevant in a range of business activities and public services. It has been clearly demonstrated that their impact on the economy is increasing and that public support for them is improving. Their membership is also rising; I think that nearly 13 million people in this country are now members of one form of co-operative or another. This debate will play a small part in raising awareness, assembling ideas and testing the Government to see how deep their commitment is and how they can take the agenda forward.
We have until 5.30 for this debate. At 5 o’clock I shall call Mr Gareth Thomas, who will speak for 10 minutes, the Minister, who will speak for 15 minutes, and Mr Adrian Bailey, who will sum up for five minutes. There are 13 potential speakers. Obviously, I want to call everyone, so I hope that hon. Members will co-operate and share the time. I will call first those colleagues who wrote to the Speaker.
It is a pleasure to serve under your chairmanship, Mr Amess. I congratulate the hon. Members for West Bromwich West (Mr Bailey) and for Islwyn (Chris Evans) on securing this important and timely debate, which coincides with co-operatives fortnight. I will talk about financial mutuals, particularly credit unions. This is a promising time for financial mutuals, in the wake of the banking crisis and against the backdrop of the big society agenda and the emphasis on debt affordability at all levels.
Financial mutuals remain large, in spite of what has happened over the past couple of decades, and still serve one in three of the population through building societies, mutual insurers and friendly societies, co-operative financial services and credit unions. Credit unions, sadly, come at the bottom of that list, because it is ordered by number of members or customers or by assets under management. If the list were ordered by number of individual institutions, credit unions would come at the top. There are 48 building societies in the UK, with more than £300 billion in assets. The number of credit unions is about 10 times higher, at 426, but they hold assets of less than £1 billion.
Nevertheless, despite their relatively small size, credit unions in this country have been growing rapidly. Over the past 20 years, from 1990 to 2010, the number of members has grown from 54,000 to 800,000 and assets from £17 million to £750 million. However, there is an awfully long way to go. Compared to other countries such as the United States, Ireland, Australia and elsewhere, the penetration of credit unions among the UK population is small indeed. I see that as an opportunity rather than a problem.
Credit unions are traditionally mutuals owned by their members, who are savers and shareholders, and managed or overseen by a board of directors elected on the traditional one-member, one-vote basis. Critically, the interest rate at which they can lend is capped. It is about the only part of the financial sector that has such a cap. Historically, it was 12.7%, but it is now 27%. That still means, however, that anybody borrowing from a credit union knows that they are getting their loan at a reasonable rate. It is very important, because the market in which they operate features many other operators that charge a good deal more.
Payday lenders are a part of the financial market that Stella Creasy might mention later. They represent an area of growth in the market and have received a lot of attention, but there are plenty of others. Home credits, for example, are a much larger part of the sub-prime market, have been around in this country for much longer and serve many more customers. Other parts of the market may not appear to have the same sky-high rates of interest, but they end up being just as bad a deal in terms of their overall charging structure. I am thinking in particular of some rent-to-own operators.
There are some brilliant opportunities for credit unions at the moment, and some strong and encouraging news from the Government, particularly the £73 million that they are making available in the modernisation fund for credit unions. Many areas of modernisation need to be looked at, but I think that what the sector finds most exciting is the development of the back-office platform and the potential to interface with the Post Office. That opens huge opportunities to bring credit union services to a much larger part of the population and for them to be much more visible in the marketplace.
Another critical piece of the jigsaw is the legislative reform order, for which the credit union sector has been waiting for some time. The issue has straddled the change in Government and we hope that it can now progress with great speed. It will enable critical changes in the sector to facilitate its further development. First, it will soften the common bond requirement—which relates to where someone lives or works, who they work for, or which organisation they are a member of—to become a member of a credit union. Secondly, it will enable credit unions to offer services not just to individuals, as is the case at present, but to organisations, particularly charities and voluntary organisations, although it might also apply to firms. Thirdly, it will enable credit unions to offer a fixed rate of interest to savers, if they wish. That will make them more attractive and enable them to provide a better range of financial services.
There are other issues. The sector looks to Government for a proportionate approach to regulation. They are, relatively speaking, only little and have not had the problems that the big banks had during the crisis. They want an appropriate level of regulation that matches their size and role.
There are also new opportunities, such as the big society bank, which is a wholesale bank that needs organisations on the ground to administer its funds. I am sure that community development finance institutions will play a big part in that, as will credit unions, in a post-legislative reform order world. Not all credit unions will find that appropriate, but some of them may. Credit unions could also play a role with the son or daughter of the social fund, in its new, evolved form. Local authorities will be more responsible for elements of that. They do not have a long history of dealing with crisis loans and so on, but their local credit unions could help them in that regard.
Looking to the future, I think there will be some blurring of the exact lines between credit unions, CDFIs, social lenders and microfinance institutions. It would be good to see the development of more microfinance institutions of one sort or another in this country, as well as internationally. Technology may also help us to broaden the boundaries of credit unions and to bring more people in, particularly as savers, which will allow them to expand their business. That is also applicable to microfinance and, eventually, to retail investors in social impact bonds.
Two key developments will enable that. They might involve a role for Government, but they might not—they might come from entirely different parts of the social finance sector. The first is the development of a social ISA, which I wrote about some years ago in a Bow Group pamphlet on credit unions and increasing the capitalisation available for them. Others have written about similar things in relation to all sorts of other projects. It sounds very much like an idea whose time has now come, to enable ordinary retail investors to put their money behind socially worthwhile projects and accept a slightly lower financial return as a result.
My hon. Friend has mentioned returns, but at the moment the banking system seems to be failing both savers and entrepreneurs simultaneously. I wonder whether such projects might give a better return to savers while benefiting entrepreneurs.
I am grateful to my hon. Friend for that fine point. In fact, it is true now, to some extent, that people will get a better return through a dividend from some credit unions than they would through some high street bank savings accounts. It is also possible to say that interest rates for savings accounts in general are so low that it does not make a whole lot of difference whether one gets a return that is much lower—credit union returns have the benefit of not changing after the first six months and of not having complicated introductory marketing deals. The general principle that I am trying to outline is that there are many people who, for a proportion of their savings, would be happy to accept, on average, a slightly lower cash return, because they know that their cash will be doing something worth while, either in their local area or, as is the case with some people, in supporting microfinance and so on.
I will mention the second development briefly, because I have talked for longer than I had anticipated. It relates to exchanges to bring people together, so that they can find the opportunities. Many people to whom I speak who are relatively well off and who have heard about credit unions, CDFIs or microfinance, say, “I’d love to put a bit of money into that.” The problem is that they do not know where to find these things. How would they? They are not organisations with multi-million dollar marketing budgets, so an exchange could put people in touch with those opportunities.
In conclusion, the future is bright for credit unions. We need the legislative reform order to complement the investment and support that the Government are giving the sector. Of course, credit unions also need to step up to the plate. They need to make sure that they keep their cost base trimmed, that they have a balanced portfolio with a good mix of customers, savers and borrowers, that they continue to develop their financial products, and that they consolidate the sector in the post-LRO world.
It has been a pleasure to take part in this important debate. Again, I congratulate the hon. Members for West Bromwich West and for Islwyn on securing it, and thank you, Mr Amess, for presiding over it.
I pay tribute to Damian Hinds for his work as chairman of the all-party group on credit unions, of which I am treasurer. I called for this debate, along with my hon. Friend Mr Bailey, because my whole political life is framed by my experiences of where I grew up in the south Wales valleys. We lived in a close-knit community. This speech might be sloppy and sentimental, if you will allow it, Mr Amess, but that is where I grew up.
When I grew up, the Co-op, as we called it colloquially, was always there. My mother told me, “I’ve brought you and your sister, Cara, up on Co-op milk,” and we went down the Co-op shop for our groceries. If you died, you were laid out in a Co-op funeral home and they probably buried you as well. As my great-grandmother said before she died at 104, “Don’t worry, everything’s sorted—I’ve been paying the Co-op for years.” That is where I came across the co-operative movement.
The most iconic moment of my life growing up in the valleys was seeing the proud workers walking back to Tower colliery in the Cynon valley. They had taken over their business and mines after being written off by the previous Conservative Government. They were walking back to run a workers’ co-operative. I have never felt more proud of my community and my people than when I saw them marching together. Those proud men, who had been beaten down by the Government, said, “No, there is a better way.”
I come from a similar background, and I pay credit to the workers at Tower. However, they were given the opportunity to turn it into a co-operative by Michael Heseltine, who rejected the private sector bid and accepted their bid. It is therefore slightly churlish to be dismissive of the previous Conservative Government’s position on that.
At the end of the day, I have to get political. As I always say, I am from a mine-working area, and the previous Conservative Government were no friend of the miners. I cannot get away from that; that is what I was born into, that is what I grew up believing and that is what I still believe.
I am extremely proud of those communities, and I am proud to be here as a Labour and Co-operative Member representing them, but there was a dark side. I am perhaps being romantic again, but I remember being out on the street kicking a football against the wall every Monday evening after school. The women would shout at us children and move us on.
At about half-past six, however, we would all rush through our doors and slam them shut. We would see the white XR3i coming down the hill, if anyone remembers those flashy cars. A woman would pull up and get out. I can see her now with her bleached blonde hair. My mother would say, “Caked with make-up, she is. She stinks of Estée Lauder perfume,” not that I knew what Estée Lauder perfume smelled like, but that is exactly what my mother said.
The woman was there with her little book, her little bag and her pen, and everybody would run inside. She would hammer on the doors. She was the woman from Provident, and everybody in our street had Provident. If people did not pay her, she would bang on the door and say, “I know you’re in their, love. You owe me £400.” If people had made the mistake of leaving the door ajar, she would push it open and go, “Where’s my money?”
When I was first elected, I found a chitty from when my mother took out a Provident loan in 1987, and the annual percentage rate was 150%. Years later, I went to work for Lloyds TSB, and I thought there was no way that Provident could still exist, but it does.
When the basic bank account was introduced, I felt the banks often did not want to know about people with a basic account. These people did not have a credit score for loans or credit cards, so when they needed money, they had no access to it. When they were asked how they were getting by, they would say they had Provident or Shopacheck and that someone would come round to their house to pick the payments up.
It is a pleasure to intervene in the hon. Gentleman’s flowing speech. As I have said in many debates, the other problem with firms such as Provident is that they build relationships. They turn up at people’s doors and suggest ways in which their customers can spend money. They might say, “Christmas is round the corner. Have you sorted your Christmas presents?” They take advantage of the most vulnerable people.
The hon. Gentleman is absolutely right. I was coming to that. This culture is very much engrained in the valleys. My mother, my grandmother and all my aunties and uncles had Provident. However, this is not just about Provident; it is also about paying off the money for the television through the slot in the back. People put a pound in, and they had 10 hours of television. In that way, they could pay off their television. It was always a nightmare, because the pound was guaranteed to run out just at the conclusion of “EastEnders”, and we would never know what the cliffhanger was. The hon. Gentleman is absolutely right that once the television had been paid off, the firms would come round and say, “The carpet’s looking a bit bald. Do you fancy a new one? What about a new washing machine.” They would then sign people up.
This problem of high-cost lending still exists. I cannot believe that I am going to admit this in a Westminster Hall debate, but I actually watch Jeremy Kyle; I am ashamed to admit it, but I have watched his show. As I was waiting for the all-important DNA tests and the lie detector, the adverts came up. One was for a company called Wonga.com. It was wonderful; Wonga was revolutionising same-day lending. I thought, “This is marvellous.” The advert said, “You’re in control.” I thought, “This is brilliant.” Then, however, I looked at the APR, which was 4,125%—pure, utter profiteering.
I did not think any more about the company. Then, however, I got on the tube on Monday morning, and there was an advert for Wonga.com, saying, “You’re in control.” The APR was more than 4,000%. I cannot get away from this company. I was watching “Match of the Day” and the press conference after the match. There were adverts for Barclaycard, but the Blackpool players also had the word “Wonga” right across their chests. Such things give the company the legitimacy that it does not deserve.
There is a way of out this. Yes, we can have legislation, and I pay tribute to my hon. Friend Stella Creasy, who has done a lot of work on the issue, and I am sure she will speak about it later. However, there is a more intrinsic way forward, so let me move on to credit unions.
The other day, I went to Islwyn Community Credit Union with my hon. Friend Mr Thomas—I will not talk about our earlier visit. We talked about how the credit union had lent a total of £1 million to the most vulnerable people. To pick up the point made by the hon. Member for East Hampshire, the people at the credit union said it was all very well lending money at competitive rates and allowing people to save, but that people did not know about credit unions. Provident, Safeloans and Shopacheck will knock at the door, and people can go to Wonga, Ocean Finance or someone else, but they do not know about credit unions. People are hearing about them by word of mouth and they are hearing about getting more protection points.
The other day, I was proud to visit Trinant school—I must give it a plug. If anybody wants to see a credit union, they should go there to see the children’s enthusiasm.
The pupils have formed their own saving scheme, which is run along the lines of the Islwyn Community Credit Union. Those children have saved £600. The scheme has 56 members. One of the wonderful things about the scheme is not only that the children are saving, but that they are so enthusiastic that they are going home to their parents to tell them about credit unions. They are promoting credit unions in that way. This is an excellent project.
When the Minister sums up and talks about credit unions, I hope he will talk about Wales. Everybody in Wales has access to a credit union, and I really think the coalition Government should have that as an aspiration more widely. We should also take legislative obstacles down. I would ask the Minister to lower the minimum age necessary to join a credit union, which is presently 16—the same as the minimum age people need to be to serve as a company director. If we take such steps, we can promote credit unions, good lending and good saving.
I turn now to the mutualisation of the banks. I have been accused of banging on about the banks, but, like many Members, I am disappointed that Northern Rock will be sold privately. I hope the Government can look at introducing a mutual element, because we need that in society. In the middle of the banking crisis, there was one bank that did not need bailing out and which had run its business ethically: the Co-operative bank. When we look at the banking sector again, I hope the Co-operative bank is one of the examples we look to and learn from.
It is also true that the Nationwide, a mutual building society, did not require a bail-out. In fact, it was like the Rock of Gibraltar throughout the crisis.
As my right hon. Friend says, there was also the Principality. That backs up my point that we need a mutual element. We need something strong in the banking industry; we need a safety net.
I will conclude now, because I have spoken for a long time, including about the valleys. Co-operatives have a huge role to play in the economy. They are central to society, and I hope that, when the Minister sums up, he will give a strong commitment to ensuring that they have an important part to play in our future economy.
It is a pleasure to speak in a debate under your chairmanship, Mr Amess.
I should start by disclosing that I do pro bono work with the John Lewis Partnership, which kindly pays into a charitable fund for local independent charities in my constituency. I am also the chair of the all-party group on employee ownership.
I massively welcome the debate and its excellent timing, coming as it does in co-operatives fortnight. I very much congratulate the hon. Members for West Bromwich West (Mr Bailey) and for Islwyn (Chris Evans), as I know other Members will, for calling this important and timely debate.
I want to celebrate two organisations in my constituency. One is Money Box, which is Herefordshire’s own credit union. The second is Widemarsh Workshop, which I am working to help transform into a co-op. It is a social enterprise that creates excellent furniture and works with disabled local people.
I have been interested and actively involved in co-ops, mutual organisations, employee-owned firms and similar organisations for many years. In that context, I pay tribute to an extraordinary man called Robert Oakeshott, whom many Members will know of and who died about 10 days ago, on
I am also very pleased to have been able to help so many of my colleagues and to spread the word on the value of co-operative and mutual ideas on the centre right of the political spectrum through what we have called the Conservative Co-operative Movement. I have 37 Conservative colleagues who are members, and the number is growing. So far we have published two publications. One is called “Nuts and Bolts: How to Start a Food Co-op”, and is a detailed guide. It was mentioned earlier that the original form of co-operative organisation was the industrial and provident society, but now, and in many respects thanks to the previous Government, there has been an expansion, and people can use many different routes, including trusts and community interest companies. One thing that this lovely little book does is to set out all the possible different legal and practical approaches to setting up a co-op, and to consider the advantages and disadvantages. Our second publication is a pamphlet that we have recently published, called “Co-ops in the Big Society”, which explores all the different ways in which co-ops can add to the delivery of public and private services, and the role they can play in society.
Co-ops, with the mutual ethos that they derive from and celebrate, their spirit of trust, and their moral embedding in our society and communities, are of profound importance. One is reminded of the Rochdale Pioneers, whose history brings out a truth that some hon. Members may find slightly rebarbative, although I think it is important to remind ourselves of it: co-ops are by their nature rather conservative—with a small “c”— institutions. The first successful co-op, as has been mentioned, was established by the Rochdale Pioneers in 1844. They were 28 poor weavers and tradesmen looking for a better future as the industrial revolution mechanised the cloth trade. They relied on slowly accumulated subscriptions of £1 each from their members and initially made a modest £13 a week in sales. By 1850, just six years later, the co-op had 600 members, nearly £2,300 in capital and sales of £300 a week. In 1861, 11 years on, it diversified into housing for its members. By the end of the 19th century the Rochdale Pioneers had in turn established the Co-operative building society, which is a major provider of mortgages to this day.
We should look again at the Rochdale Pioneers’ experience. That success was the result of self-help, entrepreneurship and community energy. It was not the result of state patronage or official intervention. Those men and women were able to adapt the co-operative form and the broader idea of shared ownership to a variety of social needs—a local food shop, local housing and local mortgages. They were motivated as much by high ideals as by economic necessity—a point that has already been well made. In their first year of operation they established the Rochdale principles, to which all co-ops broadly adhere today. I think we need something similar today if we are to combat the fragmentation of British society.
There is a huge opportunity—I am delighted that it is being seized and developed by the Government—to initiate a great wave of change across society, whether that is through Cabinet Office pathfinders, the mutualisation of the Post Office or some of the work that is being done to create new forms of delivery of public services. Those are all thoroughly important. No less important are the opportunities to stimulate the growth of co-ops, mutuals, employee-owned organisations and the like in the private sector. That is a point that is widely misunderstood and I am thrilled that the Government take the same positive and proactive attitude towards private sector co-ops as they have to public ones.
I have been looking for an opportunity to return to the issue of Northern Rock, on which my hon. Friend intervened earlier, and his work on assessing the possibility of remutualisation. Is my hon. Friend disappointed by the fact that United Kingdom Financial Investments appears to have made the recommendation on sale but not published the outcome of its assessment of the option of remutualisation? I respect what my hon. Friend has said about it, but it seems a bit odd that we have not seen the detail, even though UKFI obviously must have looked at that subject.
It is a disappointment that UKFI has not published its thinking on that even in outline. The calculations are not enormously complex. There is, of course, a further political issue, which has to do with the return of cash to the public Exchequer at a time of extreme economic crisis, but one still hopes that something of the form of the mutual ethos can be retained in the new organisation when it is ultimately sold.
I wonder whether, like me, the hon. Gentleman is disappointed that the Government have not considered the proposal for a payback to the taxpayer. Perhaps he will join me and other co-operatively-minded MPs to challenge the Chancellor to re-examine the issue, because of the benefits that could accrue from the mutualisation of Northern Rock.
I am not absolutely sure I understood the thrust of the hon. Lady’s intervention. It seems to me that there is an important issue in relation to the publication of the decision that has been made. It is quite right that there should be a public justification of the decision not to proceed with the mutualisation. One would like further progress to be made on retaining the mutual ethos. I am not sure how much further there is to be done on it.
I am afraid I have a foggy head, but my mind is clear on this. The Co-operative party has submitted a proposal to the Government about paying back and the mutualisation of Northern Rock. I ask the hon. Gentleman again whether he will combine with me and other co-operatively-minded MPs to press the Chancellor to respond to that document, which he has not yet done.
Perhaps if the hon. Gentleman agrees that it is worth considering models of remutualisation for Northern Rock, which would examine the payback to the taxpayer through the remutualisation process, he will meet us to look at how to progress that, and not lose the opportunity that mutualising Northern Rock would present.
I am of course happy—if this is what the hon. Lady is asking—to meet her and other Co-operative MPs to discuss that, so that I can understand the proposal better. I do not know whether the hon. Lady was present when I intervened earlier, but there is a clear financial problem to do with the capital structure, the taxpayer value and the sustainability of a model that has a large vendor note sitting in it from the Government—that is a form of loan—and substitutes public ownership of equity with public ownership of a loan, which may be no more stable for less return. There is a genuine economic issue, and that is what we need to engage with.
I hope that we can come together as a House and a community of MPs, in a bipartisan way, to promote co-ops, change our public culture, develop and spread the co-operative ethos, and encourage the Government to push ahead with all the work they are doing so successfully, so far, in this area.
Thank you for the opportunity to speak in the debate, Mr Amess. I congratulate my hon. Friend Mr Bailey on obtaining it. It marks co-operative fortnight and also comes at the 10th anniversary of the Co-operative Commission report.
I am delighted that the debate is so popular—something perhaps illustrated by Jesse Norman. I hope that he may be willing afterwards to look at the document that my hon. Friend Stella Creasy referred to. Often, good ideas in the co-operative movement do not reach a wider audience. If the hon. Gentleman has not yet had the opportunity to read those suggestions, I am sure that we can help him with that, especially as he responded so positively to the intervention.
I am grateful to my parliamentary neighbour for allowing me to intervene. What has been put forward by the Co-operative party is not the only way in which Northern Rock might still end up with a mutual future. It is known that some mutual building societies are, in fact, interested in bidding, even through the Government’s proposed route. However, that will depend on the recognition of a capital instrument. Does the right hon. Gentleman hope, as I do, that we might hear something along those lines from the Government later this afternoon?
I am not wedded to one particular proposal. The Co-operative party has put forward ideas but, as the hon. Gentleman has suggested, there are other options. A genuine will is needed to find a solution to overcome the problems that have been raised.
It is 10 years since the Co-operative Commission published its report on the co-operative movement, and it has come a long way in that time. If we went back further than that—perhaps 20 years—it would feel almost as if we were living in a different world. Then the retail co-operative movement was struggling, but now it is back in the top ranks; then the building societies were under pressure and were not very popular, but now their value is much more appreciated, as has been mentioned.
The creation of the Co-operative Commission was itself a landmark event that demonstrated the co-operative movement was important enough to be the subject of a Government-initiated commission. Virtually everything in that report, which contained some 60 specific recommendations, has been acted upon, mostly by the movement itself. The introduction of legislation during the past decade has assisted the movement’s development and success. As has been made clear in the debate, the name “co-operative” does not guarantee good governance, but good corporate governance has the capacity for business success and stability. Co-operative principles can also contribute significantly to public service.
Today, I want to celebrate the sheer energy and creativity of the movement, as well as its genuinely positive political impact. Politics is not just about narrow party interests; at its best, it is about people working together to change the world. Certainly, that is what drew our 29 Co-operative MPs into the political front line. It is worth noting that that is the largest group of MPs there has ever been in the history of the Co-operative party. In the past year or two, the co-operative movement has seized the opportunity to deliver on the concept of the co-operative school. In the past few days, Ben Reid has launched Co-operative Energy, and Supporters Direct is nurturing the growth of popular engagement with sport. On that point, I hope that the recent glitch can be overcome, so that Supporters Direct can continue and succeed.
The issue is not just about setting up co-operatives. I want to touch on four important initiatives where the experience of co-operative governance is being applied to a much wider aspect of public policy and organisation. The first initiative relates to how British Waterways is organised. I chair the all-party group on the waterways and I am pleased that the Government have picked up on the Co-operative party proposal to move our canals into the third sector under a non-governmental organisation. That idea found its way into the Budget report before the election and has been described as seeking to create a sort of National Trust for the waterways. It has had a positive response from the public. The main aspect of co-operative governance that needs to be built into that new organisation is public engagement and involvement, so that people feel a genuine degree of ownership in the new organisation and are willing to contribute to it both financially and in terms of volunteering. The all-party group will produce a report shortly on the hearings we held in respect of governance and finance.
The second initiative is the idea of a co-operative council. That is not just about having a council that encourages people to consider setting up co-operatives and includes the co-operative model in options for change; it is about transforming the relationship between leadership and management of the council, those who work for the council and the public that the council exists to serve. The idea is powerful and will enable us to refresh how we do business locally.
The third area of initiative is internet governance. The internet offers enormous potential for co-operative solutions. I chair the UK Internet Governance Forum, which is leading the way in the UK in bringing together Government, business, Parliament and civil society to look for better ways of encouraging creative and positive human activity nationally and internationally. It was part of the 2010 Co-operative party manifesto, but we are co-operating across party. Ministers have been very supportive of delivering that approach, and it will be taken a stage further when the UN’s internet governance forum meets in Kenya in September.
The fourth area of initiative is the partnership approach to reducing local crime and disorder. That idea has flourished since I had the privilege of taking the Crime and Disorder Act 1998 through the House and has proved a success in reducing crime. However, the potential of such an approach has not yet been realised because the governance of local partnerships is not as well developed as it should be. In Cardiff, such an initiative reduced violent crime by about 25% more than in comparable cities. That shows the value of taking that approach to enable local partnerships to succeed. Methodology and governance provides the potential for greater success in that respect. Those are examples of areas where the co-operative model can contribute to the public and private sector.
In 2007, I did a piece of work for the Cabinet Office and the Treasury, which was commissioned by the then Minister for the third sector, who is now the Leader of the Opposition. That work was part of the preparation for the 2007 spending review and involved taking a wider, general look at the contribution that could be made by the third sector to social and economic regeneration. My report concentrated specifically on the evidence of what mutuals and co-operatives could contribute to that. It is fair to say that the Treasury officials in particular were genuinely surprised and impressed by what they saw across the country when we were undertaking that work. I personally found it an invigorating experience.
The report showed the contribution that is already being made in areas such as health, housing, child care, financial services and community cohesion. That potential has not yet been realised partly because I discovered immediately after we published the report that the people on the team who had gathered all the information and worked with me so positively were sent back to their original places of work. I am not sure why, but some Departments have the capacity for getting rid of expertise as soon as it has been developed. I cannot blame the Minister for that, but I hope that he will have a look at the report and consider how its findings might be used by the current Government, because its proposals cross boundaries.
During that period, we saw how co-operative principles can transform an inner-city hospital—Homerton hospital, Hackney was the example we considered—and how co-operative initiatives, from credit unions to play groups and social groups, were transforming the lives of individuals and communities across the country. The co-operative movement and the application of co-operative principles in a whole range of areas—not necessarily just to things that would be described as an industrial and provident society—are probably one of Britain’s best kept secrets. I am glad that we are having this debate to highlight, however briefly, all the areas on which the movement is having an impact.
Co-operation and mutuality is alive and well in the sphere of political action, and the latest initiatives to create co-op councils will open up a new era of delivery to our communities locally. Change of power through an election should not just change the name plates at the Executive table; the relationships between the people who work for the council and the public that they serve should also be changed. I hope very much that all the examples given during the debate will lead to a greater flourishing of the co-operative principle and will perhaps pick up the impetus that was given by the Co-operative Commission 10 years ago to refresh our activities into the next decade.
It is a pleasure to serve under your chairmanship, Mr Amess. I am grateful for the opportunity to speak in this important debate a few days into co-operatives fortnight. I congratulate the hon. Members for West Bromwich West (Mr Bailey) and for Islwyn (Chris Evans) on persuading the Backbench Business Committee to enable them to initiate this debate. I very much enjoyed the speech of the hon. Member for Islwyn. I loved the delicious irony of a boy from a mining community in the valleys who went to work for a bank that was bailed out by taxpayers crossing the picket line today to talk about co-operatives. I congratulate him enormously on that.
I am sure that many Opposition Members are surprised to see hon. Members on this side of the House taking a real and genuine interest in a debate on the co-operative movement. I hope that I can not only reassure hon. Members that we support co-ops and mutuals, but reclaim a bit of the movement back for the Conservative party. I was amused to read, in the Library debate pack, an opening line from Guardian journalist Tim Smedley, which read:
“Have you heard the one about the Conservative-led government encouraging public servants to form employee-owned mutuals?”
He went on to write that, “this is no joke.” I know that we are supposed to bristle at the Labour party’s missive to the media to call the coalition a Conservative-led Government. However, as a Conservative Back Bencher and member of the Conservative Co-operative Movement, if a left-wing paper wishes to highlight, even in a mocking tone, our support for co-operatives and mutuals, frankly, that is fine with me.
As the hon. Gentleman mentioned, my hon. Friend said that there are 37 members, but the movement has only just been launched. We are a small but perfectly-formed group. [ Interruption. ] I may also add, thanks to help from my hon. Friends from a sedentary position, that there are 37 members within Parliament.
Without wanting to intrude on this debate, I will not suggest how many Liberal Democrat hon. Members are members of a similar co-operative movement. I will simply say that there are 12.8 million members of co-operatives in this country, and they are the ones on whom we should focus.
I am grateful for that clarification. The hon. Lady may be interested to learn that members of the Conservative Co-operative Movement have been considering whether, perhaps at the next general election, we may do something radical and stand as Conservative, Unionist and Co-operative candidates. That is under active consideration.
It is important to emphasise that the Co-operative party is a separate party—it is a registered political party. A Co-operative and Labour MP has to be selected by the Labour party, and by the Co-operative party through a separate selection process. It is not just a question of the name; it has a very deep reality in our history.
I thank the right hon. Gentleman for his intervention. The issue is under consideration by members of the Conservative Co-operative Movement. I think that we have just ruined any kind of cross-party consensus that we were having on the co-operative movement. The Conservative party should be congratulated on the fact that it has now established this movement in its own party, and I hope that Opposition Members will consider that to be an important step forward.
As I was saying before I was sidetracked, there are many reasons why co-operatives and mutuals are good for growth and for society. Hopefully, I shall cover those reasons in what was supposed to be a very short contribution to the debate. Having spent too much time talking about it recently, one area of co-operative success that I will not focus on this afternoon is football. There have been many debates in the Chamber and on the Floor of the House about football club ownership, so I shall surprise colleagues by avoiding my main non-political passion and concentrate on other issues today.
The co-operative movement has a far greater pedigree than perhaps people give it credit for. The first co-operative was established in 1844, and there has been a steady increase in numbers across the country, with some gaining a foothold and becoming cornerstones of local communities. Examples that have already been referenced this afternoon are, of course, the Co-operative Group and the John Lewis Partnership. Together, they have an impressive combined turnover of approximately £18 billion.
It is often the small co-ops, which do not have the big brand names, that make the biggest and best impact in our communities. As a relative newcomer to the Conservative Co-operative Movement—run impressively, if I may say so, by my hon. Friend Jesse Norman—I have read with interest about the potential for co-operatives. Undoubtedly, they have intrinsic social benefits, promoting ethical, responsible, democratic and equitable ways of doing business. Inclusion, another positive contribution they make to society, ought not to be underestimated, not least at a time when we are asking individuals to do more for their communities. Co-operatives command cross-party support and that is to be welcomed. However, I believe that it is under this Government, with their desire for people to take up responsibility and seize the initiative, that they can really flourish as social enterprises and local providers.
We often hear co-operatives mentioned favourably in reference to their social, ethical and communal benefits, but many people who are not hugely involved in the movement will be surprised to learn of the enormous contribution that they make to the economy. In the south-east region, where my constituency is located, 328 co-ops now employ more than 13,000 people and generate more than £3 billion per annum. They take many guises, and I have read with interest about the coverage that they offer across a range of sectors, including housing, finance, agriculture and retail.
The Minister knows that I am heavily engaged in the debate about high-cost credit lending and debt management companies. I am therefore particularly interested in what co-operatives can offer the financial sector. My hon. Friend Damian Hinds and others who have already spoken have made the point that credit unions demonstrate particularly valuable and welcome traits. They foster a self-help and community ethos, while encouraging financial inclusion, affordable borrowing and prudent saving on a not-for-profit basis.
By law, each credit union must be founded with a common bond, which all applicants must satisfy before they can become members. In the case of the Medway Credit Union, which has a catchment area covering part of my constituency, the common bond is geographical. It restricts membership to those living and working within the union’s prescribed boundaries. It is seeing a steady increase on its 400 members. I appreciate that bonds are being considered as part of the legislative review, but the point is that each member is part of a community that has grouped together to offer a service that is independent of the state and is self-sustaining.
On top of the ability to promote saving and equity in an area such as Medway, where there is a significant personal debt problem, credit unions offer a very different and innovative approach to debt reconciliation, unique to their mutual nature. The advantage a credit union possesses over a high street bank or a loan company, for example, is its personal and flexible nature. Of course, someone can have a rapport with their bank manager, but he is ultimately concerned with generating profit. As part of a credit union, however, each loan that is taken out is given careful consideration by peers and fellow members who have one’s best interests at heart, and any loan taken out incurs a low rate of interest.
The point about the loan being in the best interest is absolutely essential to this. We were talking earlier about the Provident doorstep lending, with their nudge, nudge sales techniques. What a stark contrast the credit unions are, and what a real difference they make to the most vulnerable people.
I agree completely. It is for that reason that it is right that credit unions receive so much support from across the House and from Government. They are great advocates of financial inclusion and can offer an alternative to high-cost credit that blights many, and submerges them further into debt. I look forward to visiting the Medway Credit Union in the autumn, and to helping to raise its profile.
That leads me on to an observation that many have no doubt already made. Small, particularly localised co-ops such as the Medway Credit Union, rely heavily on volunteers. Unlike private ventures, which have a large amount of start-up capital, they can call on little in the way of reserves. If we are to encourage the co-operative contribution to the economy, the Government must focus their energies and funding on providing start-up capital. It is encouraging therefore that the Government have recognised that and established a fund to help mutuals to meet such costs. I would also like local enterprise partnerships, which are meant to focus on providing localised services and on developing a devolved enterprise strategy, to explore how co-ops can become involved, attract investment and improve membership. The Government have previously committed to reducing the regulatory and administrative burdens so that it is easier to start and run a co-operative. I hope that we see that commitment become reality soon. We must then, with some cross-party zeal, start championing and promoting the co-operative movement.
I feel particularly strongly about the issue because, in the run-up to the general election, a major high street bank decided that its small branch in my constituency, with its over-the-counter service and ATM, was surplus to its global requirements. HSBC decided that Aylesford village did not fit into its strap line of “The world’s local bank.” Despite serving an elderly and local business population, the branch was closed without any concern about the impact on the local community. The village is now bereft of its post office and its bank. Given the thousands of names we had on a petition from Aylesford and the surrounding villages, I wish I had seen the example of villagers coming together to provide their own local counter services and forming a co-op. We could and should have done that, and the village would have been better off for it.
I promised a short contribution, but now I have wittered on about co-op opportunities that passed by. This debate, however, has allowed me to emphasise that the co-operative and mutual movement has cross-party support. Co-ops bring huge benefits to society and the economy, and they can demonstrate entrepreneurial brilliance and deliver rewards to all those involved. There are legal obstacles, which the Government are looking at, but it is hard not to want to get involved in this debate and to encourage the establishment of more co-operatives, to help to deliver what society and the country needs.
On a point of order, Mr Amess, I want to put on record my sense of the great discourtesy done to this Chamber and to the House by Stella Creasy, who came in, did not listen to the opening speeches, asked a series of questions and then left. That ought to be in the record.
All I say about hon. Members staying for the debate is that, when I made my announcement about the timing of things, there were 13 possible speakers. I hope I did not scare people off, because we seem to have lost a number of them. I am not referring to our current proceedings but, as far as the specific point made by the hon. Gentleman is concerned, Mr Speaker has said that it is certainly discourteous for a Member to arrive, make an intervention and not return. I cast no aspersions on what is happening at the moment.
Further to that point of order, Mr Amess, as we are having this discussion about courtesy, has not Mr Speaker also ruled more than once in the past that, if a Member intends to make a critical comment about another Member, he should first have spoken to that Member, to apprise of his intention and to see whether there might have been good reason for any action that had provoked him to intervene?
I declare an interest: along with many other Labour and Co-operative Members of Parliament, I am proud to be part of a movement motivated not purely by the pursuit of profit but by values of openness, social responsibility and solidarity. As well as being founded on strong principles, in practice co-ops and mutuals can be more efficient and are a positive force in local communities. The co-operative model also makes sense economically. As right hon. and hon. Members in all parts of this Chamber have alluded to, last year the co-operative economy throughout the UK stood at 12.9 million members, who were part of almost 5,000 co-operative businesses, with a turnover of £33.5 billion, contributing 237,800 jobs to the national economy. In the north-west region, where my constituency is located, 416 co-operatives turn over £2.2 billion and employ 20,350 people. As a proud member of the Lodge Lane credit union, I see the many benefits of co-operatives in my own constituency.
As well as highlighting the successes of co-ops nationally, I want to focus my remarks this afternoon on how the co-operative model is thriving in the energy market. Up and down the country, communities have come together to find new ways of generating renewable energy. Co-operatives have pioneered renewable energy in the UK, whether large ones such as the Co-operative Group powering its stores with renewable energy or innovative businesses such as Powys-based Dulas developing green technologies.
The co-operative model is providing communities with the means to invest in, own and benefit from new wind farm developments. Nine community co-operatives currently own wind farms in the UK, providing a great model of community power. Baywind, for example, is a wind co-operative in Cumbria which has successfully carried out two share offers since it was founded in 1996 and has more than 1,300 members. Westmill wind farm in Oxfordshire is entirely owned by about 2,500 members, largely drawn from the local community, who between them have invested £4.4 million. Nationally, wind farm co-operatives alone have 6,700 members and turn over £2.5 million.
Until recently, energy co-ops have benefited from a supportive central Government. Recent Government decisions, however, have resulted in support for community-based energy co-operatives being withdrawn, risking their success. The Government’s decision to cut the feed-in tariff subsidy for projects that generate more than 50 kW will mean that many community co-op solar projects on hospitals, schools and community buildings are now no longer commercially viable. Alongside that, it was announced in the 2011 Budget that renewable energy schemes eligible for the feed-in tariff would no longer qualify for tax relief under the enterprise investment scheme, harming at least 20 communities planning a community share launch soon—the business model is entirely based on securing the feed-in tariff and the enterprise investment scheme. Small schemes with less than £0.5 million of capital costs will struggle to be viable.
Community ownership is a wholly different approach to purely commercial operations and brings additional benefits such as increased community engagement and education on low-carbon issues, but it does not often generate the same level of revenue to pay the interest on investors’ capital during the early years of development. In that situation, the enterprise investment scheme offers a breathing space for community initiatives not to pay interest while the enterprise is established, allowing them to grow. It is regrettable that moves to boost equity investment in small enterprises will damage the smallest of those enterprises and many co-operatives and mutuals.
As well as removing support for existing co-operatives, the Government have rejected Labour plans to encourage the establishment of new energy co-operatives. We recently concluded the Energy Bill’s Committee stage, and many hon. Members are familiar with its provisions. The main Government proposal in the Bill is to establish a pay-as-you-save energy-efficiency scheme called the green deal, a programme first piloted under the previous Labour Government. Under the green deal, homeowners and tenants will be able to borrow money to make energy-efficient improvements to their homes, such as insulation, with no up-front costs. The improvements will be paid for in instalments from the money saved on utility bills.
The new marketplace that the scheme will create offers huge potential for co-operatives and mutuals to become green deal providers, installing energy efficiency measures. Labour’s vision of the green deal marketplace is one in which small businesses, co-operatives, mutuals and social enterprises are able to compete equally alongside the big energy companies and supermarkets that want to take part in the scheme. For that reason, on behalf of the Opposition, I tabled amendments to the Energy Bill in Committee which would have guaranteed fair access to the marketplace for co-ops and reduced the administration costs that they would have had to pay in order to take part in the scheme. I hope there is broad agreement on both sides of the House that co-ops and mutuals that want to benefit our communities and focus resources on vulnerable people and households in fuel poverty should not be excluded from the green deal marketplace.
Reduced admin fees and fair access to the market would not only lessen the financial start-up costs for those organisations, but would act as an indicator to them that they have an important part to play in the green deal. Surely the idea of helping co-operatives and mutual societies to flourish, instead of the market being dominated by a few big companies, is very much in the spirit of the big society? Unfortunately, the Government did not think so, and voted down those amendments. That did not stop the Minister of State, Department of Energy and Climate Change, Gregory Barker, using warm words about co-operatives, but what good are words when they are not followed up by actions?
“The evidence increasingly shows that they reduce absenteeism, improve performance management, encourage innovation, and increase productivity.”
Will the Minister take the concerns that I have raised back to his ministerial colleagues in the responsible Departments, and press them to look again at their decisions, so that instead of punishing co-ops and mutuals, we build on them and drive the energy co-operative sector forward?
The threat of climate change is the greatest threat to our planet, and it is only through co-operation that we will be able to take urgent global action to fight it. Renewable energy co-operation to tackle climate change and to reduce household fuel bills at a time when they are increasing is just one example of how co-operatives can benefit our society. This debate has highlighted how much co-operatives can benefit our society, and it is timely at the start of co-operatives fortnight. From banking and finance to renewable energy and environmental protection, co-operatives are making a difference. I thank my hon. Friends for securing this debate, and I thank you, Mr Amess, for your stewardship.
I intend to consolidate some potential interventions in a short and efficient speech, partly in recognition of you, Mr Amess, because your role as chairman of the all-party group on small shops reminded me of a few extra elements that have not been touched on. The first is the impact on the high street. The Government have commissioned Mary Portas to review the high street, and having avidly watched her TV programmes for some years, I know that her main mantra is about customer service. All too often in this great nation of shopkeepers, customer service is appalling at best. Through the principle of co-operatives, employees are directly involved and have a direct incentive to offer far better customer service, and to help to rescue our high streets. That is an element that we should consider.
Some hon. Members have talked about credit unions, and I intervened several times. It is essential to the interests of the most vulnerable consumers that they have access to loans on which their interests are put at the heart of decisions, in stark contrast with the doorstep lenders who prey on people, and encourage them to get into a long-term cycle of expensive debt, and end up buying dodgy-smelling perfume. There is so much consolidation of banking services on the high street that there is less competition, and that is another opportunity for the credit unions to step in. Access to services is key, because vulnerable people often do not know how to access more affordable credit, and the help and advice that come with it.
I want to issue a slight warning to Chris Evans for picking on Wonga. It does not lend to vulnerable consumers, who must go through rigorous checks. If the headline interest rate is 4,400% APR, and if someone is two days from their pay day and wants to borrow £100 to tide themselves over, they will be charged a product fee of £5.50 plus 4,400% APR of £1 a day, so they will pay £7.50 for the privilege. If they just go overdrawn at their bank, Lloyds TSB, for example, would charge a flat fee of £10 a day plus £2.50 for the debit card charge, which makes a total of £22.50 so they will be £15 worse off. We must be careful not to fall into the traps of some headlines.
The way to get round the problem is to support my financial education campaign so that more people understand the deals that are put before them. However,
I was testing some people on Wonga’s APR yesterday, and not one person was able to calculate the interest rate, including a Treasury manager.
I agree with some of the hon. Gentleman’s sentiments about APR. I have always said that people should be quoted a flat rate of interest, which is simpler and easier to understand than APR. As Tracey Crouch said, I used to work for Lloyds TSB, and I have regretted it every day since, but I have always said that a flat rate is simple.
I thank the hon. Gentleman for his intervention. In an ideal world, we would have cash-for-cash comparisons if people wanted to borrow money. I echo the comments about doorstep lending. The Minister feels strongly about it, and it really needs to be dealt with. The sales techniques are nothing short of disgraceful.
Does my hon. Friend agree that despite the apparent attraction of straightforward interest charges being disclosed, they lack something because they do not cover any of the behavioural charges. There is no perfect way, but it would perhaps be slightly closer to perfect to have disclosure of both the set-up costs for the loan, and the interest rate on top. That twin-rate approach is much more reflective of lenders’ cost structures.
I absolutely agree. The key message is that the Government are reviewing the matter, and they should do so with time and patience to make sure that it is delivered in the right way that people can understand. We do not want to fall into the trap of obvious headlines, because that would just make the situation a lot worse.
On public services, I spent 10 enjoyable years in local government, four of them as a cabinet member making key decisions. I fully support the principle of allowing staff with front-line experience, and who are fuelled by their direct passion, to make a difference and have a greater say in how services are delivered, instead of remote politicians—this applies to all of us—without that experience.
I pay credit to the Co-operative shops—my local shop is a Co-op and its cheesy tasty bread is very good—for the way they conduct the elections to their board. Every member—I am a proud member of my local Co-op—is sent a clear booklet, and as we consider creating elected police commissioners and having other elections, that may be a model to consider, especially if we manage to ban political parties from being involved in such things.
It is a pleasure to serve under your chairmanship, Mr Amess. As many other hon. Members have done, I declare an interest as a Labour and Co-operative Member of Parliament. I also join other hon. Members in congratulating my hon. Friends the Members for West Bromwich West (Mr Bailey) and for Islwyn (Chris Evans) on securing this debate as we come to the start of co-operatives fortnight. I want to highlight the contribution of the mutual sector in many areas of life, and then to comment specifically about one sector, leaving the Minister with plenty of opportunity to respond to the issues that hon. Members have raised this afternoon.
As other hon. Members have said, one of the challenges facing the mutual sector has been to explain what a co-operative is, how it works, and why it is relevant in the present and the future. My family’s experience of co-operatives is slightly different from that of my hon. Friend the Member for Islwyn. My grandparents were dairy farmers in east Kent, and were part of a co-operative that fed into a retail co-operative, so there is a long and varied history of what co-operatives are. There is huge potential for their future, and I am glad that in recent years we have started to go beyond the common misapprehensions and the occasional suspicion or dubiousness on this side of what co-operatives are about and how they fit into the wider Labour movement. It is gratifying that we have got over that in recent years, and I hope that we are now starting to see not just the value of co-operatives, but the potential for future co-operatives and how we can develop them in future.
I want to speak about one form of mutual ownership that is particularly close to my heart. Unlike Tracey Crouch, I will not apologise for talking about football supporters’ trusts yet again, because it would be remiss of me in this debate not to refer to them in a little more detail than others have been able to do. My personal involvement in the co-operative movement and Co-operative party comes from having helped to establish the Fulham Supporters’ Trust just over 10 years ago. If anyone is at a loose end this evening, Fulham start their European adventure at Craven Cottage, and hon. Members would be more than welcome to join me in attending the game to watch Fulham play the team that finished third in the Faroe Islands Premier League.
It seems an apposite time to raise the issue of supporters’ trusts, because of the problems surrounding Supporters Direct to which I want to refer this afternoon. Supporters Direct is a matter of concern to hon. Members from all parties—early-day motion 1909 on the funding of Supporters Direct has been signed by 66 hon. Members from all parties except the Scottish National party, although that is not necessarily a good way to measure levels of concern.
Many hon. Members will be aware of and familiar with the work of supporters’ trusts in their constituencies, and there will be clubs—rugby league clubs as well as football clubs—in which they have either a constituency interest or a direct supporter interest.
On that point, I am a proud member of Swindon Town supporters club, which I joined when it first formed. One challenge it faces is that it often meets in moments of crisis—Swindon Town lurched from one crisis to another until the new owners transformed it. We need to encourage supporters’ trusts to set up and work in the long term, especially when the sun is shining on a football club.
The hon. Gentleman anticipates the point I was about to make. My experience—and that of many others involved in supporters’ trusts—has been that at a moment of crisis, when owners walk away from a club because they have lost interest, or are unable to continue because it is more challenging than they thought it would be, they leave clubs in the lurch. One thing that can be said about football clubs is that players, managers and chairmen may come and go, but the fans remain constant. They have a huge amount of concern for and emotional attachment to their clubs, and they will step in. In the past, fans have stepped in very successfully—we could all give examples of trusts that have become involved in running a club, and done it well. The hon. Gentleman’s point is right. I desire to see supporters’ trusts not only getting involved in times of crisis when no one else steps in, but also getting involved in representation and the running of the club, so that there is a direct link to the supporters and communities.
That is why I am concerned about the situation with Supporters Direct. As I know from personal experience, Supporters Direct has provided huge support in getting trusts established, and it has campaigned on some wider issues concerning the ownership of football clubs and other sporting clubs. We need such a body to help co-ordinate that work. I raised that point with the Minister for Sport and the Olympics during questions to the Department for Culture, Media and Sport a couple of weeks ago. He recognised the issue and said that talks would be taking place on Friday. I am not sure which Friday he was referring to, but there have been a couple of Fridays since then and the issue is as yet unresolved. If Supporters Direct, or an organisation of that type, does not take that role, there is the danger that supporters’ trusts that need to be developed will not get the opportunity to learn from others and proceed with development. Instead, the funding will be fragmented and, as hon. Members will be aware, it is a relatively small amount of money given the wealth that swirls around football, particularly at top level.
As I understand, part of the Premier League’s reasoning concerns comments made by the former chief executive of Supporters Direct. I know that the individual concerned regrets those comments; he has apologised fully and since resigned. I hope therefore, that that issue is not still an impediment to the continuation of Supporters Direct. I realise that that is not the Minister’s direct responsibility, but I hope that he will mention the issue to his colleagues in the Government. It is an important aspect of co-operatives and mutuals and there is a great degree of concern about it.
I also wish to raise a couple of specific issues about credit unions. Damian Hinds and my hon. Friend the Member for Islwyn spoke eloquently and passionately about the role of credit unions. I am fortunate in having a number of credit unions in my constituency, and everybody is covered by the bond for credit unions. Blantyre and South Lanarkshire credit union means that the whole of South Lanarkshire is covered, and there are a number of smaller credit unions in Rutherglen, Cambuslang and Hamilton.
On Friday I met representatives from the WHEB credit union—Whitehill, Hillhouse, Earnock and Burnbank—which operates in a small part of Hamilton in my constituency. I raised a couple of issues with them that refer back to the comments made by the hon. Member for East Hampshire, particularly in relation to the potential for credit unions in the future. The ambitious and appropriate programme for future development will do a huge amount of good to the credit union movement and to consumers, but we must be aware of the concerns felt by smaller credit unions that they do not get lost in a drive that could up with larger credit unions effectively taking them over. I say that because WHEB credit union, for example, is tied to a specific, but quite small geographical area and has a relatively small number of members in comparison with other credit unions. WHEB is trusted in that area because it is seen by members of the community as a sound source of credit and a reliable organisation. I am slightly concerned that in the drive to develop credit unions, some of the smaller and community credit unions could be left behind. I do not want that to happen.
I have a further point, which is relevant to the Minister’s responsibilities. WHEB told me last week that one problem that happens more and more frequently is where people join the credit union and save the minimum amount needed to have access to a small loan. They then take out that small loan and almost immediately apply to become bankrupt, which they use as an opportunity to get over the repayments. I appreciate that insolvency is a devolved issue, and that accountancy and bankruptcy are devolved responsibilities in Scotland, but part of the problem I have described is because of radio adverts, for example, that say to people “We can help you get rid of your debts by you becoming bankrupt”, without explaining some of the consequences. We hear about such things more and more frequently, and we heard during earlier contributions about some of the other advertising that goes on. There are examples of people using credit unions to save enough to be able to borrow money, and they then default on their debts.
That issue was raised with me because, as I have already said, WHEB is a small, community credit union—I am sure there are many others—and it is not well placed to absorb the number of insolvencies that are taking place. I was told that there were seven such cases over the past month. That might not sound like a lot, but for a small credit union in that area it is starting to have a significant impact and causing concern. Perhaps when the Minister responds, he will address the issue of advertising for such services, which, given the way the adverts seem to suggest to people that all their problems could be over, borders on irresponsible. The effect on smaller credit unions is an unintended consequence of that.
I am conscious that the debate is about co-operatives and mutuals, so I do not want to draw the hon. Gentleman too much further into this area, but does he agree that part of the problem is that, these days, the route that people end up pursuing in an alleged solution to their debt problems seems to be driven far more by which advert they see first, rather than which type of solution is most appropriate to them? In some cases, it will be insolvency, but in many others it is not, regardless of the fact that the specific firm that they go to may have charges that are inappropriately high.
The hon. Gentleman makes an important point. I am under no illusion that the issue is an easy one for the Government to tackle, but I wanted to reflect the concern and raise it with the Minister. I am sure that he is aware of it, but I hope that he will comment on it.
Finally, I want to reflect on the importance of mutuals and co-ops. This has so far been a very good debate, covering a wide range of issues. That highlights the wide range of co-operatives and mutual organisations that exist. They are not just an interesting historical relic, but a huge opportunity for the present and for the future. In relation to Supporters Direct, I am pleased that the coalition agreement is explicit about the positive role that can be played by supporters having ownership of football clubs on a mutual basis. However, some contributions to this debate have reflected the fact that there are a lot of warm words on this issue and we now, across the parties, want to see those transformed into action on the specific points that we have discussed. I hope that the Minister will be able to reflect on and respond to those points and give Opposition Members some comfort that the rediscovery of mutualism by a wider range of people means that there is a real, lasting and meaningful commitment to helping to develop mutual solutions to some of the issues that the country faces.
I welcome the opportunity to have this debate and I congratulate my hon. Friends the Members for West Bromwich West (Mr Bailey) and for Islwyn (Chris Evans) on convincing the Backbench Business Committee to allow it to be held. I also echo the welcome for the opportunity to speak under your chairmanship, Mr Amess.
I am a member of the Co-op party; indeed, I am privileged to chair the Co-op party, and to be a Labour and Co-op MP. I therefore particularly welcome the opportunity to speak in this debate for the official Opposition. As other hon. Members have said, it is taking place during co-operatives fortnight, which runs until
First, let me acknowledge the contributions made by hon. Members who have taken part in the debate. My hon. Friend the Member for West Bromwich West, in setting out the scope of the debate, rightly alluded to the stereotypical view of the co-op movement that there certainly was throughout the 1990s and the early part of the current century. It saw co-ops not as dynamic and forward looking, but as things that were associated very much with the past. He rightly drew attention to the considerable change in the fortunes and perceptions of the co-op movement. I am sure that he shares my view that part of the reason for the turnaround in the perception of the co-op ideal in recent years has been the performance of the Co-op Group, notably under Len Wardle as chair and Peter Marks as chief executive.
I also echo my hon. Friend’s tribute to Cliff Mills, a solicitor from Cobbetts and an expert on the law surrounding co-ops. When I had the privilege of taking a private Member’s Bill through the House in 2002-03 that, I hope, began the process of modernising co-op law, Cliff Mills was a huge support and source of expertise. My hon. Friend was right to pay tribute to him.
Damian Hinds rightly drew attention to the contribution that credit unions make and to their considerable potential to do more. He drew attention to the opportunity for the current Government to build on the work of the previous Government in encouraging access to credit unions. He gently asked—I paraphrase—why on earth the Government had not got on with the legislative reform order. Perhaps the Minister will be able to tell us when that order might appear before us.
A number of hon. Members drew attention to the difficulties that many people in the community that we represent have in needing to access money. I remember from my time in government the huge concern that grew and still exists today, which no doubt the Minister will want to comment on, in relation to illegal money lending. I pay tribute to my predecessor as the Minister responsible for consumer affairs, Ian McCartney, for, among other things, creating the concept of illegal money lending teams. That resulted in multidisciplinary teams, whose members included police and people from housing associations. They worked together not only to crack down on loan sharks, many of whom were particularly unpleasant individuals—there has been real success in bringing loan sharks to justice—but to ensure that victims had support to get out of the financial problems that had drawn them into the web of the loan sharks. Credit unions were often a crucial part of helping the victims of loan sharks to move towards a more sustainable future. In that context, I will come in due course to a point that my hon. Friend the Member for Islwyn made about access to credit unions across the country.
The hon. Member for East Hampshire raised the issues relating to social ISAs. I would be interested in the Minister’s response to the view expressed by the hon. Member for East Hampshire about their potential. The Minister may be aware of the Big Lottery Fund’s launch of a social impact bond—a particular model that it has backed. Again, I would welcome hearing from the Minister the Government’s view on whether that bond has considerably more potential and in particular whether it has the potential to help co-operatives to expand, perhaps in the way that my hon. Friend Luciana Berger alluded to in the context of renewable energy.
My hon. Friend the Member for Islwyn drew attention to the success of Tower colliery following its conversion to a worker-led co-operative. I echo his praise of the leadership of the colliery. I enjoyed my visit to Islwyn with him. I very much enjoyed the opportunity to see the Islwyn community credit union. Some fantastic people are involved in the leadership and running of that organisation and are making a real difference to his community. He referred to the considerable success that Wales has had in ensuring that there is access to a credit union for anyone and everyone in Wales if they want to join one. That is surely an ambition that we should have for England. It would be good to hear from the Minister whether the Government share that ambition and what they intend to do about it.
My hon. Friend made a very interesting proposal when he talked about whether we should consider lowering the age at which someone can join a credit union. That might encourage far earlier recognition of the potential of credit unions and thus draw people away from the very high interest rates charged by some of the legal companies. Some of them offer small amounts of money on what are often very high interest rates, relatively.
Indeed, but that brings me back to what I said about the difference between Wales and England. Credit unions have a far greater reach in Wales than they do in England. We definitely need to see better access to credit unions in England, and better teaching in our schools about their potential to encourage saving from an early age.
Jesse Norman made a number of important points about the contribution that co-ops have made. He adds to the pressure on the Government to prove their commitment to the co-op sector, as opposed to making worthy speeches about them. I echo his tribute to the life of Robert Oakshott. However, I gently suggest that he needs to do a little more to convince us that there really is a Conservative co-op movement, and that it is not just an oxymoron. We shall doubtless hear more from him on that subject in due course.
I turn to the contribution of Tracey Crouch. She made a number of references to the role of co-ops in the south-east, and I am sure that that will have been appreciated by the members and leadership of those co-operatives. She also alluded to the possibility of Conservatives standing under the banner of the co-operative movement. I understand why she would want to tone down the Conservative brand at the next election, but I doubt that that will be enough to help her.
My hon. Friend Tom Greatrex spoke about the role and contribution of supporters trusts. He and the House may not be aware that the two greatest football teams in Wales and England, Swansea City and Arsenal, both have supporters trusts, and both have been helped by Supporters Direct. My hon. Friend will know, as will some of my other hon. Friends—but not Government Members, I suspect—that Supporters Direct was originally proposed by the Co-operative party and taken up by my right hon. Friend Andy Burnham when he worked for Lord Smith of Finsbury.
I join my hon. Friend in urging the Premier League and the Government to sort out the funding problems for Supporters Direct. It would be a terrible tragedy if the misjudged comments of someone who has now resigned from the leadership of Supporters Direct were to undermine the concept of football supporters trusts and the ambition of giving fans ownership and some further involvement in the running of football clubs. Perhaps the Minister can give us an indication of the Government’s thinking on that, and say whether they have been able to sort out future funding for Supporters Direct.
A number of hon. Members referred to the contribution of the Rochdale Pioneers. It is worth restating that, in opening their first shop on
Today, the global co-operative movement has about 800 million members. It employs 100 million people and secures the livelihoods of some 3 billion people—half the world’s population. Indeed, there are 20% more jobs in co-operatives around the world than in multinational corporations. If only the same attention were given to the needs of co-operatives as is given to multinational corporations, the co-op movement would be in even better shape.
My hon. Friend the Member for West Bromwich West identified the traditions of collective self-help and the entrepreneurial spirit as driving influences in setting up effective co-operatives. As we heard, the UK has almost 5,000 successful co-ops, with almost 13 million members. The turnover of UK co-ops has risen by some 25% over the past three years. Perhaps the best-known example of co-ops in the UK is the Co-op Group, of which the Co-op bank is an essential part. Its move into renewable energy was mentioned by others. There is also, of course, the excellent John Lewis Partnership. If I may crave your indulgence, Mr Amess, I praise also those who are part of the Rainbow Saver credit union, in which I declare an interest, and those who run the excellent Harrow and Hillingdon credit union.
As I said, I had the privilege of piloting a private Member’s Bill through the House, which enjoyed the support of a huge number of co-operatives, including those running Labour clubs, rugby clubs and even armed forces clubs—and, surprising to me at the time, those running Conservative clubs. They all supported my Bill, which helped me to get it past the then Member for Bromley and Chislehurst, one Eric Forth.
Ministers have made a number of positive speeches over the past 12 months or so about the potential contribution of co-operatives, but the Government’s record over that time suggests that the apparent enthusiasm for co-ops shown by the coalition is not backed up by the reality.
Jonathan Evans, who is no longer in his place, and my right hon. Friend Alun Michael have, on many occasions, raised the issue of the possible remutualisation of Northern Rock. Indeed, Co-op Members on the Opposition Benches have been pushing for some time for the Government to give serious consideration to the case for remutualisation.
The Government have clearly rejected that option, but it is important that they publish the work that one hopes has been done on that subject by United Kingdom Financial Investments Ltd. That is necessary not least because, when the Government said that they intended to sell Northern Rock to the highest bidder, there was much media speculation, presumably briefed by Treasury sources, that the Government did not expect to receive in full what they had injected into the bank. Will the Minister assure the House that all the paperwork that UKFI has produced on the feasibility of remutualisation will be published urgently, so that the House can assess whether UKFI and Deutsche bank, its advisers, did a thorough piece of work?
The Minister will be aware of the real concern about other aspects of the financial mutual world, particularly about the new European capital requirements to enable financial services businesses better to absorb losses, and how they will impact on building societies following the introduction of the new Basel standards. They do potentially pose a threat to the future of building societies. I recognise that the Government have acknowledged that and have been in discussion with European partners. I would welcome an update on that and further reassurance from the Minister that the Government are on the case to ensure that these new requirements do not prevent successful mutuals such as Nationwide, the Coventry and the Principality from being able to play an important role in the financial services sector in future.
The Minister will also have been briefed about the concerns about the future of friendly societies and the way in which the Financial Services Authority has revisited its own rule book and used a piece of legal advice. A former Minister, who was re-elected to the House in 2010, introduced the legislation on which that legal advice is based, but has said that it should not be applied to mutuals. None the less, that legislation is being used by the FSA as the basis of a piece of legal advice, which it will not publish, that is causing a series of friendly societies to face the prospect of demutualisation in the long term. It cannot be in the interests of the country to have an important part of the financial mutual sector facing such a threat.
I appreciate that both Hector Sants, the head of the FSA, and the Financial Secretary to the Treasury, who has responsibility for financial mutuals, have come to the all-party parliamentary group on building societies and financial mutuals to answer questions on the issue. As yet, though, there appears to be no serious effort by the Treasury and the FSA to find a resolution to the problem. I urge the Minister, who has made positive comments about co-operatives and mutuals in the past, to use the influence of his position to turn that situation around.
Furthermore, will the Minister explain what on earth has gone wrong with the coalition’s support for co-operative schools? Schools that want to become co-operative trusts have traditionally been funded to the tune of some £5,000 to help with the process. Currently, there are more than 100 schools that want to become co-operative schools. Given the success of that programme, why has the Education Secretary decided to end funding for that programme?
My right hon. Friend the Member for Cardiff South and Penarth mentioned that the previous Labour Government had intended to announce the mutualisation of British Waterways. Will the Minister explain how it will become a genuinely mutual organisation that involves people other than just a select group of trustees in its running?
The Minister has done much work on the future of the Post Office and has announced plans for it to become a mutual. One of the concerns that has been expressed both on the Opposition Benches and outside the House is about whether or not there is a viable business plan. I welcome the mutualisation of the Post Office, but there needs to be a viable business plan if it is to be successful. Will the Minister provide further clarity on that matter?
Will the Minister explain why the Government have decided to scrap the funding that supports the development of community pubs? The previous Government worked with the Plunkett Foundation to set up a programme to support such pubs. The scrapping of the funding can only hasten the demise of pubs in many communities across the country, making it far more difficult for people to come together and organise themselves.
My hon. Friend the Member for Liverpool, Wavertree talked about the failure of the Government to encourage community energy projects. Given that the Minister is a member of the same political party as the person who is responsible for that dismal record, will he pledge to take back to the Secretary of State for Energy and Climate Change the concern of the Chamber over his lack of commitment to co-operative energy projects?
Lastly, in terms of a critique of the coalition’s record on co-operatives, will the Minister explain to the Chamber why the Secretary of State for International Development is refusing to fund again the International Labour Organisation’s project for helping co-operatives in Africa? That programme has had considerable success in helping to strengthen the co-operative model, particularly in the financial sector in Africa, and such a decision seems somewhat at odds with the coalition’s commitment to both international development and co-operatives.
This has been an interesting debate with some important contributions from all parts of the Chamber. None the less, the only conclusion that one can draw after 12 months of the coalition Government is that there have been a lot of fine words about support for co-operatives, but not much action. I hope the Minister will give us some clarity as to when that situation will change.
This has been a very well informed and, mostly, consensual debate. There was a break-out of competition between the Conservative and Labour parties, but it obviously falls to a Liberal Democrat Minister to bring everyone back to real co-operative principles. It was good to see all contributors to the debate affirming their commitment to that. I can affirm my personal commitment, my party’s commitment and the coalition Government’s commitment to working for the co-operative movement and to developing the mutual sector more broadly.
If we look at the performance of the sector at the moment, we can see that it is in rude health. The turnover of the co-operative movement is slightly more than £33 billion and the turnover of the mutual movement rose to more than £100 billion last year, with more than 1 million employees. Interestingly, the Co-operative Financial Services won the FT sustainable banking award in 2010. Clearly, this is a sector that is doing well.
Despite the rather bizarre remarks by Mr Thomas, there have been many strong developments under both Labour and Conservative Governments. I point, for example, to the Oxford Centre for Mutual and Employee-owned Business, which is developing a lot of the thinking and the research so that we can drive forward this agenda in a consensual way. Although this area requires cross-party support, a lot of good things have been happening to it for quite some time.
Let me try to answer some of the points that have been raised during the debate and then I will make some comments about the direction of Government policy. A number of speeches focused on credit unions. My hon. Friends the Members for East Hampshire (Damian Hinds), for Chatham and Aylesford (Tracey Crouch) and for North Swindon (Justin Tomlinson) and the hon. Members for Islwyn (Chris Evans), and for Rutherglen and Hamilton West (Tom Greatrex) spent a considerable amount of time talking about credit unions. This is an area in which the Government would like to see real progress.
My hon. Friend the Member for East Hampshire has been a champion of credit unions. I pay tribute to the work that he has been doing in that area. He mentioned that the Department for Work and Pensions has earmarked £73 million to invest in the sector. However, we are not spraying money around in the way in which we have seen in the past; we have done a feasibility study to see where that money can best be spent.
My hon. Friend referred to a proposal by the Association of British Credit Unions, which is one of the main associations that brings together credit unions, to build an IT platform to enable credit unions to work together potentially through the post office network. Such a move would be significant, and it picks up on remarks that hon. Members have made during the debate. There are two real challenges for credit unions. One is to get better access, so that people can access credit unions. Clearly, a better IT platform, particularly if it was linked to the post office network, would be a massive development in improving our constituents’ ability to access credit unions. The second issue is even more important: awareness. There needs to be awareness that this credit source is available and that it can compete with the high-cost merchants that are around.
I want to reflect on something that the hon. Member for Harrow West said. He was quite right to praise his predecessor, Sir Ian McCartney, on setting up the illegal money lending teams. As a Minister, I have ensured that our funding for those teams continues at the levels that we inherited. Given the cuts that we are having elsewhere, that was a significant decision. The reason that we continued their funding is that those teams are successful and they are curbing the criminals who prey on vulnerable people in our communities.
I urge Members to look at how illegal money lending teams are working. I have been privy to a video of their work, from which one anecdote emerged that shows the importance of increasing awareness of the availability of credit unions. A family had borrowed £200 from a “family friend” on their estate and 10 years later, after intimidation and threats of violence, the family had paid back £90,000. It was only when the illegal money lending teams came and helped them, prosecuted their “family friend” and then gave them support as victims of a crime that they became aware of the existence of credit unions. Now they are borrowing from credit unions and they have put their lives back together, which is a tribute to the work of the illegal money lending teams. However, that story tells us an awful lot about this area and how we should approach it; above all, it shows the need to improve people’s awareness of credit unions.
As my hon. Friend the Member for East Hampshire also said, we need reform in this area of credit unions. We have been waiting for a legislative reform order—I share colleagues’ impatience about that—but it is coming and I am sure that in the autumn we can get it through the House. I am glad that it will have such support and it will make the difference, as my hon. Friend said.
The hon. Member for Rutherglen and Hamilton West made an interesting point in relation to potential abuse of credit unions by people who then went bankrupt. If he can write to me about that issue, we will be responding—soon, I hope—to the consumer credit and personal insolvency call for evidence. Often, people have not focused on the personal insolvency side of the credit unions issue, and the hon. Gentleman was quite right to focus on it. The link between personal insolvency and credit unions is an important one to make and if there are problems we need to deal with them.
The hon. Gentleman also rightly raised another important issue; although it is not particularly germane to the title of this debate, it is important and I am glad to have the chance to speak about it. He raised the concerns that many of us have about the advertising of debt advice. Frankly, I think that I have broken a few radios as I have thrown things at them when they spew out these tempting adverts. We know that those adverts are a temptation that people should not go for. We need to address debt advice. In that regard, one of the issues also applies to credit unions: the importance of raising awareness so that people know that there is free, quality debt advice available. We must make sure that that is better known. The money advice service is doing some research on debt advice and considering how we can take it forward as a priority.
I want to go back to some of the other issues that were raised in the debate. The issue of Northern Rock raised its head. First, I want to say to some Opposition Members that the list of building societies that demutualised during the previous Labour Government is rather a long one. I suggest to those Members that they would be wise to press the Government very carefully on the issue, not least because my right hon. Friend the Secretary of State for Business, Innovation and Skills pressed the Labour Government to tie up some of the loopholes in that area, which they failed to do. I urge them to be a little more cautious as they approach the Northern Rock issue.
I will give way to the hon. Gentleman in a moment, but I think that he should listen to my full response before intervening.
I can say something to those Opposition Members who raised the issue of Northern Rock. I think it was the Commercial Secretary to the Treasury, Lord Sassoon, who made a statement recently that we have launched a sale process for Northern Rock. He had written to the all-party group on building societies and financial mutuals, and he made it very clear that any interested parties can bid, including mutuals. That reaffirms the Government’s commitment to promote the mutual financial sector. Having said that, of course, we cannot rule out any other options at this stage. Members may be interested to know that two building societies have expressed an interest in taking over Northern Rock. Remutualisation is an issue that must be addressed in due course by UKFI, but I am not the Minister with responsibility for UKFI. Nevertheless, those remarks that I have just made should reassure colleagues.
I am very grateful to the Minister for his recollection of my constituency. He has talked about the trade sale route that the Government have announced for Northern Rock. Notwithstanding the fact that he has said that other building societies might be interested in a direct purchase of Northern Rock, can he say categorically that the member buy-out option, whereby borrowers and savers of Northern Rock might have the chance to enter into a member buy-out arrangement, is still on the table and is still being considered among the other options that he was talking about? I understand that my hon. Friend Mr Thomas has written to the Treasury with the details of the member buy-out option.
As the hon. Gentleman knows, I am not the Minister responsible for Northern Rock and my Department is not responsible for it either, so I would be ill advised to go into detail about it. I have tried to ensure that the Members attending this debate received some answers about that issue and I believe that I have fulfilled that obligation, but he may need to attend Treasury questions to probe further on the issue.
I am quite surprised by the hon. Member for Harrow West, because he has been a Minister and he will absolutely know that there are areas that a Minister does not go into when they are the responsibility of another Department. As I instructed the hon. Member for Nottingham East, I believe that he needs to attend Treasury questions and ask Treasury Ministers about this matter.
Let me help the right hon. Member for Cardiff South and Penarth and the hon. Member for Harrow West, who has twice interrupted me from a sedentary position, by saying that the decisions have not been made yet. If a lot of decisions had been made, I would be very happy to tell right hon. and hon. Members about them and let them ask questions about them.
Before the right hon. Gentleman intervenes again, I urge Opposition Members to remember that Labour’s record on demutualisation was very poor. Does he want to apologise for Labour’s record in that area?
I will not go into point scoring of that sort. We know where the demutualisation exercise started and that piece of history is not a very good one.
I say to the Minister that it is normal in exchanges of this sort that, if a Minister is unable to answer a question, they offer to follow up the debate by providing an answer to that question. The difficulty that we have is that very often there is not a good understanding of mutuality within Whitehall; I am talking about official machinery now, particularly in relation to the Treasury. Therefore, there is a fear that a door has been closed that should be kept open. That is what the question is—is the door still open? It is a straightforward question and suggesting that people should attend Treasury questions is not really answering it.
With respect, the right hon. Gentleman clearly did not listen to the answer that I gave, because I made it very clear that the door is open.
If the right hon. Gentleman is prepared to listen, I will bring his remarks and those of other Members to the attention of my Treasury colleagues.
Other general issues about mutuals and co-operatives were raised very pertinently by Mr Bailey and indeed by the right hon. Member for Cardiff South and Penarth. They asked how we can develop mutuals. The hon. Member for West Bromwich West made it very clear that we cannot impose mutuals. Mutuals have to take people with them and there cannot be a top-down approach. I absolutely agree with that. In addition, the right hon. Member for Cardiff South and Penarth talked about a sense of ownership. When we approach the issue of mutuals—whether that is developing more mutuals in the private sector or developing them through public sector reform—we have to learn those lessons.
I will give two examples, one from my constituency and one connected to my responsibilities. In my constituency, we have one of the first social enterprise mutuals in the health sector—Your Healthcare, which was spun out of a local primary care trust. It has slightly more than 450 employees, and will soon have local community members as well. It has been going for nearly a year, and is already a huge success. The employees feel a much greater sense of empowerment and feel relieved of bureaucracy. They elect their own managers, and have been driving efficiency and improving care. The enterprise is a key part of the reform agenda, and shows how powerful mutuals can be.
The notion of a health mutual in my constituency was first put forward about five years ago, and I pay tribute to the previous Government for being prepared to countenance such an idea. There was a lot of debate, because the Government could not quite agree on the issue, but at least they left the door open. Unfortunately, the PCT went too quickly and tried to tell the staff that they had to form a social enterprise, and from the start the staff were worried about pensions and terms and conditions. The local unions came to me, and I went to the PCT and said, “I think the idea is brilliant, but you have to take people with you,” for the very reasons that the hon. Member for West Bromwich Albion—[ Laughter. ]—West Bromwich West gave. The PCT stopped the process and re-consulted. It took a lot longer, but the local unions were then very supportive and the mutual has now gone forward very successfully. That is an example from the health sector of how important it is to involve people and to use a bottom-up approach.
The other example is the Post Office mutual proposal, contained in part 1 of the Postal Services Act 2011. If it is appropriate, we can move Post Office Ltd from being Crown-owned to a mutual model, and the hon. Member for Harrow West is absolutely right that we could do that only if the Post Office became commercially viable. The post office network relies on subsidy at the moment, but we are turning that situation around. I refer the hon. Gentleman to our policy paper published in October last year, which contains a whole set of serious business changes that will ensure that the post office network can go forward, wash its face and approach mutualisation. Those proposals are in stark contrast to how the network was run by the previous Government. For all the hon. Gentleman’s big words about mutuals, when we debated the relevant clauses on the mutualisation of the Post Office, neither Labour Front Benchers nor Labour Back
Benchers asked a single question or tabled a single amendment. That is how interested they were when a major proposal on mutualisation was introduced to Parliament. It therefore ill behoves the hon. Gentleman to make such criticism when Labour Front Benchers did not even bother to ask questions in Committee or on Report about such a significant mutualisation. The hon. Member for West Bromwich West and the right hon. Member for Cardiff South and Penarth were right to make the points they did about mutuals having to work bottom-up.
I want to talk a little more about the Government’s approach. The hon. Member for Harrow West criticised us for not doing anything. Let me be rather more balanced and pay tribute to the previous Government for some of the things they did. The establishment of the new governance model of the community interest company has been very successful. When I recently went to see the community interest company regulator, who is based in Companies House, I heard about many successful CICs that are setting up. The previous Government’s decision to have the NHS right to request in community health care, again was a good thing, as was the development of co-operative trust schools, and we will support those types of initiative. The hon. Member for Harrow West, from a sedentary position, says “How?” He ought to wait a bit and let me finish the list of positive things. I was being positive about the previous Government and therefore he ought not to intervene at this point.
The hon. Gentleman mentioned legislation. The previous Government, through private Member’s Bills with cross-party support, improved the legislative framework. This Government are modernising that framework and taking it forward. We have heard about the legislative reform order. It is currently before Parliament and we hope to debate it in early autumn. We have also enabled greater electronic communication by mutuals, which is a very good deregulatory measure for them, and we will commence shortly the Co-operative and Community Benefit Societies and Credit Unions Act 2010. We are consulting on the future registration and regulation of mutual societies as part of Treasury reforms to the landscape of financial services regulation. The Cabinet Office will give public sector workers new rights to form employee-owned mutuals and co-operatives, going much further than the previous Government and generating a huge amount of interest in many areas of the public sector.
In February 2011 we established the mutuals taskforce to advise the Government and to help drive the process forward, finding a way around some of the technical problems that were completely ignored by the previous Government. The right hon. Member for Cardiff South and Penarth said that this is not understood; we have set up the mutuals taskforce to drive the process and to get external advice so that we can deal with some of the problems with pensions and other regulatory or technical problems. The mutuals taskforce has already met five times, and is a key development in driving the process forward.
I am encouraged by what the Minister has just said. Can he assure us, though, that whoever is dealing with that process in the Treasury and the Cabinet Office will not be dismembered and sent off to do other things as soon as they have developed the expertise that is needed? In my experience, once officials grasp the contribution of mutuality they become great enthusiasts, and we need that in Whitehall.
I am sure that we will learn the lessons from the previous Government’s mistakes.
We have also launched 20 pathfinder mutuals in areas including health, education and housing, to test some of the issues that went untested under the previous Government. The Localism Bill, which we will soon be considering, will give voluntary and community groups the right to challenge local authorities to take over delivery of local services. This is a rich picture of action, and therefore far from not delivering on rhetoric, as the hon. Member for Harrow West tried to maintain, we are indeed delivering.
There are one or two other questions that it would be remiss of me not to answer before I sit down, but I am conscious that I have been speaking for slightly longer than 20 minutes. There were a few questions about Supporters Direct. The Government are actively engaging in talks with the premiership in the hope of resolving the matter. The new head of Supporters Direct will, I hope, smooth some of the ruffled feathers, and perhaps with his efforts and those of the Government some moneys can be unlocked. I think that Members will understand why I cannot say too much more about that.
The hon. Member for East Hampshire asked about social ISAs, and the hon. Member for Harrow West took up the issue. The hon. Member for Harrow West will no doubt be delighted to know that I was not briefed on that question. I am very much in favour of social finance initiatives, such as social impact bonds, community development finance institutions and the big society bank, and think that the Government have been very creative in this area. My colleagues in the Treasury and the Cabinet Office will get a lot of support from the Department for Business, Innovation and Skills in taking the issues forward.
I welcomed this debate, and it has been a good one. I wish the hon. Member for Harrow West had not brought so many partisan things into it, such as mentioning Swansea and Arsenal, but apart from that I am sure that collectively, as a Parliament, we will take forward this very important agenda.
Perhaps I had better start by saying that I am the Member for West Bromwich West, not West Bromwich Albion. Representing, as I do, a constituency that is evenly divided between West Bromwich Albion supporters and Wolverhampton Wanderers supporters, I am always anxious to demonstrate that my football loyalty resides with Cheltenham Town football club. I am a season ticket holder there and a member of the supporters’ trust.
This has been a good debate. There has been some political partisanship, but that is good, and it is probably good for the co-operative movement that the Government are being put on their political mettle to demonstrate their level of commitment. It struck me that it would have been almost impossible to have this debate 10 years ago, because the movement had not then demonstrated how important it is, not just to the economy but to the development of policies relevant to each of the parties’ political platforms. I ought to mention that that is demonstrated pictorially, succinctly and effectively in the Co-operatives UK report “The UK co-operative economy 2011: Britain’s return to co-operation”. If Members have not read it, I recommend that they do so. It is a succinct and easy-to-read document, just right for Members of Parliament, and it graphically and effectively demonstrates the range of co-operatives, their impact and their potential.
Turning to the issues raised, credit unions were mentioned a lot. We will wait with bated breath for the legislative reform order, but it is good that the Government have at least recognised the issue and are prepared to take action to advance that agenda. It has always been a source of amazement to me that credit unions, so powerful in a number of countries that are not regarded as cradles of co-operation, do not seem to have taken off in this country. There is enormous potential for a Government to provide the right legislative background for them to do so, and I welcome that.
There was a fairly sharp political exchange on Northern Rock. From my perspective, there is definitely a feeling in the financial press and elsewhere that the option of any form of mutual ownership has been closed. The Minister says that the door is open and that mutuals still have the opportunity to bid. However, I get the feeling that the conventional Treasury-backed wisdom is that that is not appropriate. My right hon. Friend Alun Michael made a point about Treasury thinking.
The Minister commented on the previous Government’s record on de-mutualisation. I cannot remember exactly which building society de-mutualised when, but I know that when Labour first came to office, co-operators found it difficult to get the Treasury and Whitehall to understand what made mutual organisations and co-operatives different and what potential they had. Numerous battles were fought to obtain that recognition, some of them through the passage of private Members’ Bills; my hon. Friend Mr Thomas piloted one of them. Over time, we were successful. I do not say that we have won every battle, or that there are not battles still to be fought, but we undoubtedly gained much greater recognition of that difference and the importance of the model within the range of financial services. We need reassurance that that opportunity still exists. If it is rejected, we need the reasons for the rejection to be clearly stated and understandable by the co-op movement.
Several other issues were raised, including that of Post Office. My hon. Friend the Member for Harrow West said that we are happy that the model is being considered for Post Office, but given the interdependence of Royal Mail and Post Office, the right business relationship between them is needed so that a co-operatively or mutually run Post Office is not undermined. It would be disastrous to the movement for an organisation of the sheer scale and public standing of Post Office to be made into a mutual in such a way that the financial model undermined it and it was not successful. That could put back the cause of mutuality and co-operation for many years.
My last point concerns an issue on which there was a lively exchange—Conservative co-operators, whom I welcome. It is a reflection of the success of the movement that so many politicians are now willing to jump on that bandwagon. However, some of us were co-operators through the difficult days of the ’70s and ’80s and have brought our battle scars into Parliament with us. The commitment and capacity of Conservatives to claim co-operative credentials will be judged only when they can demonstrate what they have delivered during this Parliament. Co-operators such as my hon. Friend the Member for Harrow West can do so, having piloted a co-operative Bill through the Commons. A range of changes were made as a result of pressure applied by Co-operative Members of Parliament. We in the Opposition are looking at Conservative and Liberal Democrat Members to see whether they can do the same with their Government.
Question put and agreed to.