Christina Rees (Neath) (Lab/Co-op)
I beg to move,
That leave be given to bring in a Bill to make provision about groups of employees at risk of redundancy buying their employing company as a co-operative; and for connected purposes.
As a Labour and Co-operative MP, I am very proud that Robert Owen, who was born on 14 May 1771 and is regarded as the founder of our co-operative movement, and whose vision included villages of co-operation and a “new world order” of mutual help and social equality, was born in Newtown, Powys, in beautiful Wales.
In the 1840s, cotton and woollen workers in Rochdale fought against falling wages and poor working conditions and adopted Robert Owen’s values to form the first UK co-operative. By 1900 there were 1,439 different UK co-operative societies with over 2 million members, and in 1917 the Co-operative party was formed, with an electoral agreement with the Labour Party. UK co-operators believe that too much power rests with a small number of investors, shareholders and executives, and that decisions are often made for the benefit of the powerful and wealthy, not for the benefit of communities, workers, and the environment.
The “Ownership Effect” inquiry, chaired by Baroness Bowles, found that there was an economic dividend to employee ownership that benefits workers, businesses and the wider economy. The Nuttall review of employee ownership found a lack of awareness and a misconception of employee ownership among businesses, and that banks, traditional funders, education, academia and advisers lack employee ownership expertise.
The Employee Ownership Association found that without incentivised support for entrepreneurs and their employees to pursue employee ownership, few would take the perceived risk of changing their company structures and practices. Firms that want to transition to employee ownership, or those that have transitioned but want to expand, have problems accessing loans from banks. In times of crisis, co-operatives resist destabilisation because they fight for the long-term economic and social sustainability of their workers, and sacrifice remuneration to reinvest and to maintain employment levels. Any restructuring takes place locally.
UK Co-operative party public polling in our “Owning the Future” report of June 2020 found that only 10% of people believe that the economy prioritised wealth sharing before the pandemic, but nearly 70% believe there will be an opportunity post-pandemic to widen ownership and give communities more say in how businesses and the economy operate and shape our lives. Unfortunately, nearly two years after the onset of the pandemic, the virus is mutating, not fading away.
One way to widen ownership is to provide employees with the advice, support and funds to buy out their at-risk employer company. In Italy, the former Industry Minister, Giovanni Marcora, established the worker buy-out system over 30 years ago, during the economic crisis of the 1980s. Marcora law gives workers the pre-emptive right to save their jobs by taking their redundancy entitlements, plus three years’ projected social security payments, as a lump sum to invest in a new worker-owned co-operative company, supported by Italian Government loans and advice. Since 1986, the Cooperazione Finanza Impresa, known as the CFI, an institutional investor, has operated Marcora law on behalf of Italy’s Ministry of Economic Development.
This is how it works. The CFI supports the setting up and development of worker production and social co-operatives, prioritising workers who have been excluded from the production cycle when the employer company is at risk, or the employer decides to close the business without succession planning, or a company has been sequestered or confiscated due to organised crime. It does that to promote, increase and safeguard employment so that new co-operatives can grow and compete.
The CFI holds a temporary and minority shareholding for no more than 10 years, with a repayment of 25% due in the fifth year. Its recipients are small and medium-sized enterprises with an annual turnover of less than €50 million and a maximum of 250 employees. The funding lasts for not less than three years and not more than 10 years, with a three-year grace period at 0% interest.
The risk capital shareholding has a maximum value equal to the company capital, or double in the case of reserves and member loans. The debt capital is made up from participative, subordinate and subsidised loans. An amortisation plan is put in place for workers to gradually pay off the funding, by deferred six-monthly instalments, expiring on 31 May and 30 November every year. Funding is granted for not more than €2 million, and not more than five times the share quota, which is held by the CFI in the beneficiary co-operative.
The decision to grant CFI funding is conditional on the positive outcome of checks on workers through the national state aid register—a centralised mechanism for verifying tax payments, social security contributions and public aid—and on workers’ compliance with the anti-mafia code. The average investment per worker is €12,040, which is considered non-taxable for these purposes. The Ministry of Economic Development retains 98.6% of the capital investment and has an oversight role on the CFI board. The CFI has a success rate of 85%, achieved by investing over €300 million in 560 companies, saving the jobs of 25,000 workers with a return of over six times the investment and retaining the skills and experience of the Italian workforce.
I must confess that as a Labour and Co-operative MP, I have previous as far as the Marcora law is concerned. I secured a Westminster Hall debate in September about the co-operative purchase of companies, and in December I spoke about the Marcora law in the excellent Westminster Hall debate that the hon. Member for Wycombe (Mr Baker) secured on co-operatives and mutual societies. In both debates, I set out the benefits of employee ownership, as I have done today, and urged the UK Government to consider introducing a UK-type Marcora law.
Italy is watching us. Camillo De Berardinis, chief executive officer of the CFI, watched my Westminster Hall debate and invited me to speak at the CFI’s 35th anniversary in Rome in November, to celebrate the commitment of Italian workers who had transformed the failing companies that they worked for into successful co-operatives. Unfortunately, I did not get to Rome, but they beamed me in from Neath.
In response to the pandemic, the Chancellor created the furlough scheme, which saved many, many jobs. Perhaps he would consider creating a UK Marcora law to save many more jobs during the ongoing pandemic and in the future: in his honour, we could call it Sunak’s law. I humbly request that my Bill be given due consideration and passed into law.
Question put and agreed to.
That Christina Rees, Gareth Thomas, Tracey Crouch, Luke Pollard, Christine Jardine, John Mc Nally, Claire Hanna, Mr Steve Baker, Preet Kaur Gill, Ben Lake, Rachael Maskell and Jim Shannon present the Bill.
Christina Rees accordingly presented the Bill.
Bill read the First time; to be read a Second time on Friday 18 March, and to be printed (Bill 222).