Co-operatives

Hannah Bardell Excerpts

Thursday 14th July 2016 Westminster Hall

[Stephen Doughty]

That is a crucial point. My hon. Friend, who has been a leader on the co-operative ideal in this Parliament, across the country and within the Co-operative party itself, led the campaign for a military credit union. I would certainly be interested to hear from the Minister about that. As a member of a credit union myself—Cardiff and Vale Credit Union—I know that many Co-operative supporters also belong to and promote credit unions in their communities. I also recognise that fair lending and fair access to finance can help different sectors: particularly, as my hon. Friend pointed out, veterans and those serving in our armed forces. It is crucial that they do not fall prey to the payday lenders who create such a problem in our economy.

We have seen progress not only in fair lending but in fair tax, an issue on which the co-operative movement has shown leadership. It is worth noting, and the House will be interested to know, that Britain’s top five co-ops pay more UK tax than Amazon, Facebook, Apple, eBay and Starbucks combined. That is very much in line with where the public stand. Only 34% of the British public believe that most big businesses in the UK pay their fair share of tax, and, sadly, just 6% trust a company of any size to provide accurate information on the tax that it has paid. Recent research undertaken by KPMG shows that trust in companies’ approach to tax is the fourth most significant factor in how much overall trust an individual places in a company or brand.

The Fair Tax Mark campaign has been established to set a new standard in responsible tax practice, from the smallest shop to the biggest multinational. The pioneers of the campaign have, as we would expect, been co-ops and social enterprises. From the beginning, the Co-operative party, Co-operatives UK and Social Enterprise UK have been highly supportive of the fair tax mark. I am proud to say that the Co-operative party is the first political party to achieve the mark. That is something that we could all aspire to. Co-operative retail societies such as East of England, Midcounties, the Co-operative Group and Scotmid have also achieved the fair tax mark. It is clear and evident that co-operatives have seized the opportunity to benefit from the public’s willingness to punish tax avoiders.

The co-op movement’s enthusiasm for adopting fair tax policies further demonstrates that the co-operative model is an inherently social and responsible form of business. I would certainly be interested to hear from the Minister what lessons he thinks there are for the rest of the economy in the example being set by co-operatives and those leading the Fair Tax Mark campaign. Achieving the mark certifies that a company is making a genuine effort to be open and transparent about its tax affairs and pays the right amount of corporation tax at the right time and in the right place. I am proud of the work done on that.

Co-operatives clearly provide new and innovative solutions to some of the other challenges of our changing economy, one of which is the growing number of self-employed workers. There are now more self-employed workers than at any time since modern records began. Some 4.6 million people, around 15% of the workforce, are now self-employed. Data from the Office for National Statistics show that two thirds of new jobs created in the UK in recent years are down to self-employment. Current projections are that by 2018 self-employed people will outnumber those working in the public sector. That is a huge challenge for Government, for tax authorities and for trade unions, but a challenge that the co-operative movement has risen to. Self-employed workers often do not enjoy the employment rights and protections at work or any of the implicit services associated with being an employee, such as payroll or workplace insurance, let alone such things as pensions or sick pay. They also face additional challenges related to being paid on time, the right to contracts and so on. As we all know, self-employed workers often end up being some of the lowest-paid and most put-upon workers in the country.

With that in mind, it is particularly interesting to note that throughout the country freelancers and self-employed people are coming together to form co-operatives for shared services, in some cases with support from entrepreneurial trade unions that see the opportunity to support members who are self-employed, not just those who are employed in traditional workplace arrangements in larger businesses.

I have some interesting examples. In Wales, the Oren Actors Management co-op allows actors to work between roles as agents for other co-op member actors, marketing their services—a two-way process in which they mutually support one another. That is a very good example of co-operative principles in practice. In Swindon, 50 music teachers have come together to form a co-op to market their services to schools with support from the Musicians Union, with which I enjoy a proud association—indeed, I should state for the record that my register of interests shows that I have enjoyed support from it in the past. The Musicians Union does an excellent job in that respect and I am very excited to see it working to help self-employed music teachers. In London, interpreters came together in a co-op in November 2012 after changes in their terms and conditions when the firm Capita took on the contract to provide interpretation services in judicial courts. I do not want to get into a lengthy debate about Capita and its good and bad aspects, but that is a fascinating situation of a co-op of interpreters coming together.

Compared with practice in some countries overseas, these initiatives are only in their infancy. They have to potential to grow tremendously, like other models witnessed in other parts of the world. I am certainly interested in whether the Minister thinks we could play a bigger role in promoting best practice and supporting such initiatives from other countries. In the United States, for example, Freelancers Union, which was formed for the self-employed, has attracted over 280,000 members. In the Netherlands and Spain, general unions for self-employed workers have emerged and developed since the late 1990s and provide a range of services as well as representation. The Assemblée Nationale in the French Parliament has also introduced legislation, which came into force this January, to recognise the role of 72 business and employment co-operatives, supporting members with accounting and access to the sickness pay and benefits of conventional employees.

It is worth highlighting that the Wales Co-operative Centre, another body with which I enjoy a close association—I work closely with its head, Derek Walker, locally—and Co-operatives UK have recently published the “Not Alone” report, which sets out some key findings on how the co-operative movement and trade unions can come together in the UK to build support for self-employed workers.

[Hannah Bardell (Livingston) (SNP)]

Does the hon. Gentleman agree that recent legislation that erodes travel and subsistence benefits for freelancers and that affects their tax reporting will hinder our freelancers and those working in the environments he describes?

[Stephen Doughty]

I absolutely agree. The challenges, the additional pressures and the disproportionate impact that legislative and other changes can have on the self-employed are often not highlighted enough in this House; they can have a much bigger impact than they would have on a larger company, for example. We need to do all we can about that, and the co-operative movement is clearly playing an innovative and key role in trying to address those changes. The interests of self-employed workers are not well represented in our policy making, with the result that they face unnecessary regulatory burdens and barriers. I am proud that the co-operative movement is championing our self-employed, who make such an invaluable contribution to our economy and represent such a growing proportion of our labour market.

As a Welsh Labour and Co-operative MP, I want to highlight some of the work that is going on in Wales and the contribution that co-ops make to the Welsh economy. In 2015, the Wales Co-operative Centre launched its report on social businesses in Wales. That report outlined the scope and scale of the sector, its performance and the many opportunities for further development. The term “social businesses” includes social enterprises, co-operatives, mutuals and other employee-owned businesses. We have seen the statistics for co-operatives’ contribution to the UK economy as a whole; the report found that the total value of the social business sector in Wales is £1.7 billion and that it employs over 38,000 people. Social businesses tend to be more active in deprived areas than other small and medium-sized enterprises and to employ and procure locally, which suggests that they make an important economic contribution—perhaps a disproportionate contribution—in some of the poorest areas of the country.

Social businesses are a robust and dynamic sector, confident about the future. Indeed, 69% of social businesses in Wales expect turnover to increase in the next two to three years. Women are also keenly represented in leadership positions, with 35% of social businesses reporting a majority of women in leadership roles, compared with 19% of SMEs. Women’s leadership in business and the corporate sector is often discussed in this House, but here again we see the co-operative sector leading the way in putting principles into practice and ensuring that women are occupying a majority of roles. Some of the larger corporates and businesses in this country would do well to learn from that example of the benefits that come from ensuring that the equality that exists in the country is reflected in the boardroom, in decision making and in economic practice locally. It highlights how the co-operative movement is at the forefront of addressing some of the key problems that exist in our labour market as a whole and shows innovative practice in moving forward.

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[Hannah Bardell (Livingston) (SNP)]

Thank you very much, Mr Hollobone. I will do my best not to take such an extensive amount of time. I am sure we would all agree that the last few days have felt like something of a marathon, so I will keep my remarks brief.

I congratulate the hon. Member for Cardiff South and Penarth (Stephen Doughty). We have crossed proverbial swords in this Chamber recently, but I think today’s debate will be more conciliatory than previous ones. There have been many important and significant contributions today and I look forward to hearing the answers from the Minister on issues such as the mutualisation of Channel 4 and a public stake in Transport for London. There are many interesting ideas. I hope that we can work across the House on areas of mutual interest and agreement.

I am very happy to be participating today. My family have a great tradition in the co-operative movement. Both my grandmother and my great-grandmother travelled with the co-operative and I still remember some of the artefacts that my grandmother brought back from Russia in the 1920s.

It is particularly important to discuss and focus our attention on the role and benefit of co-operatives in our society at the end of the Co-operatives fortnight because of the Brexit vote and in the light of the Finance Bill. In this time of economic uncertainty, we would do well to highlight the contribution of co-operative, employee-owned businesses in our economy. Those employee-owned businesses contribute an estimated £34 billion a year to the British economy and there are nearly 7,000 independent co-operatives across the UK. I will not take hon. Members on a full tour of my constituency, but I would like to mention a couple: West Lothian Credit Union, of which I am a member, Pentland Garden Services, based in Kirknewton, and Eliburn Tenant Management Co-operative, all of which have an employee-owned structure and make a great contribution to the local and Scottish economy.

Two of the largest co-ops in the UK are the Co-op and John Lewis, of course. All co-operative retailers, including those two, account for £24.3 billion of the sector’s turnover. With the two strongest areas in the co-operative sector being retail and agriculture, Arla Foods and United Oilseeds contribute £5.8 billion. We cannot ignore their contribution to the economy. Nor can we ignore the co-operative sector’s contribution to the job sector. When John Spedan Lewis, the son of the founder John Lewis, handed the business over to his employees in 1928, he was driven by the desire to improve the working lives of his employees, shaking up the old ways of doing business. Today, the John Lewis Partnership is the largest employee-owned business in the UK. Its 91,500 staff members are partners in the business, and together they own 46 John Lewis shops and 349 Waitrose supermarkets across the United Kingdom, manage their respective websites and run a production unit and farm. That is a significant contribution to the United Kingdom.

John Spedan Lewis was ahead of his time. Studies now show that staff members who are also owners of their businesses are more motivated, engaged and productive. They also experience higher levels of wellbeing. In the John Lewis Partnership, absenteeism is at 3.4%, which is less than half the retail sector’s average.

Given the increasing demand placed on workers today and the impact that 24-hour access to work through phones and emails can have on employees’ mental health—I am sure we and our staff are all well aware of that—putting more ownership in the hands of employees is a model with a lot of merit. The numbers speak for themselves. The White Rose Centre for Employee Ownership, based at the universities of Leeds, Sheffield and York, found that 70% of companies that convert to an employee-owned model report an increased quality of goods and services, 57% report better productivity and 55% report better financial performance.

The co-operative sector currently employs 222,000 workers across the United Kingdom, and co-operatives affect even more of the population than they employ. There are 17.5 million members of co-operatives across the UK—about a quarter of the total population.

As my hon. Friend the Member for Glasgow South West (Chris Stephens) said, the co-operative sector has proven resilient during this period of austerity. Figures from the Cass Business School show that, in the recessionary period of 2008-09, job growth dropped 2.7% but rose to 12.9% in employee-owned firms. Their importance has endured among uncertain economic conditions. Given the current economic conditions and the recent Brexit vote, their importance to the economy is even greater. There is evidence that employee-owned businesses are more resilient and are able to create jobs at a faster rate than their non-employee-owned counterparts during periods of economic instability.

Successive Governments have consistently supported employee ownership. I pay tribute to the coalition Government, which in 2014 introduced a series of tax changes to level the playing field for employee-owned businesses. As a result, shares of profits in indirectly owned and employee-owned businesses are now income tax-free up to the value of £3,600. Business owners can also now benefit from capital gains release when they transfer control of their company to their employees.

However, we must ensure that that legislative support continues. Co-operatives are presently expressing legitimate concerns about details in the 2016 Finance Bill, specifically—I have spoken to a number of businesses that have this concern—that the calculation of the apprenticeship levy will leave employee-owned businesses at a disadvantage compared with conventionally owned businesses. Even worse, there is a real fear that that action could disincentivise the creation of employee-owned businesses in the future. I would be grateful if the Minister commented on that. There has been some speculation about the apprenticeship levy. Given the change in Government, he probably will not be able to clarify that, but any insight he can give will be of great help. A number of businesses, not all of them employee-owned co-operatives, have approached me recently with concerns about the apprenticeship levy. The recent example of BHS and the devastating impact that that has had on its workers shows how important co-operatives and employee-owned businesses are to our economy.

The numbers I have cited demonstrate how important co-operatives are to the economy and the job sector. I do not want their contribution to be diminished in any way by the apprenticeship levy. The present wording of the Finance Bill dictates that the apprenticeship levy does not include dividends to shareholders, but does include bonus payments to employee owners. That will affect about 70 employee-owned businesses across the UK, based on the criteria of companies with a payroll bill of £3 million and over.

In Scotland, the Scottish Government have pledged to encourage more challengers to mainstream service providers and to give consumers more options when choosing a loan or savings. In 2013, Alyn Smith MEP, who received a standing ovation in the European Parliament for his speech following the Brexit vote, said:

“Scotland has a long heritage in the cooperative movement.”

He noted that Scotland was home to the first co-operative—the Fenwick Weavers, in Ayrshire. It is a tradition that brings us great pride. Before I finish, I also want to mention the Edinburgh Bicycle Co-operative, which has a proud heritage in Scotland.

The message from both co-operatives and the statistics gathered by academics is clear: that alternative ownership structure makes an important and sustained contribution to the UK economy.

[Jim Shannon (Strangford) (DUP)]

Before the hon. Lady finishes, will she give way?

[Hannah Bardell]

I would be delighted to.

[Jim Shannon]

I congratulate the hon. Member for Cardiff South and Penarth (Stephen Doughty) on bringing this debate to the House. It is not anti-business to suggest that big business needs to change, and co-operatives are one way of doing that. I would like to make a plea for farming co-operatives, if that has not already been done. We have done that in my constituency. A single farmer by himself cannot make a change, but collectively, with a number of other farmers, they can secure contracts, move forward and employ more people. Does the hon. Lady agree that that is an example of how things can improve? Co-operatives can move things forward and make things happen that big businesses cannot. Sometimes a change is good.

[Hannah Bardell]

I could not agree more. I am always interested to hear what the hon. Gentleman has to say. He is such a regular contributor here and in the main Chamber. The point he makes about being small and agile, and being able to respond and do things in a different way, can be applied to co-operatives—it can also be applied to small nations. I will leave that with the House.

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[The Minister for Civil Society (Mr Rob Wilson)]

It is always a pleasure to serve under your chairmanship, Mr Hollobone. I hope you will indulge me today, because I feel slightly nervous, as I always do on the first morning of a test match.

I thank the hon. Member for Cardiff South and Penarth (Stephen Doughty) for securing this important debate. I also compliment him on his excellent timing for it, following as it does the International Day of Co-operatives only a couple of weeks ago.

I congratulate my new shadow, the hon. Member for Salford and Eccles (Rebecca Long Bailey), and I wish her the best in her new job. It is a bit disconcerting to have a new shadow here, but with an old shadow, the hon. Member for Harrow West (Mr Thomas), sitting just behind her.

We have heard some important things today. Certainly, everyone has commented on the huge value we all see in co-operatives in this country. We in the Government share that enthusiasm, because we believe that a balanced economy is the best way to create a healthy economy. That involves a number of different aspects, from rebalancing our economy across the various regions of the UK, to bringing in greater balance in terms of gender diversity in our industries, all of which means encouraging and supporting a diverse range of business models as well.

Co-operative enterprises have a proud history in this country, as a number of hon. Members have commented. Back in the 1760s, weavers in Fenwick were already forming a society to sell cheaper oatmeal and to help their members with savings and loans. Hon. Members might recall the famous work of the great Welsh reformer, Robert Owen, and the Rochdale principles agreed by pioneering artisans in 1844, which paved the way for the co-operatives that exist throughout the world today.

We want to uphold the co-operatives tradition and ingrain it ever deeper in this country. We have nearly 7,000 independent co-operatives across sectors and across the UK—my own constituency has the True Food Co-op, a not-for-profit community shop that has been selling local food at affordable prices since 2004. I hope you do not mind the constituency plug, Mr Hollobone, in particular today.

I am pleased that the model is increasing further in popularity, with the co-operatives sector growing by 6% a year—that is about 250 new co-operatives every year. Together, as others have said, they make a huge contribution to our economy, worth more than £30 billion and owned by about 17.5 million of our citizens. What makes co-operatives so unique is the democracy that runs through their core: they are run by their members, for their members. From farming co-operatives to football club co-operatives, they are all about their members working together to shape their own service, and their own success.

I noted the interest of the hon. Member for Cardiff South and Penarth in the armed forces credit unions. To remind him, the Government gave £0.5 million from LIBOR funds to establish payroll deductions to allow armed forces personnel to access credit union savings and loans. I understand the project is up and running well, with members joining in large numbers. In due course, it will also serve people in receipt of an armed forces pension. I hope that deals with his concerns.

It is the fact that the co-operative model gives members a stake in their futures that makes it so powerful. A study by the industry trade body Co-operatives UK found that that stake gives members of co-operatives much more motivation and boosts the UK’s productivity to the tune of almost £60 billion. The model is not only productive but highly resilient, as was shown by the financial success of the co-operative sector in the years following the economic downturn of 2008, when it continued to increase its average turnover.

Co-operatives are more productive and more resilient, but they also give their members more control over what matters to them. It is not distant shareholders who have a say; the customers, residents, suppliers or fans that own those businesses set their direction and priorities. Therefore, co-operatives often have a real focus on the social and environmental benefits that those owners want to see. That is why they should undoubtedly be seen as a force for enormous good, not just here in the UK but across the world.

I was asked about learning from overseas. Officials have met the leaders of the co-operative movement in the US to learn about how they have achieved a thriving co-op sector. The Government’s mission-led businesses review, which I commissioned at the turn of the year and co-ops are considered part of, will draw on best practice from around the world.

[Ms Karen Buck in the Chair]

[Hannah Bardell]

The Minister is making some interesting and important points. I hope that he will come on to the apprenticeship levy, which businesses have raised with me. I would be grateful to hear his thoughts and reflections on that and the point about not discouraging apprenticeships in the current business environment.

[Mr Wilson]

I will certainly come to that if I have time, but I have several questions to address, so I will write to the hon. Lady if I do not.

It is important that we create the right kind of environment to help co-operative businesses to flourish, and in 2014 we introduced several measures to do just that. My hon. Friend the Member for Wycombe (Mr Baker) raised the question of further ambition for the sector. He was a bit harsh on what we did in 2014. With those measures, we started by consolidating laws to make it easier for societies to understand and apply the legislative framework and rules governing them. We also simplified the electronic registration process to help new societies get going, and more importantly, made it easier and cheaper for them to raise capital by increasing from £20,000 to £100,000 the withdrawable share capital an individual member may invest. To ensure that any business claiming to be a co-operative functions properly and lawfully, we gave the Financial Conduct Authority further powers to investigate any suspicions of impropriety.

The new Prime Minister has set out her commitment to public service mutuals and co-operatives as a means of safeguarding public services. I was interested to hear the views of the hon. Member for Harrow West. I know that many hon. Members would support the notion that he raised about Channel 4 and perhaps the BBC, but we will see in due course what the Prime Minister has to say about that. The Department for Culture, Media and Sport has published its White Paper on the future of culture in the UK, and the Government will consider the future of key public bodies in light of consultation responses. That will ultimately be for the new Secretary of State at DCMS to consider, but I am sure that the hon. Gentleman will want to get his views heard in that consultation.

I want to say a few words about the important role that co-operatives play in the social investment market. The Government are committed to helping to develop the retail social investment market, which allows people to invest in causes that they really care about. Community shares, which enable local people to buy shares in local assets and invest in causes that they care about, are a great example of social investment models in action and make up an estimated 6% of the overall UK social investment market. We are excited to see large-scale community share-raising by organisations such as FC United of Manchester, which raised £2 million from 2,000 local people. The Government support such share offers through the social investment tax relief, the second anniversary of which we recently celebrated. Several community share offers have benefited from that relief, which has allowed local people to buy shares in Clevedon pier, Portpatrick harbour and Burley Gate community shop and post office.

We have also taken specific measures to support credit unions, which are financial co-operatives. We have around 500 credit unions in the UK, ranging from large and complex financial institutions to much smaller organisations run by volunteers for just a few hundred members. British credit unions combined have a membership of 1.6 million, more than £2.8 billion in assets and more than £1.2 billion in outstanding loans to members, and play an essential role in broadening the range of financial services on offer to customers in the UK. They aim to promote savings and provide an alternative source of finance. That is good for competition, and it is good for customer choice when it comes to the question of whom to bank with.