Corporate Profit and Inflation

Mark Hendrick Excerpts

Tuesday 16th May 2023 Westminster Hall

[Several hon. Members rose—]

[Sir Mark Hendrick (in the Chair)]

Order. I remind Members that they should bob if they wish to be called in the debate. I can see at least four people bobbing.

--- Later in debate ---

[John McDonnell (Hayes and Harlington) (Lab)]

I want to try to take the argument on from the discussions that have taken place so far. My hon. Friend the Member for Liverpool, West Derby (Ian Byrne) spoke about food, which is such a basic need. If we cannot control the supply and price of food, to be frank, we lose control of our overall economy and our society itself. The food increases that my hon. Friends have spoken about relate partly to short-term issues such as the breakdown of the supply chain post covid and the Ukraine war, and partly to two seemingly more permanent issues. The first is the impact of climate change, which is undoubtedly impacting the supply of food, and the second is the almost permanent installation into our economy of profiteering. That is why the Unite report, which introduced the concept of greedflation, is so important.

My hon. Friend cited several instances of greedflation, but food is a good example. There has been a 97% increase in supermarket profits, and a 255% increase in the profits of agribusinesses themselves. Unless we can develop policies to tackle climate change, including by accommodating to it in some areas, and get greedflation under control, these rises will be a permanent factor that will undermine the quality of life of all our constituents in the long term.

This debate is not just an exposition of the problems; it has to be a way for the Government and Opposition parties to talk about solutions to address the immediate problems and look at the long term. My hon. Friend the Member for Leeds East (Richard Burgon)—I congratulate him on securing this debate—mentioned some. The first is the need for immediate action, which must mean price controls. Price controls on basic foodstuffs have been introduced in this country in the past, particularly to deal with short-term problems. I do not think that permanent price controls are effective, but on a temporary basis—12 months, for example—they can be. Other countries, including Switzerland and Hungary, are already developing price controls, and France has introduced its own mechanisms for negotiating prices down on the basis of the expectation of price levels.

My view is that price controls are needed because of the urgent situation our constituents are facing. I think the Unite report said that there has been a 57% increase in the number of households that are restricting their food intake, and in which parents are choosing not to eat so their children can. Unless we can do something urgently to assist them, we will be inflicting human suffering on our society. To be frank, my generation has not seen that before; it is almost reminiscent of the ’30s.

Secondly, let us just talk about excess profits. I want to quote a senior Conservative Minister, who introduced excessive profit taxes across the whole of the economy. He said:

“At a time like this sacrifices should be equally borne. We are not prepared to see excessive profits”.—[Official Report, 11 March 1952; Vol. 497, c. 1289.]

He introduced a new levy, which was charged on the amount by which current profits exceed standard profits. That was Rab Butler in the 1950s, who introduced a model that we could draw upon now. It would extend across the whole economy and would expose and properly tax those who are exploiting the current economic situation.

The other issue is something I have raised in previous debates. During the banking crash—some of us were here at the time—we witnessed a shift in investment from the crashing mortgage economy. The crash at one point brought our banking system to a halt, and almost did something more fundamental, in terms of destroying confidence in the financial system. Money moved out of property, where prices were crashing, and into food speculation, and we saw rapid increases in food prices. In fact, in some areas of the globe, we even saw famine as a result.

Then, on a global basis, an agreement was reached and we inserted into the regulatory regime after the banking crash certain controls on food speculation—for example, how much food wealth could be owned by a particular speculator. The Government at the moment, in their Financial Services and Markets Bill, are removing those protections. Already food speculation is taking place and causing some of the profiteering that is happening, but we are inviting even further speculation, which I think in the short and medium term will result, in the same way it did after the banking crash of 2007-08, in people going hungry and famines occurring in parts of the world.

My final point is that if the Government are not willing to act so decisively with price controls, regulation of speculation or an excess profits tax, the minimum that we should ask for is an inquiry into the anti-competitive market practices taking place in certain sectors. I would like to start with the food sector. We are seeing this demand being met in the US now; an investigation is taking place into the anti-competitive market practices that are happening. The US is at the moment looking at the fertiliser and agricultural business sector. In this country, we need an investigation into the profiteering and greedflation in particular—that is the No. 1 issue—that is taking place in the food and agricultural sector.

We cannot stand by and watch people line their pockets and corporations make excessive profits while our people, in some of our constituencies, are actually starving—they are actually going hungry. That is why, in this period, special measures are needed. They are measures that we have used in the past, that people are using in other countries and that have proved to be effective. If nothing else, if they were even temporary measures, they would alleviate the situation that our constituents face. This is a matter of urgency. That is why I keep repeating time and again, in as many debates as I possibly can, the need for action.

I will just say this to my own party: this crisis of greed inflation, combined with the climate crisis, means that when we take over and go into government next year—as soon as possible, I hope—we will have to address this issue. We will have to have the radical solutions that need to be put forward; otherwise, we will not be fulfilling our historic mission of looking after working-class people in this country.

[Sir Mark Hendrick (in the Chair)]

Now we move to the Front-Bench contributions. I call the spokesperson for the SNP.

--- Later in debate ---

[John McDonnell]

Let me explain this to the Minister. There is such a thing as the Co-op party, of which some people on this side of the House will be members, and there is such a thing as the Co-op store. The Co-op store is not related to the Labour party; it is a completely separate commercial entity. The Co-op party is separate completely, so there is no relationship between the Members here and the Co-op store, although some of them might shop at it.

[Sir Mark Hendrick (in the Chair)]

Order. John McDonnell has made a good point, but for clarification, as a Labour/Co-op MP—

[Andrew Griffith]

Declare your interest!

[Sir Mark Hendrick (in the Chair)]

I do declare an interest. What you call “profits” for the Co-op actually get reinvested in it; they are not given out to shareholders in dividends. That is the difference.

[Andrew Griffith]

As I said, the Co-operative, as a food retailer, is a marvellous organisation. My point is that we should be very cautious about simply making the assumption that an increase in the prices that consumers are paying, which is spread across very different parts of the producer sector, automatically leads to the sorts of outcomes that we heard from Opposition Members.

We have strayed quite a long way away from the topic of debate. I would dearly love to be a fly on the wall, or a passenger on the train as it returns to both Leeds East and Leeds West, because there is some dissonance in my mind about the position of the Opposition today. We have had a very refreshing debate that has been honest and open in its candour. We have heard about the need for the minimum wage to increase to £15 an hour, the need to scrap all anti-trade union laws and to give an above-inflation pay rise to workers, the need for an excess profits tax and for wealth taxes, the need for private rent controls, the need to impose price controls on food staples—there is lots of nodding, so please intervene on me—and the need to return to public ownership every water, rail and energy company. These points were all raised in the debate—

[Sir Mark Hendrick (in the Chair)]

Order. Because of the Divisions, we have run short of time.

Co-operatives, Mutuals and Friendly Societies Bill

Mark Hendrick Excerpts

3rd reading
Friday 24th February 2023 Commons Chamber

[Sir Mark Hendrick (Preston) (Lab/Co-op)]

I beg to move, That the Bill be now read the Third time.

The object of my Bill is to help ensure the best business environment for co-operatives and mutuals, and that means three things. First, we need a good policy understanding of the importance of mutual business, and that must stretch across Government to Ministers and officials. We recognise that it is always a challenge to get attention from a busy Department such as the Treasury, but well-informed and motivated Ministers and officials will give us a fighting chance. Co-operatives and mutuals are an important feature in a mixed economy when their different business purposes are recognised and allowed to flourish. Good policy is the foundation stone for that.

Secondly, on legislative reform, the Bill is part of making legislation on co-operatives and mutuals fit for purpose for a modern economy. Co-operative law was first introduced to this House in the 1860s, and formed the basis for co-op law in many countries around the world, but it has sadly not been kept up to date. We want to draw on the best practice in the world, which is why the idea of protecting assets for their intended purpose is so important.

Countries that have adopted such provisions have much more robust co-operative and mutual business sectors. The removal of the incentive to demutualise means that they can continue to grow in line with the interests of the members they serve. There is more to do on legislative reform, as my original Bill identified. We look forward to working with the Government to ensure that legal options are no longer a poor relation but match the standard of the best in the world.

Thirdly, we need regulators to appreciate the role of co-operatives and mutuals. We can have the best policy and legislation, but in practical terms, progress can be thwarted if regulators lag behind. They should no longer see their role as facilitating demutualisation, as they unfortunately did in the LV debacle. Instead, the true champions of consumers should be driving corporate diversity and choice. If there was one lesson to take from the global financial crisis, it was that we do not want all businesses following the same mistaken strategy. In that regard, diversity is strength, and regulation should take seriously its role in ensuring that co-operatives and mutuals are not ignored, or worse, homogenised into a single idea of business driven by shareholder-owned interests.

The Bill is one of a series of such private Members’ Bills over the last 20 years. I am proud to have played my part in bringing it to the House in the way that my predecessors did. There have been five Bills to modernise co-operative and mutual law, all of which have received Royal Assent. It is welcome that our efforts and endeavours have had the support of Treasury Ministers and from both sides of the House. This is one area in which there is genuine and lasting cross-party consensus. It is no less welcome that we enjoy today the support of His Majesty’s Government for this sixth such Bill. It is perhaps less positive that we have had to take this piecemeal private Member’s Bill approach to legislation, but I sincerely hope that the promised Law Commission review puts that right, and that a modern framework for business is established once and for all.

My Bill is about giving mutuals the option to maintain mutual capital for the purpose for which it is intended. There is a fundamental distinction between the rights of members of a mutual society and members of an investor -owned company. Members of a company—shareholders — have the right to a pro-rata share of distributed profits, or dividends, based on their shareholding, and to a pro-rata share of the underlying value of the company. The more capital they own, the greater their share of the profits and of the value of the company.

By contrast, members of a mutual society generally have neither of those rights because a mutual’s profits are not generally used as a mechanism for rewarding capital, and members of a mutual do not have any expectation of or entitlement to a share in the increased value of their society. As members of a mutual are not entitled to any share of its increased value, the amount by which the net asset value of the society exceeds the capital provided by members—otherwise known as capital surplus on solvent winding up—has no specific owner. It is effectively a legacy asset held by the society for future generations, enabling the society to provide for and invest in its future. That is a core part of the mutual’s identity. It represents the trading surplus accumulated by previous generations of members participating in their society’s business, in which they were always content to have no personal share. By implication, it is held for the benefit of future generations. The society was originally set up not to make capital surplus to reward members, but to provide goods and services for those who need them. That was its purpose, and it was the basis upon which previous generations have taken part in its trade.

Seen through the lens of investor ownership, a capital surplus is a tempting asset—a windfall of unearned profit that, were mutual members to be replaced by investor-shareholders, could be shared out among those shareholders. Capturing that asset is the usual incentive for a demutualisation, which is when a capital surplus or legacy asset is divided up between shareholders, when the mutual agreement between the former members, whereby they engaged in their society on the basis that they would not personally profit from its trade, is broken up. In short, it is when a mutual purpose for the common good is replaced by a profit-driven purpose for private benefit.

In UK law, there is no generic or principled recognition of the value to wider society of mutuality or the legacy asset of a mutual society. As a result, the ability to access legacy assets actively incentivises demutualisation. Provided that relevant formal procedures are completed, including securing consent from a statutory minimum threshold of members, a demutualisation cannot be stopped. The statutory minimum threshold has been changed from time to time for different types of mutual society to make demutualisation less likely, but these measures provide only partial protection. There is currently no statutory mechanism for ensuring that surpluses, which the previous generations never intended should be a private reward for anybody, remain committed to the wider public purpose.

At present, it is not possible for an existing society, or those setting up a new society, to proscribe demutualisation. That leaves mutuals vulnerable to those simply aiming to liberate the legacy asset, share it out among those they choose and convert the business into an investor-owned company. That has resulted in much of the UK building society sector being lost, and their businesses then either failing or transferring to non-UK ownership. That has been bad for mutuality, and bad for the economy with the damage it has caused to corporate diversity. Demutualised former building societies were mostly absorbed into the banks that failed in the financial crisis.

Legislation is needed to help UK mutuals to preserve their legacy assets for the purpose for which they were intended: to maintain and encourage greater corporate diversity and to build a more resilient economy. Mutuals need to be able to incorporate appropriate measures into their constitutions that have a statutory basis, either at the point of establishment or thereafter, with an appropriate level of member approval. That will be even more important if the legislative reforms for co-operative and community benefit societies I have explained are taken forward. To optimise the successful implementation of new legislation, properly recognising legacy assets for the benefits they bring will be an important ingredient for building confidence.

Many jurisdictions have acted to preserve mutual ownership by ensuring that the assets may be used only for the purpose they were intended. That ensures they cannot be distributed to members or third parties, thus disincentivising demutualisation. Mergers, dissolutions and transfers of business are still permitted, so this arrangement does not hamper the evolution of a business in any way. Ideally, such measures would be universal, but in some legal traditions that is considered problematic, as it arguably alters the ownership rights of members retrospectively. It is not desirable to cut and paste legislation between different traditions, so solutions are required that respect the political culture of different legal frameworks. To deal with this, simple legislation can be introduced in common law jurisdictions that would give every mutual the right to choose a constitution that preserves legacy assets for the purpose they were intended. My Bill does that.

My Bill disincentivises the raiding of legacy assets through legislation. Voluntary legislation will ensure that legacy assets are preserved for the purposes for which they were intended. It will empower mutual members to decide what should happen to assets on a solvent dissolution, and it will match the best legislation in many countries around the world.

My Bill would introduce a voluntary power to enable a mutual to choose a constitutional change so that its legacy assets, or the capital surplus, would be non-distributable. It would detail precisely the destination of any capital surplus on a solvent winding-up and would outline the procedures necessary to include such provisions in a mutual’s rules. It would make statutory provision for the relevant rules to be unalterable. It defines the capital surplus as the amount remaining after deducting a mutual’s total liabilities from its total assets, including repayment of members’ capital. It would introduce new provisions to maintain the destination of the capital surplus and ensure that where a mutual’s rules make the capital surplus non-distributable, any resolution to convert into, amalgamate with or transfer engagements to a company will also include a provision to transfer the capital surplus, as provided by the rules in the event of a solvent winding-up.

That is my Bill, Madam Deputy Speaker. I thank the Minister and his team for their co-operation and help in bringing it forward.

--- Later in debate ---

[Sir Mark Hendrick]

With the leave of the House, I wish to thank all my friends and colleagues in the House for their support of my Bill. I also thank the variety of Treasury Ministers who, due to a number of reshuffles, have been able to work with me on the Bill from last year to now, including the hon. Member for North East Bedfordshire (Richard Fuller) and the current Economic Secretary to the Treasury. My thanks go out to all the Treasury civil servants who are present in the Chamber today. I wish to thank Peter Hunt and Mark Willetts at Mutuo for their help and advice in drafting the Bill, and also the Co-operative party, which has supported me throughout the whole of my political career, stretching back to the 1980s when I was in local government, the 1990s when I was in the European Parliament, and since 2000 when I entered this House.

Finally, I wish to thank in advance my noble Friend Lord Kennedy of Southwark for agreeing to take my Bill through the other place.

Question put and agreed to.

Bill accordingly read the Third time and passed.

Co-operatives, Mutuals and Friendly Societies Bill (First sitting)

Mark Hendrick Excerpts

Committee stage
Wednesday 30th November 2022 Public Bill Committees

[The Chair]

Before we begin, I have a few preliminary reminders for the Committee. Please switch electronic devices to silent. No food or drinks are permitted during sittings of the Committee, except for the water provided. Hansard colleagues would be grateful if Members could email their speaking notes to [e-mail].

My selection and groupings for the sitting are available online and in the room. I have selected the three amendments in the name of the sponsor of the Bill, Sir Mark Hendrick. Amendments will be considered alongside the existing content of the Bill in a single debate.

Clause 1

Power to restrict use of assets of relevant mutual entities

[Sir Mark Hendrick (Preston) (Lab/Co-op)]

I beg to move amendment 1, in clause 1, page 2, line 2, at end insert—

“(ba) provide for the case mentioned in subsection (2)(a) to be subject to such exceptions as may be prescribed;”.

This Amendment would enable the Treasury to make provision in the regulations about exceptions to the case allowing for a mutual entity to use or deal with assets for a purpose for which the activities of the entity are carried on.

[The Chair]

With this it will be convenient to discuss the following:

Clause stand part.

Clause 2 stand part.

Amendment 2, in title, line 1, leave out from “Make provision” to “to permit” in line 3.

This Amendment and Amendment 3 would amend the long title of the Bill to reflect that the purpose of the Bill is to permit the capital surplus of mutual entities to be non-distributable.

Amendment 3, in title, line 4, leave out—

“; to amend the Friendly Societies Act 1992”

See the explanatory statement for Amendment 2.

[Sir Mark Hendrick]

Good morning, Mr Mundell. It is a pleasure to serve under your chairmanship. I am grateful to you and to Committee members for joining me to look at the detail of the Bill.

Co-operatives, mutual insurers and friendly societies have an important part to play in the biodiversity of our economy. These businesses share their origins in self-help movements that are relevant to the economic and social challenges faced by people today, and they need a business environment that facilitates their activity. I have therefore introduced a Bill to make long overdue changes to the legislation that governs co-operatives and mutuals and to create a more modern and supportive business environment for them to operate in.

Members on both sides of the House agreed on Second Reading that a strong network of co-operative and mutual businesses can play an important role in a diverse and modern economy. Co-operatives and mutuals represent a serious contribution to the UK economy, accounting for more than £133.5 billion of income annually.

The Bill will ensure that Government policy understands and supports the difference of mutual businesses. It will also create legislation that permits co-operatives, mutuals and friendly societies to undertake their business purpose of serving their members’ needs in the best way possible. Crucially, it will give co-operatives and mutuals the opportunity to opt into a framework providing greater safeguards for their assets and more protection against demutualisation.

The Bill does that by proposing simple voluntary legislation that would give every mutual the right to choose a constitution—either at the point of establishment or thereafter, with an appropriate level of member approval—that preserves legacy assets for the purpose for which they were intended. As witnessed in 2021 with Liverpool Victoria, or LV=, mutuals remain a target for asset-stripping demutualisers attracted by legacy assets built up over generations. That is unfortunately incentivised by the legislation governing mutuals and remains a real and present threat to the mutual sector.

The Bill is about giving mutuals the option to maintain mutual capital for the purpose for which it is intended. Legacy assets have been built up over generations of membership and often constitute a significant part of the working capital of the business. Current members typically have not contributed to that capital base, but have enjoyed the benefits of previous years of successful trading. The Bill disincentivises the raiding of legacy assets through legislation. Voluntary legislation will ensure that legacy assets are preserved for the purpose for which they were intended.

The Bill empowers mutual members to decide what should happen to assets on a solvent dissolution. It would match the best legislation that exists in many countries. The Bill achieves that by introducing a voluntary power to enable a mutual to choose a constitutional change so that its legacy assets would be non-distributable; to detail precisely the destination of any capital surplus on a solvent winding-up; to outline the procedures necessary to include such provisions in a mutual’s rules; and to insert a statutory provision for the relevant rules to be unalterable.

The Bill defines the capital surplus as the amount remaining after deducting a mutual’s total liabilities from its total assets, including repayment of members’ capital. The Bill introduces new provisions to maintain the destination of the capital surplus. It ensures that, where a mutual’s rules make the capital surplus non-distributable, any resolution to convert into, amalgamate with or transfer engagements to a company shall also include a provision to transfer the capital surplus, as provided by the rules, in the event of a solvent winding-up.

[Danny Kruger (Devizes) (Con)]

May I say how much I appreciate the Bill? I am pleased that the Government are supporting it. Does the hon. Member agree that the value of the asset lock he proposes for mutual funds will enable places that have suffered from deindustrialisation and globalisation to have a base of capital with which to build the local economy, and that what he is doing very much supports the wider levelling-up agenda?

[Sir Mark Hendrick]

Yes, I totally agree. The Bill is consistent with the levelling-up agenda. It is meant to ensure that the assets remain in place for the purposes for which the asset base was originally intended.

Let me set out the detail of the clauses and the amendments. Amendment 1 addresses an inconsistency in the legal text in clause 1(2)(a), which results from trying to capture the varied range of entities that make up the mutuals sector. As I said, there are co-operatives, mutuals and friendly societies—different types of organisation and company. In its current form, the Bill proposes an asset lock for a purpose that is for the objects of a mutual entity. The purpose of a co-operative is often seen as one that is for the benefit of its members. It could be argued that demutualisation, which involves distributing surplus funds to members, is for the benefit of members. However, given that the Bill aims to reduce incentives for demutualisation, the amendment is needed to close that loophole; otherwise, the ultimate purpose of the Bill risks being defeated. The amendment also ensures that the Bill is sufficiently broad that it is future-proofed and works for the wider mutuals sector.

The other two amendments are technical changes to ensure that the long title reflects the current contents of the Bill—namely, that the purpose of the Bill is to permit the capital surplus of mutual entities to be non-distributable. They leave out the words from “Make provision” to “to permit” and the words “; to amend the Friendly Societies Act 1992”.

I would like to express some disappointment that the overall ambition of my original Bill is not included in this version. In addition to allowing co-operatives, mutuals and friendly societies to safeguard their legacy assets to disincentivise demutualisers, the Bill’s initial proposals addressed some other issues: co-operatives needing the ability to issue perpetual capital to fund investment and growth—that would have meant a new type of share—and mutual insurers and friendly societies needing to be able to issue mutuals’ deferred shares to fund investment and growth without suffering disproportionate tax penalties. I discussed that issue in some detail with Ministers—both the current Minister and the former Minister, the hon. Member for North East Bedfordshire, who is on this Committee. The initial proposals also dealt with friendly societies needing an updated legal framework to facilitate their contribution as modern businesses working to help level up and promote economic prosperity. Friendly societies have not seen their legislation updated for quite some time; that is long overdue.

The Bill does not cover the whole scope of what I wanted it to achieve, but I am extremely pleased that the Government are backing a key aspect of my proposals concerning mutual assets. They have also given assurances that they plan to conduct a wider review of key legislation underpinning the co-operatives, mutuals and friendly societies sector with some firm proposals, instructing the Law Commission to conduct a review as part of that process. That is major progress and a step forward for the sector.

[Richard Fuller (North East Bedfordshire) (Con)]

Would the hon. Member be interested, as I would, to hear an update on the progress the Minister has made on that front? It is a key part of what the Bill is trying to achieve, and we want to ensure that we do not lose this opportunity.

[Sir Mark Hendrick]

I thank the hon. Member for his contribution and for the part he played in my getting this far with the Bill. I hope the Minister will indicate what moves are afoot and what progress will be made in that direction.

[Richard Graham (Gloucester) (Con)]

The Bill is hugely supported by everyone present, but will the hon. Member clarify his proposed amendment to line 3 of the title to reflect the fact that the Bill aims

“to permit the capital surplus of mutual entities to be non-distributable”?

I understand exactly what he means about potential creditors moving those assets into a different structure—he mentioned the LV= situation—but what happens when a mutual, for whatever reason, sadly fails? At that stage, does the Bill allow for any remaining capital to be distributed to the members of that mutual?

[Sir Mark Hendrick]

I thank the hon. Member for his intervention. A lot depends on how it is framed at the start when the mutual or co-operative decides to register. Remember that this is an opt-in; therefore, any conditions upon the dissolution of the company will depend very much on its registration and constitution. Those would allow for this, if the organisation were so set up. I am sure that the Minister will comment on that as well.

Returning to the previous intervention, I hope the Minister will give some assurances, because there are obviously none in the Bill. I hope that moving in the direction of the Law Commission setting up a review of the sector and of the two pieces of legislation he wrote to me about that need review will bring the rules and legislation on co-operatives, mutuals, associations and friendly societies up to date with what is seen as best practice across Europe. Italy, France, Spain and Germany are far more advanced in how they help the sector, in terms of both taxation and the way in which organisations are viewed and are able to expand.

[Gareth Thomas (Harrow West) (Lab/Co-op)]

My hon. Friend has done an impressive job of getting his Bill to this stage. He will know that one problem with increasing access to capital for mutuals has been the roadblock of His Majesty’s Revenue and Customs. When the Minister reflects on the question raised by the hon. Member for Gloucester and on the contribution of my hon. Friend, will he clarify whether he has instructed HMRC to co-operate fully with the Law Commission’s work? If it does not, we will still have a roadblock in terms of increasing access to capital for mutuals.

[Sir Mark Hendrick]

I concur totally with my hon. Friend.

Let me close by thanking you, Mr Mundell, and by thanking my colleagues for their contributions and for being present to support the Bill. I also thank everyone who has worked so hard to make it a success, including Peter Hunt and Mutuo, the Co-operative party, the co-operative sector, and the Minister and his Treasury officials. Only by working in a modern and supportive business environment will co-operatives, mutuals and friendly societies be able to make a full contribution to the prosperity of our country by serving the interests of customers, and, indeed, citizens.

[Richard Graham]

I should mention that I once worked for a mutual group and with co-ops, mutuals and friendly societies, Mr Mundell. That is, if you like, a declaration of historic interest.

Today’s Bill is indicative of the huge support for the sector from the hon. Member for Preston. He highlights the fact that co-ops, mutuals and friendly societies can still, and do, play a key role in modern finance. I congratulate him and successive Treasury Ministers on their partnership in bringing the Bill forward. In fact, everyone here is so supportive of the sector that we probably all qualify for the support of the Co-operative party—a recruitment opportunity that I hope it is alert to.

--- Later in debate ---

[Andrew Griffith]

I am always happy to engage with the hon. Member. The simple answer is that I do not know whether it is for the House to engage, but I am happy—I hope my actions to date speak as loudly as my words—to engage on what that scope should be. I certainly assure him that, before the launch of a review, the sector will be consulted. If hon. Members have particular points to make, I am keen to hear them.

The future of mutuality looks bright and prosperous. That ambition is supported by the Government. I commend the hon. Member for Preston for his work on the Bill. The Government will support it.

[Sir Mark Hendrick]

I am grateful for the co-operation that the Government have shown on the Bill through successive Ministers over the past four or five months. I am encouraged to hear about the co-operation of the Law Commission and the moves to be made to involve it in a review of the sector. I look forward to seeing what the review brings forward. In the spirit of what my hon. Friend the Member for Harrow West said, I hope that the House will get the chance to deliberate the outcome of the review and to produce future legislation that will go towards solving many of the problems that I identified in my original draft of the Bill.

This is not the Bill that I introduced, but a good chunk of it is there, and I am grateful for the asset lock that is being introduced. I hope that we can also work to deliver, in future, further aspects of my original Bill in order to reach what I think is a conducive and favourable environment for co-operatives, mutuals and friendly societies in this country. If we look at the examples of the sector in other countries, in particular in mainland Europe, we can see that we are well behind in the degree of contribution to the GDP of those countries, compared with the degree of the contribution to GDP of the sector in this country.

A lot remains to be done, but I thank the Minister for bringing forward that work to ensure that we can get there at some stage in the future. Thank you, Mr Mundell, and I thank the Minister, the Treasury team and everyone else present today to support my Bill.

Amendment 1 agreed to.

Clause 1, as amended, ordered to stand part of the Bill.

Clause 2 ordered to stand part of the Bill.

Title

Amendments made: 2, in title, line 1, leave out from “Make provision” to “to permit” in line 3.

This Amendment and Amendment 3 would amend the long title of the Bill to reflect that the purpose of the Bill is to permit the capital surplus of mutual entities to be non-distributable.

Amendment 3, in title, line 4, leave out—

“; to amend the Friendly Societies Act 1992”.—(Sir Mark Hendrick.)

See the explanatory statement for Amendment 2.

Bill, as amended, to be reported.

Co-operatives, Mutuals and Friendly Societies Bill

Mark Hendrick Excerpts

Friday 28th October 2022 Commons Chamber

[Sir Mark Hendrick (Preston) (Lab/Co-op)]

I beg to move, That the Bill be now read a Second time.

May I begin by thanking the former Minister, the hon. Member for North East Bedfordshire (Richard Fuller), who is in the Chamber, for his time and effort— I am also grateful to civil servants for their time and effort—and for our fruitful discussions, which have led me to introduce the Bill in the Chamber? While the Bill does not cover the whole scope of what I wanted to achieve, the fact that the Government are willing to give their support to a key part of my proposals and instruct the Law Commission to conduct a review of legislation affecting co-operatives, mutuals and friendly societies is, in my view, major progress.

I first became active in the co-operative movement 40 years ago, when I bought a £1 share in the Norwest Pioneers Co-operative Society in 1982. The society had evolved from the actions of the original Rochdale Pioneers in 1884, and set up what is generally regarded as the first successful co-operative retail venture. The society was set up in the harshest times, when 19th-century industrial capitalism was on the rise. It was an age of child labour, exploitation and poverty. Sometimes owners of cotton mills paid their workers in tokens, which could only be spent in shops owned by the mill owners. In those shops, the food was often adulterated, so those pioneers set up their first shop in Toad Lane in Rochdale. It was an explicit example of self-help, which started a movement that is now global.

Co-operative societies then mushroomed to form dozens of co-operatives in many Lancashire towns and cities until the 1930s, when the Manchester, Salford and Stockport societies amalgamated to form the North West Co-operative Society. In July 1982, what became the Norwest Co-operative Society merged with the Pioneers Co-operative Society to form the Norwest Pioneers. I bought a share later that year. I would never have dreamed that 40 years later I would have the opportunity to stand here and propose a new piece of legislation that could help to preserve and protect members’ assets accumulated, in many cases, over generations from potential predators who, in recent decades, have sought to take away those assets from members for their own personal profit and gain. That matters to me because co-operation and mutuality are about equity and fairness. The growth of co-operatives in the UK is an integral part of the levelling-up agenda; it can provide many thousands of new jobs in the economy; and it is complementary to the Government’s growth agenda.

Alongside investor-owned firms, co-operatives, mutual insurers and friendly societies have an important part to play in the biodiversity of our economy. These businesses share their origins in self-help movements that are relevant to the economic and social challenges that people face today.

[Dr Luke Evans (Bosworth) (Con)]

The hon. Gentleman is making a fantastic speech. In my constituency, in Hinckley and Bosworth we have several building societies spawned from the fact that we had shoe manufacturing there. Does the hon. Gentleman agree that it is fantastic to have a mix of options for people? These organisations will often pick up people who may not be able to get finance and support they need, but because they have that local community connection they are able to make that judgment and give people the support they need; that should be welcomed.

[Sir Mark Hendrick]

I agree and commend the hon. Gentleman for his comments. Co-operatives spring up from local communities; they are bottom-up, grassroots organisations—certainly not top-down.

As I said, alongside investor-owned firms, co-operatives, mutual insurers and friendly societies have an important part to play in the biodiversity of our economy. They need a business environment that facilitates this: Government policy that understands and supports the mutual business difference; and legislation that is up to date, flexible and permits co-operatives, mutuals and friendly societies to undertake their purpose of serving their members’ needs in the best way possible. Only by working in a modern and supportive business environment will co-operatives, mutuals and friendly societies be able to make a full contribution to the prosperity of our country by serving the interests of customers and citizens. Yet demutualisation remains a real and present threat to the mutual sector, which is, unfortunately, incentivised by the system.

My Bill is about giving mutuals the option to maintain mutual capital for the purpose it was intended. There is a fundamental distinction between the rights of members of a mutual society and members of an investor-owned company. Members of a company—shareholders—have the right both to a pro rata share of distributed profits, or dividends, based on their shareholding, and also to a pro rata share of the underlying value of the company. The more capital they own, the greater their share of the profits and of the value of the company. Members of a mutual society, by contrast, generally have neither of these rights, because in mutuals profits are generally not used as a mechanism for rewarding capital, and members of a mutual do not have any expectation of any entitlement to a share in the increased value of their society.

Since members of a mutual are not entitled to any share of its increased value, the amount by which the net asset value of a society exceeds the capital provided by members—commonly referred to as the “capital surplus on a solvent winding up”—has no specific owner. It is effectively a legacy asset, held by the society for future generations, and enables it to provide for, and invest in, its future. It is a core part of its mutual identity. It represents the trading surplus accumulated by previous generations of members participating in their society’s business, in which they were always content to have no personal share. By implication, it is held for the benefit of future generations. Societies were originally set up not to make a capital surplus to reward members, but to provide goods and services for those who need them; that was the purpose, and this was the basis upon which previous generations have taken part in the trade.

Seen through the lens of investor-ownership, a capital surplus is a tempting asset—a windfall or unearned profit —which, if mutual members were to be replaced by investor-shareholders, could be shared out among those shareholders. Capturing this asset is the usual incentive for a “demutualisation”, which is when a capital surplus or legacy asset is divided up between shareholders—when the mutual agreement between the former members, whereby they engaged in their society on the basis that they would not personally profit from its trade, is broken up. In short, it is when a mutual purpose for the common good is replaced by a profit-driven purpose for private benefit.

In UK law there is no generic or principled recognition of the value to wider society of mutuality or of the legacy asset of a mutual society. As a result, the ability to access legacy assets actively incentivises demutualisation.

[Andy Carter (Warrington South) (Con)]

I am grateful to the hon. Gentleman for his speech and very supportive of his Bill. He talked about how the Bill would protect mutuals and co-operatives. Will he give us some examples of when things have gone as he suggests they could and some assets have been used for other purposes? I think that is at the heart of it, and any examples would be welcome.

[Sir Mark Hendrick]

I thank the hon. Member for his intervention. Actually, I will come to that later in my speech.

Provided that the relevant formal procedures are completed, including securing consent from a statutory minimum threshold of members, a demutualisation cannot be stopped. That threshold has been changed from time to time for different types of mutual societies to make demutualisation less likely, but those measures provide only partial protection. There is currently no statutory mechanism for ensuring that surpluses, which previous generations never intended to be a private reward for anybody, remain committed to that wider public purpose.

At the moment, legislation governing mutuals can incentivise demutualisation by permitting those legacy assets to be distributed. Legacy assets have often been built up over many generations of membership and can constitute a significant part of the working capital of the business. Current members typically have not contributed to that capital base but have enjoyed the benefits of previous years of successful trading. Most demutualisation attempts succeed, assisted by a significant power imbalance between the boards of mutuals and members.

The example of Liverpool Victoria last year shows that demutualisation attempts can, however, be defeated, even when proposed by a mutual’s board. We should be wary of the interests that private equity is showing in mutuals across the world, attracted by the prospect of acquiring significant assets built up by generations of members. At present, it is not possible for an existing society, or those setting up a new society, to proscribe demutualisation. That leaves mutuals vulnerable to those simply aiming to liberate those legacy assets, sharing them out among people as they choose, and converting the business into an investor-owned company. That has resulted in much of the UK building society sector being lost and their businesses either failing or transferring to non-UK ownership. That has been bad for mutuality and bad for the economy, given the damage that it has caused to corporate diversity.

Demutualised former building societies were mostly absorbed into banks that failed during the financial crisis. None of the demutualised former building societies continued for long as an independent bank. They became part of larger listed banking groups or, in the cases of Northern Rock and Bradford & Bingley, failed in the financial crisis and were later nationalised. Moreover, those demutualisations converted some of the largest building societies at the time. The argument for demutualisation has proved to be bogus. It has not delivered the strong independent businesses that it was supposed to do, and the need for more capital is soon forgotten as the newly proprietary entities are generally merged into larger firms.

Diversity of ownership types and business models creates a corresponding diversity in forms of corporate governance, risk appetite and management, incentive structures, policies and practices, and corporate behaviours and outcomes. It also offers a wider choice for consumers and enhances competition that derives in part from the juxtaposition of different business models.

Legislation is needed to help UK mutuals to preserve their legacy for the purposes for which they were intended, to maintain and encourage greater corporate diversity, and to build a more resilient economy. Mutuals need to be able to incorporate appropriate measures into their constitutions which have a statutory basis, either at the point of establishment or thereafter, with an appropriate level of member approval. This will be even more important if the legislative reforms for co-operative and community benefit societies explained above are taken forward. To optimise the successful implementation of new legislation, properly recognising legacy assets for the benefits they bring will be an important ingredient for building confidence.

Many jurisdictions have acted to preserve mutual ownership by ensuring that assets are used only for the purpose for which they were intended. That ensures they cannot be distributed to members or third parties, and thus disincentivises demutualisation. Mergers, dissolutions and transfers of business are still permitted, so this arrangement does not hamper the evolution of business in any way. Ideally, such measures will be universal, but in some legal traditions that is considered problematic as it arguably alters members’ ownership right retrospectively. It is not desirable to cut and paste legislation between different traditions, so solutions are required that respect the culture of different legal frameworks. To deal with that, simple legislation can be introduced in common law jurisdictions that would give every mutual the right to choose a constitution that preserves legacy assets for the purpose they were intended.

My Bill does that. My Bill disincentivises the raiding of legacy assets. Voluntary legislation will ensure that legacy assets are preserved for the purpose for which they were intended. It empowers mutual members to decide what should happen to assets on a solvent dissolution. It would match the best legislation that exists in many other countries. My Bill also: introduces a voluntary power to enable a mutual to choose a constitutional change, so that its legacy assets would be non-distributable; details precisely the destination of any capital surplus on a solvent winding up; outlines the procedures necessary to include such provisions in a mutual’s rules; and inserts a statutory provision for the relevant rules to be unalterable. My Bill will define the capital surplus as the amount remaining after deducting a mutual’s total liabilities from its assets, including repayment of members’ capital.

[Dr Luke Evans]

The hon. Gentleman is making a fantastic speech on how to protect from demutualisation, but it seems a very defensive way of looking at things. Will the Bill provide a chance for new innovations and further capital to be brought into the sector to help its members?

[Sir Mark Hendrick]

I thank the hon. Gentleman again for intervening. One proposal I did not take up and put to the Government was the idea of a new share for co-operatives that would allow them to develop in a way that they have not been able to before. Unfortunately, the Government are not at the moment able to do that, but it would bring in the additional capital to encourage the growth he talks about. I understand from the Government that it will be considered as part of a Law Commission review of the sector. The issue is on the agenda; it is just not included in the Bill at the moment.

My Bill will introduce new provisions to maintain the destination of the capital surplus to ensure that where a mutual’s rules make the capital surplus non-distributable, any resolution to convert it into, amalgamate with or transfer engagements to a company shall also include a provision to transfer the capital surplus, as provided by the rules in the event of a solvent winding up. With the support of the House, we will be able to incorporate sensible amendments that ensure that this legislation works for the co-operative and mutual sector, and fits in with the Government’s stated policy objectives.

In finishing, I would like to thank the Minister and his officials for their time devoted to holding discussions and their help in re-drafting parts of my Bill to our mutual satisfaction. I thank Peter Hunt and Mutuo for their help, advice and expertise throughout the time we have been working together on the Bill, and I thank the Co-operative party and the co-operative societies, mutuals and friendly societies that have engaged with me to give me the encouragement and enthusiasm to get to this stage. I look forward to working with parliamentarians from across the House to get the Bill through the forthcoming stages required to bring it into law.

Before I sit down, Mr Speaker, I would like to declare an interest as a Co-operative Member of Parliament and as a member of a co-operative society.

--- Later in debate ---

[Sir Mark Hendrick]

I thank the Minister again for his positive attitude towards this Bill and for bringing in the support of his party and the Government. I am particularly happy that we have had such a lengthy debate, because I did not think it would go on for so long; it has been fascinating to hear the views of many hon. Members across the House on how co-operatives in their area function and what their attachment to the movement is.

I draw the Minister’s attention to the references in my speech to the use of the Law Commission to explore the other issues I raised originally with the Treasury and his civil servants. The hon. Member for North East Bedfordshire (Richard Fuller) also referred in his intervention to the question of the Law Commission. I had the assurance during my discussions with the Treasury that that would be looked at seriously and I would hope, as he said, that it would be explored at Committee stage, with some firm proposals and the framework for the Law Commission being entered into as part of that process.

I thank everybody who has supported me on this Bill in this House, in the co-operative sector and in the Co-operative party, and, of course, Mutuo, which has helped a lot to provide all the material for my discussions with the Treasury.

Question put and agreed to.

Bill accordingly read a Second time; to stand committed to a Public Bill Committee (Standing Order No. 63).

Co-operatives and Mutual Societies

Mark Hendrick Excerpts

Tuesday 14th December 2021 Westminster Hall

[Sir Mark Hendrick (Preston) (Lab/Co-op)]

It is a pleasure to serve under your chairship, Dame Angela. I congratulate the hon. Member for Wycombe (Mr Baker) on securing this important debate at such a critical time, when the economy and society should be in the throes of recovery from the covid-19 pandemic.

It has been 177 years since the since the pioneers successfully launched the co-operative movement in 1844 in Rochdale, Lancashire, which is not too far from my own Lancashire constituency of Preston. The movement has gone from strength to strength, and it has changed remarkably since then. As a Co-operative party MP, I have always believed that co-operatives and mutual societies are the future, not the past, and they are instrumental in creating a successful, democratic economy.

Co-operatives and mutuals contribute significantly to social integration, job creation, employment sustainability and the reduction of poverty, which makes them a serious player in the UK’s recovery from the pandemic. A key component in the make-up of co-operatives is the democratic ethos of fairness and inclusivity, where wealth and power are shared. Whether it is co-operative shops, funeral services, credit unions or, as has been mentioned, taxi firms, co-ops are owned and operated by the people closest to the business and are centred around their members and the community, rather than distant investors and shareholders focused solely on monetary returns.

When considering the impact of the covid-19 pandemic on our society, it is impossible not to acknowledge the glaring inequalities that have been exposed in our social and economic fabric. The poor of this country have borne the brunt of the devastation. The stark geographical and social divide is a clear indication that the current economic model is broken and not viable for the future.

If we are serious about levelling up the country and building back better, working people must be at the heart of economic recovery. Co-operatives and mutual societies provide a template for achieving success, where the principles of human and social capital are at the core of policy. There is no doubt in my mind that to achieve a stronger, sustainable and more resilient recovery from the covid-19 crisis, the Government must take steps to expand the co-operative sector. The evidence tells us that co-operatives are resilient; 76% of co-ops survive the first five years of business, compared with only 42% of other types of business in the UK.

I was interested to hear the points made by the hon. Member for Wycombe about whether LV= members should have gone with Bain Capital. Only time will tell whether that would have been a good move, but many of the building societies that demutualised and turned into banks were extremely vulnerable in the financial crisis some 15 or 20 years ago. I was a member of Leeds Building Society, and I tried to vote against demutualisation. In the end, I was given £2,000 and ended up with a bank I did not particularly want.

As has been mentioned, the trade body Co-operatives UK notes that about 1.5% of co-ops were dissolved in 2020, compared with 6.5% of businesses in general. Despite the pandemic, the number of independent co-ops has grown by 1.2% in 2020.

On the contributions of co-operatives to public life, the valuable and diverse sector has demonstrated its worth in meeting community need in the face of adversity, which it has done up and down the country in the last 21 months. I proudly note the co-operatives in my constituency of Preston, which led by example and contributed to the collective welfare of the local community during a time of great need. By investing in people from the start, co-operatives were able to defend workers’ wellbeing and livelihoods during the pandemic, while understanding the hardships that people faced and serving the community around them. Studies show that economies with a larger co-operative sector are more equitable, productive and accountable, with a narrower gap between rich and poor.

With all this evidence on the benefits of co-operatives, both before and during the pandemic, I wonder why there are not more of them. As the hon. Member for Wycombe said, in 2020 less than 1% of businesses were co-ops. Despite the evidence that they are nearly twice as likely as other types of businesses to survive their first five years, not nearly enough of them are being started. In the UK, more than 7,000 co-ops contribute roughly £40 billion to the economy, in spite of numerous financial and social barriers that hinder their ability to reach their full potential.

[Stephen Doughty]

My hon. Friend is making powerful points. I want to share another example of success that we can learn from. The Welsh Labour and Co-operative councillors in Vale of Glamorgan Council in my constituency have done remarkable work with Big Fresh Catering Company, a local authority trading company built on co-operative principles. In its first year, it has turned a £350,000 deficit into a £500,000 surplus, which is now being reinvested in our schools. That is an example of co-operative principles making a difference, led by Welsh Labour and Co-operative councillors.

[Sir Mark Hendrick]

I commend my hon. Friend on his involvement and the success that he outlines.

In developed countries such as our own, co-operatives play a much bigger role in GDP and cultural make-up, by design. As the hon. Member for Wycombe said, in Germany, the co-operative sector is four times bigger than in the UK. In France, 18% of GDP comes from its co-operative economy, which is six times larger than the UK’s. Unlike in those countries, our economy is tailored to the interests of private business, despite the overwhelming evidence of the co-operative sector’s success and resilience.

I believe that a strong and growing co-operative sector is key to creating a post-covid economy where wealth and power are shared, particularly in efforts to level up the regions of the country that have been worst hit by the pandemic. We cannot create such an economy by maintaining the status quo and hoping that more co-operatives and mutual societies will carry on as they have done—instead, co-operatives and mutual societies need the support that other business models receive, which is why the Government must urgently commit to bringing forward practical business support aimed at significantly growing the UK’s co-operative sector as part of our economic recovery. In their policy, the Government must enable a corporate framework that recognises and champions the success of co-operatives and mutual societies, and understands the value and mutual benefits of achieving that success.

As we rebuild today and for the future, we have an opportunity to create an economy of ambitious growth, wellbeing and social protection for all. That is why I believe that co-operatives and mutual societies are one answer to the problems raised by the current pandemic.

--- Later in debate ---

[John Glen]

I am extremely grateful for the prompt; one of my kind officials passed me a note on this matter and reminded me that there has been progress in this area. We saw some changes in the way that was delivered last year. In 2020, the PRA implemented a simplified capital regime for credit unions to remove barriers to growth. This created a graduated rate approach, removing the 2% capital buffer and the link between capital requirements, activities and memberships. These changes were broadly welcomed by the sector, but I have committed to continuing to work with the sector further. I hope I will be allowed to introduce legislation next year to address some outstanding concerns that exist within the sector as a whole. I am grateful for the prompt and to the hon. Member for Glasgow South West for raising that matter.

As I said, affordable finance is key to generating opportunity, wealth and liberty for people around the country. We provided £3.8 million to fund the pilot for the no-interest loans scheme, which I have championed over a number of years. The scheme is run by Fair4All Finance, which encourages credit unions and other non-profit lenders to offer these loans. I believe that when this gets through the “proof of concept” phase imminently, it stands to be able to expand significantly. A number of individuals have approached me wanting to support this work, and I look forward to campaigning to broaden that pool on a sound foundation of how it would operate.

We have introduced other changes to help credit unions to generate greater opportunity and wealth for communities. For instance, we introduced and ran a pilot prize-linked savings scheme for credit unions until March this year, which was a real success. Independent research found that it helped to increase positive awareness of credit unions, enabled individual savers to build financial resilience and demonstrated that prize-linked savings be an effective tool in encouraging people to build a nest egg. We have 13 credit unions around the country and the Association of British Credit Unions Ltd currently involved in continuing the scheme, and I hope more will join them in future.

We have also released £96 million of dormant asset funds to Fair4All Finance, to support access to affordable credit products, including those from credit unions. Last Monday, on Second Reading of the Dormant Assets Bill, we introduced the extension of the pool of moneys that will be available from an extended range of financial instruments—£880 million over the next 10 years—which will be for Fair4All Finance to allocate. We will bring forward legislation when parliamentary time allows. That phrase is used a lot, but I am working hard to generate that opportunity in the next Session. It would allow credit unions to offer a wide range of products and services.

I want to spend a moment on building societies, because they are key to unlocking opportunity and driving positive change across the country. For example, in mortgages, Yorkshire and Skipton building societies are among the first institutions to bring back a 95% loan, when there was a problem in the spring, and 95% loan to value mortgages after the lockdown. That obviously brings first-time buyers on to the housing ladder. In addition, the sector is pioneering new products that will decarbonise the UK housing stock. For instance, Nationwide offers a green additional borrowing mortgage, and the Leeds building society has launched two new mortgages for the most energy-efficient homes.

To help building societies continue to flourish, we want to ensure they benefit from an appropriate legislative framework. That is why last week we published a consultation proposing several changes to the Building Societies Act 1986, working with their representatives, to try to provide them with greater flexibility in their funding model, and maintain their key mutual status, which is so important. The consultation also includes proposals to update their corporate framework in line with companies.

[Sir Mark Hendrick]

The Minister has waxed lyrical on the good work that the Government are doing on credit unions and is now touching on building societies. Is he considering changing some of the regulations on demutualisation? As I mentioned earlier to the hon. Member for Wycombe, if we cast our minds back, we will remember that the demutualisations of the past gave a number of those building societies, which were more dependent on mortgage lending, a lot of leverage that made them very vulnerable during the financial crisis. Will the Minister comment on that, and on how he will be proactive in developing the co-operative sector, as well as building societies, through his work on mutuals?

[John Glen]

I mentioned the response we are considering when I talked about the hon. Member for Harrow West and LV=. The reason I am waxing lyrical is that we have genuinely put in place specific interventions across a number of dimensions of the broader sector to ensure that building societies can continue to operate more effectively, offering services that their customers want, and retain their current status. I mentioned the community ownership fund as a source of support for individuals and community groups, encouraging them to form new business models that might be more effective in dealing with their long-term community interest.

I am conscious of the time, but I hope I have illustrated that the Government are committed to supporting mutuals and co-operatives and the unique qualities they provide. Just as those organisations provided opportunity, wealth and liberty to those Rochdale pioneers, we see them as key to strengthening communities, expanding possibilities and increasing prosperity for people today. I look forward to continuing the conversation on specific interventions. As I said to my hon. Friend the Member for Wycombe as I entered the Chamber this morning, it is important that we strike the right balance between hearty aspirations for a healthy sector receiving appropriate consideration of reasonable changes to the rules and regulations underpinning them, and a doe-eyed romanticism about things that are not financially secure in the medium and long term. My job is to interrogate those opportunities and take legislative action where I can, but also to be clear that we have to take a clear, economically valid and reasonable approach to this issue if we are going to have a secure and thriving sector, which I sincerely hope we will.