CO-OPERATIVE SUPPLY ASSOCIATIONS.—OBSERVATIONS.

HC Deb 28 July 1874 vol 221 cc859-71

SIR THOMAS CHAMBEES

said, a Motion on the subject of Co-operative Associations had stood in Ms name on the Paper for some time; but considering the advanced period of the Session, he had now deemed it expedient to alter the form of Notice, and instead of proposing a Resolution on the subject he would merely call attention to the inexpediency of associations for trading purposes being established and conducted by employés of the Government under the name of Co-operative Supply Associations. The House was no doubt familiar with this question, which of late had excited a good deal of public interest. At the outset he might observe that all arguments adduced against himself on the ground that he was opposing co-operation were simply beside the mark. He had not a word to say against co-operation. Of course any two or more persons acting together for a common purpose were co-operators; but in reference to the question now under consideration, the word "co-operation" was used to signify the acting together of a number of individuals not only to facilitate the supply of their own wants, but also to supply the wants of others who did not form a portion of the body so co-operating. Under the names of Co-operative Stores and Co-operative Supply Associations there had grown up a regular system of trading which was not distinguishable from ordinary commerce as carried on by limited liability companies or by large partnerships. The retail tradesmen were desirous of having the fact brought under the notice of the House that members of the Civil Service of the Crown engaged in these undertakings. Up to a certain point no doubt they did so with perfect propriety. They might co-operate for the purpose of supplying themselves with a largo number of commodities in ordinary use, and as long as they continued to do that, whatever effect might have been produced on the body of retail traders in the metropolis and the great towns, no person either in or out of the House could have complained that there was anything either illegal or improper in such a course of conduct. The complaint now made was that, under the name, guise, and pretext of Co-operative Associations, persons combined together for the purpose of acquiring necessaries for themselves and their families and of saving the profit of the distributor. Under the guise of such associations there had, in point of fact, grown up a very large system of trading which could not be distinguished upon any principle from ordinary trading by companies of limited liability. These associations were not in any way mutual, and ought not to be called Co-operative Supply Associations. In order to give the House some information as to the facts, he would quote from a document recently issued by the Civil Service Supply Association (Limited). He held in his hand a paper containing the agenda for the half-yearly meeting. It was dated the 18th April, 1874, and contained some matters which he should like to bring under the notice of the House. The paper contained a very elaborate statement of the accounts of the society and the balance of their affairs for the half-year ending the 28th of February last. It was stated that the total purchases, at that establishment alone, during the half-year were £773,364 1s. 8½d. The total sales amounted to £819,428 1s 1d.; the gross profits being £14,088. These figures, showing, as they did, the magnitude of the operations of such societies, were sufficient to make it worth consideration whether the complaints of the tradesmen were at all justifiable. He was told, indeed, that the returns of all these societies during last year showed an expenditure of upwards of £2,000,000, and that the profit formed a very large proportion to the expenditure. Reverting to the society just alluded to, he found that the net profits were £9,000, which, added to the previously accumulated profits, made the profits in that institution alone no less than £90,000. The fact that such large profits were made was in itself a circumstance of suspicion. The only legitimate addition to the cost price of articles supplied by a Co-operative Society to its own members was the cost of procuring them, the cost of housing them until they were sold, and the cost of a small staff to distribute them, though the cost of distribution must be very small indeed, inasmuch as one of the rules required that customers should come and fetch the goods themselves. When, therefore, it was found that large profits were made, the system pursued by these societies looked more like trading than co-operation for the purpose of supplying the wants of their own members. Another circumstance worth consideration was the manner in which the profits were made. These so-called Co-operative Societies made their profits in the same way as an ordinary tradesman or partnerships with limited liability would make theirs. They did not merely sell articles at a price which would cover the cost and leave a small margin of profit, but they proceeded on the principle of selling some articles at a loss and others at a largo profit, so that the profit made on one class of articles might more than counterbalance the loss sustained on the other. This was inconsistent with the principle of mere co-operation for the supply of the wants of the members of the Association, but thoroughly consistent with the principles of trading. Everybody knew that these societies were constituted primarily by members of the Civil Service. The paper he had already referred to contained a list of persons who were to be added to the Board of Direction, and he found they were from all the departments of the Civil Service. That society consisted of 4,500 members of the Civil Service, and if they merely combined together to supply themselves and their families no complaint whatever could be made; but besides these 4,500 members there were 15,000 persons who were called ticket-holders, and who paid so much for the privilege of buying goods at the stores; and at the last meeting a Motion was to be made—he did not know whether it was made—that the 15,000 ticket-holders should be increased to 30,000. Perhaps it might be asked—"Why do you complain of that?" Well, all he would say at present was, that it was a contradiction of the principle upon which the society was founded, and that the moment it invited outside customers to pay for the privilege of dealing at the stores it ceased to be a co-operative and became a trading society. Moreover, the society was set up by Civil servants of the Government. The excuse they alleged was this—"We want to supply ourselves with goods on the principle of co-operation, but we cannot do so conveniently unless we get a larger trade than we can secure by the proper application of the principle of co-operation, and therefore we will invite the outside public to trade with us in order that we may supply our own wants at a cheaper rate." There had recently been issued the prospectus of a new Civil Service Co-operative Society, and the list of the provisional committee consisted of the names of 20 gentlemen, all of whom were members of the Civil Service. The prospectus, after referring to the large amount of profit that had been realized by the old society, amounting to £90,000, went on to say that the accumulation of profits so large was a direct infringement of the main principle of co-operation, which was that after paying all expenses and allowing a fair dividend for the capital employed, all the profits belonged to the purchasers. It stated that four-fifths of the original members—namely, 17,000—were ticket-holders, and proposed that they as well as shareholders should be entitled to the benefits of the new organization; so that the large profits realized should be devoted to the customers and not exclusively to the shareholders. The regulations, after all, were not co-operation but trade; and he could not see why Her Majesty's Civil servants should be allowed to set up this gigantic trading association against the efforts of individual shopkeepers. There was another prospectus from which he would quote—for these societies were the rage of the day—a characteristic of the age. The prospectus of the Government Offices Store, which professed to be conducted on "strictly co-operative principles," spoke of some of the other associations as having "exceeded the limits of fair play and justice, and deservedly raised enmity amongst wholesale and retail traders," and said it behoved the promoters to consider the propriety of establishing a society on sounder principles. It stated a just complaint against the old, and a just principle in the case of the new society. The writer of a private letter, a gentleman connected with the Civil Service, referred to the case of the co-operative store at Dublin, established at the end of the year 1872, and the only store of the kind in Ireland, as illustrating the tendencies to which all such associations were liable. The prospectus dwelt with emphasis on these two points—that the society was for the sole benefit of Civil servants, and that the commodities were to be sold to them at such a narrow margin of profit over the cost price as merely to cover the expenses of management. If these rules had been observed, there would have been but little cause for complaint; but in less than a year from the time when the society was established, both rules were broken through, and the writer of the letter referred to remarked that the tendency to break through such rules in all cases must be irresistibly strong. Upon the confession of those who had belonged to these co-operative societies they had exceeded the limits of fair and legitimate co-operation for the supply of the necessaries of life, and had become trading concerns, dealing also in the luxuries of life. The excuse and justification originally made were that co-operation was the only means by which persons of small fixed incomes could save themselves from paying the high prices charged by town tradesmen for long credit. If, however, the poorer classes of the Civil servants were excluded from the benefits of co-operation and the higher classes were admitted, and if the trading extended from necessaries to luxuries, the fundamental reasons for setting up a co-operative store no longer existed. The conductors of the Association Stores in the Haymarket, which did an enormous business, had recently issued a series of answers to objections. Prom this it appeared that Civil servants included Peers, Members of Parliament, justices of the peace, naval and military officers—he did not know if Volunteer officers were included—and clergymen, and it was contended that Civil servants were as much entitled to set up this trading establishment as they were entitled to invest their spare money in banks, insurance companies, or any speculation. The argument of this paper was that these societies were trading societies, and therefore the Civil servants of the Crown should be prevented from joining them. Another paper stated that the first society was established in 1858 to import or purchase produce wholesale, to contract with manufacturers, retail at the lowest possible price, and promote in every way economy. But in the official price list for 1874 of the Association in the Hay-market would be found these words— The Civil Service Co-operative Society was founded by Mr. Ansell, of the Admiralty, and the benefits it confers on the aristocracy and other classes are most important. It thus appeared that the character and objects of the Association were entirely different as held out in the prospectus and in the official circular. He had another paper which was signed by members of the Civil Service themselves. They stated that for a time these associations did very well, but in an evil day the directors grew ambitious; and what was originally a perfectly legitimate and defensive union of Civil servants had now become a vast, uncalled-for onslaught on the shopkeepers. Indeed, to use the words of one of their own writers, the whole affair was now "a gigantic sham." Let the directors only say that they had become shopkeepers on a large scale, and be content with the profits of their trade. There really was no distinction between these associations and trading societies; they should be called by the name most suitable to them, and the Chancellor of the Exchequer would have to say whether they were consistent with the rules of the Civil Service. They were certainly contrary to the rules laid down in March, 1849—namely, that the public was entitled to the whole time of the Civil Service, and that Civil servants should not be allowed to enter as directors of public companies requiring their attendance during business hours. Civil servants were absolutely prevented from engaging in mercantile pursuits if these encroached on the time of the public. Now, he had two cases where persons in the Civil Service had been conducting the business of these associations during business hours. It did seem to him, too, that it might well happen that these gentlemen might go into the market to buy colonial and other produce at great advantage, because they might command information which was not ordinarily available. The Crown prohibited postmasters from selling newspapers, and would doubtless prohibit revenue officers from selling malt. Then, why should Civil servants be permitted to engage in trade? Incidentally connected with this subject, he must call attention to the Marine Canteen at Woolwich, which, instead of being confined to the supply of the military in the barracks, sent out its servants in uniform and canvassed and supplied private families, directly and indirectly, with goods of every description—milk, poultry, beer, shoes, &c.—which, he believed, was entirely in contravention of the Queen's Regulations. Besides the ordinary necessities of life, thousands of articles of elegance and luxury, and even the game of croquet, were sold at the stores. They also supplied drugs and prescriptions of medicine whereby the public were in danger of being poisoned—drugs with enormous profits, because for every 1s. invested in that trade 11½d. was profit. Besides, it must be remembered that those who sold drugs to the public ought to have some knowledge of chemistry. There was another question with regard to the article of drugs and the sale thereof, which called for the attention of the House. Now, there were surgeries, and chemists' shops, and hospitals open, where, in cases of necessity or accident in the metropolis, immediate assistance was at hand, and it would be a great calamity if it were not. Well, a chemist, perhaps at best, turned £20 a-week in his business, and for those Civil servants, engaged in co-operative stores, to clash in competition with him was not, in his (Sir Thomas Chambers') opinion, ordinary co-operation—it rather came within the meaning of the tricks of trade. He should be very glad that any anxiety felt on this subject might be allayed, and that the effects of the system to which he had alluded might be mitigated, and he hoped that some statement would be made by the Government. It was a most serious thing that a body of gentlemen connected with the Government and in the service of the country should become an organized body, and be at liberty to go into the market and carry on dealing in competition with tradesmen in a manner which was not above-board.

MR. FORSYTH

expressed his entire concurrence in the remarks made on this subject by his hon. and learned Colleague. He wished the House to clearly understand that those who objected to these Co-operative Stores did so not because they denied the right of the Civil servants to combine to buy things wholesale and sell them retail among themselves, but because the Civil servants had become shopkeepers on a gigantic scale, and were selling not only among themselves, but also to the outside public. It was perfectly well known that these stores were not confined to the Civil servants, but that they were conducted as commercial speculations. He himself knew of a case where £80,000 had been divided among the outside public. Tradesmen very naturally said—"These Civil servants are the servants of the State; their salaries are paid out of the taxes, to which we contribute; and it is unfair that we, who have a hard straggle to live, should be forced into a disadvantageous competition in our own business with those who are paid to do the work of the State." Another objection raised by the tradesmen was that the Civil servants were supposed to devote their whole time and attention to the service of the State, and that it was an injustice to the public to allow them to become clerks, managers, and directors of these associations, where they employed time which properly speaking belonged to the State. Doubtless the practice complained of was not, strictly speaking, illegal; but what the tradesmen contended was, that it was unfair, and they hoped that the Government would not look with favour upon such a wholesale system of shop keeping carried on by those who were in their employment.

MR. MACDONALD

said, that this was, he believed, the first effort which had been made to put a stop to the thrift and providence of a large body of the people of London, and he did hope that the House would not countenance the attempt. The hon. and learned Gentleman who brought forward the question, stated that the Civil Service Stores were not conducted on the same principle as that of the Co-operative Societies throughout the country. Now, he happened to know how Co-operative Stores were conducted, and he ventured to say that all which had been said against the Civil Service Stores applied with equal force to all such stores throughout the country. At Rochdale, which was the home of the co-operative system, at Leeds, and other great manufacturing towns, the principle had been acted upon from the commencement, of allowing the general public to purchase in the stores. Nay, the promoters had even gone the length of giving a bonus to the public to induce them to purchase. That system had, in fact, been adopted throughout the entire country. When the Civil Service Stores were complained of, it ought to be borne in mind that, besides saving money, they were established to supply good, pure, and wholesome articles. There had been a system of adulteration and public poisoning going on for a long time, which the founders of the stores determined to put down, and it was being done effectually. They were selling real butter instead of a tiling called butter, which was not butter at all, and so in like manner other articles. If shopkeepers would only copy the principles on which the stores were conducted, they would succeed in winning back their customers, and would have no occasion to come begging to this House. It had been said that those Co-operative Stores were started to serve the rich; but it was the poor that they served—they served the poor in Durham, in Lancashire, in Yorkshire, and other great manufacturing places, and those Co-operative Societies had turned millions of money in their dealings. He looked upon these institutions as one of the strongest marks of the sobriety, providence, and onward progress of the people of this country, and he trusted the Legislature would do nothing to stop their action.

THE CHANCELLOR OF THE EXCHEQUER

said, the hon. and learned Member had called his attention to this subject in a tone and manner which certainly demanded attention, and of which no one, whatever might be his private opinions, had any right to complain. He had made a very temperate statement, and had so commended the question to the attention of the House. But it ought to be borne in mind that the question was naturally one of very great difficulty, and one that was by no means free of embarrassment. For instance, in regard to one of the last points which the hon. and learned Gentleman had mentioned—that relating to the sale of drugs—he (the Chancellor of the Exchequer) might be permitted to make a suggestion which applied to the rest of the hon. and learned Gentleman's argument. Undoubtedly, if the effect of selling drugs at stores was such as in any way to endanger the public interests, it must be observed that even were the Government to take strong measures, and to put down these particular stores, there could be little doubt that the system which had been initiated, and which had proved financially, and in other respects, successful, would be at once taken up and worked by others. In that case the difficulties of which the hon. and learned Gentleman had given them an illustration in the case of drugs would present themselves under another and a similar system of association. Therefore such difficulties, if at all, must be dealt with by some general system of legislation designed to prevent such abuses. They could not be dealt with simply by the interference of Government in the way of putting down these particular associations. Attention would be given to the subject; but if any legislation was felt to be necessary it would have to be proceeded with cautiously. He would say at once that the attention of the Government would be given to any matters of that sort in order to decide whether or not any remedies were required. But with regard to the general question of the carrying on of this system by the Civil servants of the Crown, and as to whether the Government ought to interfere to prevent, limit, or regulate in any way that system, the House would perceive that two questions here arose of very considerable importance. The first was, whether the tradesmen of the metropolis had a right to complain of the competition to which they were subjected by this system? He would not for the moment discuss whether these stores or associations were properly called "co-operative," or whether they were properly called "trading." It must be very obvious to everybody that such a system, when once set on foot, could not very easily be restricted within narrow limits. The history of the Civil Service Stores, as narrated to him, seemed to prove that. He understood the origin of the movement to have been something of this kind. A number of public servants, employed in the Post Office and elsewhere, endeavoured to provide for themselves in a manner which the hon. and learned Gentleman opposite said was perfectly legitimate. They found whenever they went to deal with the tradesmen in their neighbourhood that they were exposed to many disadvantages. They were charged the highest price for articles, and the latter were found not to be of the best quality. Those high prices were charged in order that the bad debts might be covered which were contracted by the tradesmen under the credit system. These gentlemen, who, though they lived upon narrow salaries, had a right to maintain themselves in respectability, thought they could protect themselves from many evils connected with the purchase of articles by introducing a system of co-operation which was founded on the principle of ready-money payment. No doubt that was of very great advantage to the Civil Service, and it was to the interest of the country that the servants of the Crown—especially those who lived upon low and moderate salaries—should be able to supply themselves upon moderate terms, and upon a system which prevented them from getting into debt. As he was informed, when they began to deal with wholesale dealers, the retail dealers complained of their proceedings and commenced a movement to induce manufacturers and wholesale dealers not to trade with these gentlemen. But that movement was limited; it was not sufficient to induce manufacturers and wholesale dealers to refuse to trade with these gentlemen. As a consequence of that movement, and for the purpose of self-Protection, the Civil Service Supply system was extended to customers not in the employ of the Civil Service. The hon. and learned Gentleman said, these stores had become trading societies. That was a matter with which they had very little to do he thought it would be difficult to draw a line between a system of co-operation which, as the hon. and learned Gentleman said, would be lawful and reasonable and commendable, and a system of co-operation which would be questionable and objectionable. Looking at it as a question of competition, he could not see how a line could be drawn up to which these gentlemen might go in this matter, and beyond which they might not go. But then there was another side of the question, and one which raised considerations of extreme difficulty. That was not so much the political or the economical question as the question of the administration of the public service. Here, also, arose a very difficult point for consideration, and that was how far public servants ought to be allowed by Government to embark in business of a remunerative character outside and beyond their own duties. He confessed that was a matter which had often caused him considerable anxiety, and it was one upon which he had not even yet come to a clear and definite conclusion. No doubt, it could be contended that you engaged the services of those gentlemen, that you paid them for their time, that their time ought to be given up to you, and that it was an abuse to allow them to employ their time carrying on business on their own account. Well, if they laid down that doctrine and applied it to all the departments in which the Civil servants were engaged, they would extend the sphere of the question very considerably. Lately, Civil servants had used various other modes of increasing their incomes. It might be said they ought not to do so, and that they should confine themselves to their own departments; but so long as the Civil servant discharged the duty of his department they had no right to say to him—"You must not turn your attention to any other way of improving your circumstances." If the Civil servant gave his six or seven hours a-day close attention to the discharge of the duties of his office, and gave satisfaction, they had no right to say to him—"You must not enter into any other business." He was anxious not to come to any definite conclusion at present, the more especially as the whole question of the re-organization of the Civil Service was under review. A Commission was sitting which might soon be able to Report, and their Report might very likely contain some very valuable suggestions. All he could say was that the arguments of the hon. and learned Gentleman who brought forward the question, and who said that the Civil servants ought not to give that time which they were not expected to give to the public service to the objects of the co-operative system, carried the question very far. But, on the other hand, it might be said the taxpayers might benefit by the system, and seeing that the co-operative system had obtained such progress in different parts of the country, he thought it would be extremely difficult to put an end to it. He, however, undertook to say that matters like this deserved the attention of the Government, and more he could not undertake to say on the question.