HC Deb 29 January 1952 vol 495 cc133-45

Order for Second Reading read.

8.42 p.m.

The Financial Secretary to the Treasury (Mr. John Boyd-Carpenter)

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

The Bill sets out to do three things: to raise from £200 to £500 the limit of the individual shareholding in an industrial or provident society; to raise from £20 to £50 the limit on the size of deposit which may be made with such a society; and to raise from 10s. to £2 the limit on the size of the deposit which may be made at any one time.

I should make it clear what bodies would be affected by these changes. The Bill applies to approximately all the 6,000 societies registered under the Industrial and Provident Societies Acts. They include, in addition to retail and wholesale co-operative societies—the type of body to which one colloquially applies the description "co-op"—some 3,000 clubs, including a great many British Legion clubs, some 500 housing societies, something in excess of 500 agricultural co-operatives which supply farmers with materials and market their produce and in some cases actually themselves farm, and some 500 smallholding and allotment societies. The Bill therefore increases in some degree the rights of a considerable number of societies of very varied types.

The theoretical justification for these changes is the fall in the value of money since the limits were originally fixed. The size of the shareholding was fixed at £200 as long ago as 1862. I have had a calculation made, which in the nature of things must be approximate, from which I understand that, in terms of the £ of 1862, the £ of today represents 6s. 5d. Therefore, looked at even from the point of view of abstract theory alone, there is considerable justification for altering financial limits fixed when the value of money was very different from what it now is.

But there are also two good practical reasons why it is thought desirable now to make this change. In the first place, the taking up of shares in these societies is an admirable method of saving, and a very considerable volume of small savings is so effected. I understand that in the case of at any rate a number of societies, savings which could otherwise be effected are being lost because the people who would wish to allow, for example, interest accruing on their holdings to accumulate, are not able to do so because their holdings are already up to the limit and it is therefore, necessary for the societies, in compliance with the law, to notify these people that they must remove the money now accruing to them. In view of the great need to assist national savings, a need which has certainly not been diminished in the minds of any of us by the statement of my right hon. Friend earlier today, it seems that we should be very wise to give greater facilities for saving in this direction.

There is also the special case of the agricultural co-operatives. In many cases they are in need of capital to finance the purchase of the very expensive machinery required by modern agriculture. I understand that in a number of cases some difficulty is being encountered for this reason.

As regards the deposits, which are dealt with in Clause 2, substantially the same considerations apply. The real justification is the change in the value of money. Any hon. Member of a mathematical turn of mind can work it out that we have not been able to effect an exact proportionate increase. What we have sought to do is to insert in the Bill round figures which bear a certain relationship to the change in the value of money and are, I understand, acceptable to the organisations themselves, and, although it would be perfectly possible to say that in one case it should be slightly more and in another case that it should be slightly less, it seems to us necessary from a commonsense point of view to round the figures to those which we have effected, £50 and £2.

There are only two other matters which I shall mention. As the House will observe from Clause 3, the Bill does not apply to Northern Ireland. That exclusion has been inserted at the request of the Government of Northern Ireland, and the matter is essentially one for the Northern Ireland Government and Legislature to consider.

I ought also to mention that if the House is good enough to give the Bill a Second Reading, it is the intention of the Government to introduce in Committee an Amendment largely of a procedural nature. Many of the societies have rules which limit the amounts of shareholding or deposit to the amounts fixed by the existing law. It will be necessary for them in due course to amend those rules, but we shall seek by an Amendment to the Bill to authorise them to increase shareholdings and deposits up to the new legal limit in advance of the necessary amendment to their rules. As the House will be aware, amendments to the rules of these societies require to be approved by the Registrar, and it might well be that some pressure on the Registrar's office, and some delay, would result if the changes could not be made until the societies had effected the alteration in their rules.

That is the essence of the Bill. Perhaps I might add that it is brought forward at a not inappropriate time, for it is almost exactly 100 years since the Statute 15 & 16 Victoria c. 31, an Act "to legalise the formation of industrial and provident societies," which was the legal definition of the movement, became law. Therefore it is, perhaps, appropriate that we should try to bring these fixed limits more into accord with the modern value of money and that we should do it in the centenary year of the societies' organisation to which it relates.

8.50 p.m.

Mr. Douglas Jay (Battersea, North)

I am glad to be able to say that we can, in this case also, promote a spirit of national harmony this evening by giving whole-hearted support to the Bill.

This is another instance where the Government have so sensibly adopted the policy of their predecessors. I assure the Financial Secretary that the best way for him and the Chancellor of the Exchequer, and, indeed, the rest of the Government, to continue this non-party atmosphere, which they often tell us is so desirable, would be for them in other matters, great and small, thus to adopt the policy of the previous Government. Indeed, I can undertake that in so far as they do this, their efforts will be received in that spirit of national unity which the Prime Minister so eloquently preaches when he is in power and so energetically destroys when he is in opposition.

As the Financial Secretary says, the Bill enables societies registered under the Industrial and Provident Societies Act, in substance, to raise the shareholding limit from £200 to £500, with certain other consequential changes. My information is the same as his, in that the limit of £200 reaches back to the year 1862. I fully agree that there have been large changes in the value of money since then. We need not argue tonight who is responsible for those changes, because when one goes back as far as 1862 all the political parties, including even the Liberals, would be pretty heavily involved.

On a strict comparison of money values, one could, perhaps, justify a rise to a higher figure, probably, than £500. Five hundred pounds today would, surely, be a smaller proportion of the total money in national income than £200 was in 1862. It would be, I would also have thought, an even smaller percentage relatively of working-class savings.

The Financial Secretary said that the change will be equally welcomed—this is my information also—by the agricultural and the ordinary type of co-operative societies—as he called them, the "ordinary co-ops," both of which always seem to me to play a larger and, perhaps, more meritorious part in our general economic life than we sometimes remember in the general economic debates in the House. It always seems to me that these societies combine many of the merits and avoid many of the defects both of some forms of private enterprise and of some other forms of public enterprise.

I also have the same information as the hon. Gentleman about the possible effect of the Bill upon savings. Members of these societies tend to leave their dividend to accumulate up to the figure of £200, but when that figure is reached the societies, as they have to do under the present law, notify them of the fact and from that moment onwards the members, it appears, tend to spend the dividend rather than to leave it to accumulate further. If that is so, and it seems to be agreed that it is, we are by the Bill making a real contribution to that increase in national savings by the small saver, which we all wish to encourage, with the possible exception of the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke), who is not here to disturb the harmony of this evening.

I am not saying that the Bill is so perfect as to be beyond any improvement in Committee, and I gather that the hon. Gentleman already has one Amendment in mind. Some of my hon. Friends who have expert knowledge and experience of the working of these societies may possibly also have one or two Amendments to put down. I therefore express the hope that the Government will receive such Amendments in the same sympathetic spirit in which we are receiving the principle of the Bill this evening.

8.55 p.m.

Mr. F. Beswick (Uxbridge)

I wish to say a word of welcome to the Bill and to the proposed Amendment which the Financial Secretary has promised. I think we all agree that for the theoretical reasons put forward by the Financial Secretary we should restore to the societies the facilities they enjoyed under the original Act of 1893.

It is also worth while spending a few moments on the reasons why we should encourage these societies. It is often claimed by hon. Members opposite that industrial, productive, or constructive activity can only be stimulated if there is profit-seeking capital, but here in the societies registered under this Act there is evidence to the contrary; and the evidence is indeed impressive. The Financial Secretary gave some figures, but he did not give the figures of the trading involved. I think I am right in saying that the retail and wholesale societies affiliated to the co-operative union alone now do a business which amounts to more than £1,000 million a year—a very impressive figure. The agricultural societies must be doing a turnover of around £90 million a year.

Some explanation of this quite remarkable growth can undoubtedly be found in the loyalty of the members to the society, to the idea of the society and indeed to the ideal of the society, but it is also a fact that to the members concerned this is a more efficient way of supplying themselves with the goods and services they require. One reason why it is a more efficient way, in my judgment, is precisely because of the method adopted to finance their activities—the method provided for in this Bill.

There is no question here of any expectation of additional returns to capital. The incentive, initiative and stimulus comes from a desire for a more efficient and economical service, either to the producer or to the consumer. This incentive does work—the figures prove it works—and in my judgment it works more fairly as between the citizen as a producer and the citizen as a consumer, or the citizen as a shareholder.

I wish to give a little illustration of what I mean by working more fairly. If, in 1862, a person invested £200 over a period of years he would get a reasonable return, but that shareholding today would still be worth £200. But, if that same £200 had been invested in another form of enterprise, invested, say, at the inception of a certain insurance company which launched out about the same year, 1862, then that £200 worth of shares would today have a market value for the investor of no less a sum than £1,360,000. No one can argue that any person who advances capital to stimulate enterprise is entitled to a reward of that magnitude.

No doubt the overwhelming majority of shareholders would never have even seen the factories and establishments into which their capital went. Moreover, in addition to the increase of capital value each year they have been receiving a very substantial sum by way of interest. In one case, therefore, we have these societies where the rewards of initiative and enterprise come to citizens as consumers or producers, but in the other case the reward goes overwhelmingly to the person who provides the money, to the shareholder or money lender.

In the orthodox type of company or organisation which Members opposite tend to support the rewards go to people who, in my judgment, are not entitled to the amount of reward that they are now drawing. It is, of course, essential that money should be ploughed back into an enterprise, whether in the case of a society registered under the Act or any other type of society. But I deny the right of the shareholder to claim all the money ploughed back as his exclusive property. The producer, the consumer, and, in some cases, the State itself ought to have a prior claim to some of the money put back into many productive enterprises.

I remember particularly the case of some farmers in the Middle West of America who banded themselves together, or co-operated together, to provide themselves with animal feedingstuffs and fertilisers, and across one of their mills which they had built they had inscribed, "Farmers have paid for many mills: this one they really own." I think that, similarly, there are many enterprises in this country which have been built up by the energy, initiative and abstinence of the men, managers and consumers which are now completely owned by people who certainly contributed the original money, but have not since whispered a word or moved a muscle to encourage the development of that concern.

I welcome the Bill. The principle of financing enterprise which is embodied in it is one that we ought to look at again and see if we cannot, as my right hon. Friend the Member for Battersea, North (Mr. Jay) said, utilise it in other ways. We ought to see if we cannot finance more and more activity in this country along something of the same lines as those societies of which we have been speaking this evening. I welcome the Bill and I hope that, with Amendments, it speedily reaches the Statute Book.

9.2 p.m.

Mr. W. Coldrick (Bristol, North-East)

I should like to extend a hearty welcome to the Bill. If all the legislation which His Majesty's Government introduce is as beneficial to the whole community as is this Measure, I can assure them that they will have a great deal of support from these Benches. I apologise to the Financial Secretary for my inability to be in the House when he made his speech. I have no doubt that he has already drawn attention to the fact that, owing to the change in values, this arrangement for an increase in the capital holding of each individual member has been rendered more than necessary.

I wish only to indicate that a great deal of his need has arisen particularly since the war. I have had experience of the trading and consumers' side of the movement, particularly during the period of the war. During the whole of that period, when young men were in the Forces and wives were working, it was common experience for a large number of them to allow their savings to accumulate inside the co-operative society, which played an effective part in connection with the savings movement.

Most of the people connected with the savings movement will readily agree that the Co-operative movement of this country has never received full credit for the part it played in increasing the savings which went into the war effort during that period. We were conscious that in allowing their dividends, as they are generally termed, to accumulate inside the Co-operative movement, those people were doing so in response to our exhortations, in the hope of being able, at the end of the war, when they settled down and built their new homes, to buy the consumer goods which were not available during the war.

Therefore, there was a considerable capital increase during the whole period of hostilities. Since the war there has, of course, been a considerable amount of dis-saving. The result has been that these young people and others have bought a large quantity of consumer goods. That, of course, has tended to increase the difficulties of the Co-operative movement and presumably all the other organisations, working within the provisions of the old Industrial and Provident Societies Act.

I wish to indicate, so far as my own experience within the Bristol area is concerned, that this has been rendered imperative because during the whole period of the war we baked bread in Bristol not merely for members, but I should think we supplied half of the Forces stationed in the South-West with bread from the Bristol bakery. That meant that the plant was running for 24 hours a day and the result was an inordinate amount of depreciation. Since the war it has been impossible to replace that plant at anything like the price we paid for it. So far as we were limited by this proviso that no member should contribute more than £200, it has been increasingly difficult in that direction.

What applies to bakery plants also applies to much of the other plant, and I think it appropriate that I should remind hon. Members, and particularly hon. Members opposite who very often like to castigate the Co-operative movement, that during the whole period of the war we had in Bristol what I regard as a model dairy and we were able to place milk on the doorsteps of houses in adjacent towns immediately after the blitzes. That I consider is evidence of the fine work which can be accomplished by people who really believe in co-operation rather than competition.

All this, of course, has meant that plant has depreciated so much more rapidly and has caused us to extend the works and to purchase new plant. In consequence we feel more keenly these restrictions which are imposed upon us. Everyone appreciates that the amount of capital which must be involved in stock is infinitely higher today than either at the time when the original Act was passed or during the time up to the war.

If £200 constituted a reasonable limit in pre-war days, I submit that £500 represents an appropriate sum at this moment. We discovered that 25 per cent. of this capital is held by people who have already reached the maximum figure and consequently, unless this particular restriction is removed, it impedes the possibility of people saving, which is so desirable a thing in the interests of the country. It is unwise for us to exhort everyone else to save, in order that the country may enjoy the advantage of that saving, and then, through legislation, to make it increasingly difficult for them to do so.

For those reasons, I am pleased to accord a welcome to this Measure on behalf of the Co-operative movement. I understand that a Government Amendment has been suggested, which we would welcome if it would make it possible to operate this provision without the necessity of going to the Registrar or proceeding in the tortuous way which one has been obliged to proceed in the past to avoid it proving a fairly costly matter. I think the Government can rest assured that we shall do everything possible to assist the passage of this Measure and to help to improve it.

9.10 p.m.

Mr. G. R. Mitchison (Kettering)

For the same reasons as those of the hon. Member for Bristol, North-East (Mr. Coldrick), who has just resumed his seat, I welcome this Bill. There are a number of co-operative societies in my constituency and it has occurred to me that there is one point which has perhaps been overlooked or postponed, and I rise to ask the Financial Secretary to give it his consideration, if possible by an Amendment in this Measure: if not, in some other form.

A great deal of practical inconvenience was caused before the Local Government Act of 1948 by the disqualification of members of co-operative societies from voting in municipal matters where the local co-operative society had some interest, and it was the main purpose of Section 131 of the Local Government Act of 1948 to remove the disqualification of indirect interest by way of shareholding not exceeding £200. It is true that in the Section in question there is no express mention of a co-operative society, but it was said at the time—and indeed it was quite obvious—that the £200 had some connection with the fact that the maximum limit for co-operative shareholding at that time was £200.

If this Measure goes through—and I hope it will—the result will be that shareholders who have a holding of less than £200 in a co-operative society and who happen to be on a local council will not thereby be disqualified from voting on matters in which the co-operative society has an interest; but there will arise an intermediate class of shareholder holding between £200 and £500 worth of shares in the co-operative society. Unless some Amendment is made they will have an indirect interest, which, in their case, will prevent them from voting on matters on which that co-operative society has an interest.

I am quite sure that no one could possibly defend the existence of that state of affairs, and I merely rise to suggest that if the permissible shareholding is to be raised from £200 to £500, an Amendment ought also to be made in what is, in fact, Section 131 (2) of the Local Government Act, 1948, and the sum of £200 mentioned in that Section ought to be increased to £500. I do not wish to suggest in detail how it should be done, but it does appear to me that, as there are already a number of Amendments of various statutes in Section 1 of this Bill, it might be possible to make the necessary Amendment in the Committee stage.

9.15 p.m.

Mr. John Rankin (Glasgow, Tradeston)

First, I must apologise to the Financial Secretary to the Treasury because, unfortunately, I was not able to be in the Chamber to hear his opening speech and he may have covered one of the points with which I want to deal. I want to assure the House, lest there should have crept in the feeling that this is an English Bill, supported only by English societies and by the English Federation, that the Scottish societies and the Scottish Co-operative Wholesale Society very strongly support the Bill. The Government can rest assured on that point.

Sir William Darling (Edinburgh, South)

Does the hon. Member declare an interest?

Mr. Rankin

Yes, the interest that a good citizen always has in good deeds. I welcome this good deed by the Government.

The first point I want to make on the Bill is that in Scotland we welcome it because within the Co-operative move- ment savings are largely an involuntary process. As a rule, the member of a society leaves his dividend in the society until the £200 limit has been attained. Once that limit has been reached, the tendency throughout the societies is for the members to withdraw the dividend. They feel that they have done their good deed, and so they withdraw their dividends with the result that that money acts as a sort of pressure on the price of available commodities. It does not stimulate savings to the extent that we want to see them stimulated today.

By raising the total amount which can be held in share capital to a maximum of £500 we provide every possibility that the member, having attained the £200 mark, will allow his savings to remain in the society until the £500 maximum has been achieved. While I recognise that, to some extent there is merely a postponement of the process already noted, nevertheless it should have a good effect during a period of what we hope will be temporary economic embarrassment. Therefore, I welcome the Bill on behalf of Scottish societies from that point of view.

There is a second point which I wish to make. It is possible that the Financial Secretary may have covered it already. To take advantage of the Bill when it becomes an Act, which we hope will be soon, societies will require to incorporate an amendment in their rules. I believe that there is a suggestion which the hon. Gentleman may have accepted that this should be done merely by resolution to be incorporated into the rules of the society when they find that convenient.

Mr. Boyd-Carpenter

I did foreshadow an Amendment in the Committee stage which, I hope and believe, will take care of that point.

Mr. Rankin

I am very glad to hear that and, with my thanks, I reiterate Scottish support for the Bill which, I hope, will have a speedy passage in becoming an Act.

Sir W. Darling

Is not the effect of this Bill to supply co-operative societies with more than double their present capital without application to the Capital Issues Committee?

Mr. Rankin

It certainly will increase the amount of capital which may be employed by the societies and by the federation, but we must remember that this power was granted way back in 1862. Anyone who measures the value of a maximum shareholding of £200 in 1862 will readily agree that £500 in 1952 is not in any way disproportionate. I think I may say, without betraying any secret, that after what we have heard this afternoon there will be no great freedom given to societies to enable them to expend their new accumulations.

Question put, and agreed to.

Bill accordingly read a Second time.

Committed to a Standing Committee.