HC Deb 26 April 1978 vol 948 cc1469-80

'Where a designated district authority are satisfied that it would be to the benefit of the designated district to assist persons wishing to establish a co-operative or common ownership enterprise, as defined in the Industrial Common Ownership Act 1976, they may make a grant or loan or both to such persons to facilitate the establishment of such an enterprise.'.—[Mr. Clemitson.]

Brought up, and read the First time.

Mr. Ivor Clemitson (Luton, East)

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

I want to argue very briefly that co-operative enterprises—I use that term in a broad sense to include co-operative and common ownership enterprises, as defined in the Industrial Common Ownership Act 1976—have a peculiarly important part to play in any renaissance of inner urban and inner city areas.

We have heard a great deal in the last few mintues about small firms and the relevance of small firms to the inner urban areas. We may not all be Socialists yet, but apparently we are all followers of Schumacher.

Co-operatives are not, of course, necessarily small, but it is obviously in the small enterprise sector that they have a peculiar relevance. The enemy of small firms is not, I believe, the Government, as a number of Conservative Members keep trying to tell us. Incidentally, in propagating this kind of mythology they do a great deal of harm to small businesses. I do not believe that the Government are the enemy. What causes the end of small businesses in many cases is the big firm taking over. That means often either the complete demise of the small firm or the physical removal of the small firm, or parts of it, through a process of rationalisation. This can have shattering consequences for inner urban areas.

The co-operative type of enterprise has a great inbuilt advantage in this respect, for it is far less likely to be taken over. Again, co-operatives retain their profits within the local community. They do this in two senses. First, co-operatives re-invest a high proportion of their profits. Indeed, the experience is that where co-operative enterprises have a certain per centage of re-investment written into their rules, the members of the co-operative or the common ownership enterprise regularly determine to re-invest a higher proportion than is required by their rules. In so far as profits are distributed, they are distributed within the local community and not to some distant sort of rentier shareholders.

Another important point is that co-operative enterprises involve local people in the management and running of a major and significant part of their lives. It seems to me that the run-down of inner urban areas has as much to do with attitudes and morale as it has to do with the actual physical run-down of those areas. Giving people the opportunity and the confidence to participate, manage their own lives, take decisions and exercise control is a very important element in building up the confidence of people in inner urban areas.

Co-operative enterprises give a great opportunity for the tapping of energies, enterprise and ideas. One of the tragedies of our society is that so much talent goes untapped and undeveloped. One of our great challenges is to devise ways in which that talent is enabled to develop.

Co-operatives, therefore, provide a very good way of developing new enterprises. Surely we all are agreed that what we want is new enterprise in inner urban areas. Co-operatives have so often been associated with the attempt to rescue failed companies. Here is a great chance for the development of entirely new enterprises.

But co-operative enterprises cannot develop unless they have resources available to them—resources of money, expertise and skilled advice. It is in this particular area that the new clause seeks to provide some help. Co-operative enterprises have not only an important but also a vital role to play in the rejuvenation of inner urban areas. I therefore hope that the Government will see their way clear to accepting the new clause.

Mr. Stanley Newens (Harlow)

I support the arguments advanced by my hon. Friend the Member for Luton, East (Mr. Clemitson) in favour of the new clause. Although I represent a new town, like my parents and grandparents before me I was born in the East End of London. Having spent a significant part of my life living and working there, I am deeply concerned about the decline of that area, as I am about the decline of all inner city areas.

During recent months—and in connection with this Bill—a considerable amount of discussion has rightly taken place about the part that can be played by small enterprises in regenerating inner city areas. Like my hon. Friend, I believe that this Government have done more to assist small businesses than have the Conservative Opposition, despite the fact that they have consistently made a noise about it.

As a result of my social background, I probably have a much greater contact with small businesses than do many Conservative Members. I assure them of that before they start challenging me on the point. I am quite prepared to discuss the matter with them. I suggest that far more damage has been done in the past by the Conservatives' lack of concern about small business men. The Conservative Party is really concerned with the interests of big business.

In these circumstances we would do well to nay tribute to what this Government have done and, in particular, to what my hon. Friend the Under-Secretary of State for Industry has done in his capacity.

Mr. Durant

Will the hon. Gentleman take it from me that some of us resent his remarks, because we are in small businesses ourselves? We resent his implication that every Conservative Member comes from big business and is not interested in small businesses. I happen to be in a small business. I have 20 employees, which I think is about right under the definition. I can tell the hon. Gentleman that there is widespread resentment at the way in which this Government have behaved towards small businesses. I should like him to give tangible evidence of what this Government have done to help them.

Mr. Newens

If I took it upon myself to endeavour to give a long catalogue of all the things that this Government have done, I am sure that Mr. Deputy Speaker would rule me out of order. There is no need for me to do so, since I am sure that my hon. Friend the Minister will take up that point.

I should like to make it clear to the hon. Gentleman that I am by no means suggesting that there are not Conservative Members, like himself, who are deeply concerned with small businesses. I wish to make it clear that I have no desire to criticise him. What I did say is that this Government have done more for small businesses than have the Conservative Opposition.

Mr. Deputy Speaker

Order. That does not appear to me to be directly related to the new clause. Perhaps the hon. Gentleman will direct his mind along those lines.

Mr. Newens

I shall certainly return to the subject, as I am anxious to do, but as I had been challenged I felt it necessary to make it clear that the Conservative Opposition have done very much less than have the Government for the category of people whom we are discussing.

A great deal of attention has been focused on private enterprise. In many respects that is absolutely right, but we should not overlook the possibility of creating other forms of enterprise where that opportunity exists. The new clause raises the issue of assisting co-operative or common ownership enterprises. In the past, many successful co-operatives were created throughout the country. However, like all small businesses, many of them in the manufacturing sphere suffered a high rate of mortality over the years. Today it is very much more difficult to establish any small business, whether it happens to be a private or a co-operative enterprise.

It is, therefore, important that co-operatives, just as much as private enterprises, should be eligible for the support that the Bill provides. Many of the arguments in favour of co-operative and common ownership enterprises were recently advanced during the Second Reading of the Bill to set up a Co-operative Development Agency. I do not intend to take up the time of the House by repeating them tonight. Like my hon. Friend the Member for Luton, East, I believe that they have a particular relevance to the situation that exists in inner urban areas.

Not only would the new clause provide designated district councils with the power to establish co-operatives; it would, by its very existence, draw attention to an alternative form of enterprise.

Co-operatives and common ownership enterprises can be formed by those seeking employment without waiting for an entrepeneur to come in and without taking the responsibility entirely upon oneself as an individual. Local authorities, therefore, ought to encourage and nurture co-operatives just as much as small private enterprises. I believe that in no way should we prefer one to the other. We should support them all equally. I hope very much, therefore, that the Minister will accept the new clause. I believe that it will in no way detract from the important purposes of the Bill. Indeed, in my view it will strengthen them.

8.0 p.m.

Mr. Peter Morrison

I was interested to hear what the hon. Gentleman said, and I agree with a great deal of it, but what, in his view, is the difference between a co-operative, as he describes it, and a partnership, such as a group of lawyers or accountants?

Mr. Newens

I do not wish to enter into a legal discussion, but in my view all those forms of enterprise, including partnerships, should be encouraged if they are likely to provide, in any locality, the possibility of developing a useful manufacture or service to the community and providing employment. Obviously there are differences between different forms of enterprise. However, I do not wish to differentiate between them in this debate. I am concerned only with the necessity of supporting them all where they have a useful social purpose to fulfil.

Mr. George Rodgers (Chorley)

In recent months, there has been a surge of interest in small firms and their capacity to provide employment, and certainly co-operatives and common ownership enterprises are usually small and labour intensive. It would therefore be unfortunate if provision were not made in this Bill for the encouragement of such ventures.

Co-operatives and common ownership enterprises, by their very nature, are community based and unlikely to uproot themselves, as has too frequently been the case with subsidiaries of major companies which have moved out from city centres to the outer areas and decided when times were hard to abandon and close down their periphery enterprises in favour of the central ones.

Profits which are generated by co-operatives will circulate locally, as my hon. Friend the Member for Luton, East (Mr. Clemitson) pointed out, and they will have a real impact on revitalising their local communities—the run-down urban areas—because they are rooted in their own localities and utilise and develop local talents and abilities. These abilities might well have lain dormant and neglected or even withered away for lack of encouragement and opportunity without the existence of the co-operatives.

It is sometimes claimed that the record of common ownership enterprises or co-operative industry has not been entirely successful. But the record is remarkably good, bearing in mind that a great number of such enterprises were created from the wreckage of collapsed private companies. This is hardly the ideal lannching ground for new endeavours. Despite that, a high proportion have flourished and many more will do so, given opportunity and sufficient support. If the terms described in New Clause No. 6 are incorporated into the Bill, I am sure that they will prove a very worthwhile investment.

The real hazard to the growth of a small firm is the ability of a large firm to gobble it up. On occasions, of course, it can be to the mutual advantage of both firms to become one. The expertise of the big company with its marketing knowhow and its many outlets can serve the interests of the pushing and enterprising small manufacturer. But sometimes Big Brother in the shape of a large company can effectively destroy the potential challenge of the newcomer.

Common ownership enterprises and co-operatives have an inbuilt protection against the asset stripper because the enterprise cannot be sold and cannot be sold out by a handful of individuals. The whole work force is the controlling ownership. Instead of labour saving capital, capital saves labour, and in fact labour saves labour. This is surely a very healthy arrangement and one which will appeal to workers throughout the country.

The proposed clause should be accepted with enthusiasm. Its implementation will give a thrust to community involvement and community enterprise. I believe that the support that should become available to co-operatives and common ownership enterprises as a result of the acceptance of the clause will prove a first-class investment to British industry and to the British people.

Mr. Nigel Spearing (Newham, South)

Clause 2(1)(a) and (b) as the Bill is drafted at present refer to the acquisition by any person of land and the carrying out by any person of any works on land so situated". Those of us who put our names to this new clause, while not thinking that the Bill excluded co-operatives, wished specifically to include them in the Bill's provisions.

My hon. Friends have made out an admirable and complete case for doing so, and all that I can do is add a few remarks from personal experience in the East End of London about the position in which we find ourselves today.

My constituency covers exactly half the designated dockland area of London, which I hope will be an entirely designated area. One of the problems which arise with the increasing pace of industrial change is the frequency of redundancy. It is fair to say that throughout London we can see the beginning of a new phenomenon. It is that a few people who have been made redundant and who have known each other in their place of employment get together in a partnership or in a co-operative. The area here is perhaps not one that we can define exactly in terms of practical operation, although I have no doubt that the lawyers will be able to tell us which is which. But these people get together and create a new enterprise very often based upon genuine partnership, working together, and usually on a combination of skills which otherwise would not come together and which, if apart, might not exist on their own. This is not infrequently done by people who have part professional skill and part manual skill.

I am thinking specifically at the moment of a small firm in my constituency. If those involved in such an enterprise manage to patent some device or if the combination of skills which they possess has great promise or great poten tial, it is not infrequently the case that they are offered capital. But they are offered it on terms which they are unwilling or relucant to accept. It may be that the people who are offering the capital want the patented device. It may be that they want the combination of skills and experience which the partners or the putative co-operative possess. They do not very often want to set them up in business as it stands. That is the experience which is not infrequent, not only in London but in other parts of the country. It is the problem of the takeover or of the people with the capital saying "Very well. We will set you up, but not in the East End of London." A small firm in my constituency has been offered money to set up in Egypt because of the skills that the principal operators possess. I am afraid that the flight from this country of manufacturing talent is frequently caused by an approach of that kind because the ways in which profit can best be made are very much along those lines.

It may be that this is a danger to manufacturing of all types, whether they be co-operatives, small businesses based on private enterprise or even the larger firms. But in the inner areas we must make it at easy as we can for these enterprises to remain, and I believe that this clause will provide one more possibility whereby they can remain.

Unfortunately, in East London and, I suspect, in most other nineteenth century areas of industry, people with skills are made redundant. Therefore, there is at least a potential in terms of skill. There is also a potential in terms of space. One has only to visit some of these areas to see factory after factory—some of them quite modern—for sale or for lease. There is no doubt that the space is there.

As we were reminded earlier in a reference to the late Professor Schumacher, the optimum size of unit for certain products can be small. There is also the possibility of using people for part-time employment, especially the assembly skills of ladies who have domestic responsibilities. That might also fit into a possible co-operative structure.

I am not saying that the new clause will suddenly create a new type of enterprise, but I hope it will. Ten years ago, few people thought that the housing associations had much to contribute. I am not saying that they are uncontroversial today, and many of us were sceptical of a new form of ownership being brought in at great speed. They have developed, however—although there are still arguments about the way in which some of them have done so.

I hope that the new clause will at least provide a potential. If those responsible for operating the Bill use it wisely, the human potential in the older areas will be made productive. I do not say that that will happen, but it could happen and it sometimes has. The new clause will provide the specific facility and to that extent, one hopes, will encourage universally desired developments.

If the Minister feels that the wording is not all that it might be, no doubt he will say whether he accepts the principle. The draftsmen may say that this provision exists in Clause 2(1), but that is implicit and it should be in the Bill explicity.

Mr. Reginald Eyre (Birmingham, Hall Green)

We on this side recognise the serious situation, described by a number of Labour Members, in so many older areas in London, the Midlands and the North. To set up new enterprises which will create wealth and new jobs, individuals must show initiative and enterprise. We welcome those qualities. The forms of organisation referred to in the new clause, particularly common ownership, are acceptable variations on the forms of private enterprise which are essential.

My hon. Friend the Member for the City of Chester (Mr. Morrison) made a valid point when he said that he saw these organisations as the equivalent of small partnership firms. We are interested in these proposals and I hope that the Minister will consider them positively.

Of course, we would not accept any discrimination in favour of these organisations which led to unfair competition. I see that some Labour Members agree with that. Therefore, I hope that the Minister can explain the reference to the Industrial Common Ownership Act 1976. Will that affect the position that I have just described?

Subject to that assurance, and to the acceptance of the principle that there should be no unfair competition, we welcome any organisation which will encourage initiative and responsibility and the creation of new products and jobs in these urban areas.

8.15 p.m.

Mr. Cryer

I am grateful to my hon. Friends who have supported the new clause, but I do not want to bolster their hopes that such a clause might be widely used for converting existing small firms into co-operatives. The reason is the Government's excellent record in assisting smaller firms. Perhaps fewer such firms can now convert to co-operatives.

The Government's recent record in relation to small firms includes the preferential rate of corporation tax at 42 per cent.; the 100 per cent. relief for small firms—and for medium and large ones—for investment in plant and machinery; the 50 per cent. special valuation for capital transfer tax; the relief for losses in the first three years for unincorporated associations against losses in the previous three years, so that they can be carried back—this is particularly useful when firms are starting up; the extension of the small firms information centres and counselling service; the extension to £10,000 for exemption from VAT; and the simplified scheme to be introduced over the coming months.

All these things are extremely valuable, together with such additional services as the Department of Industry provides, such as special nursery units in the assisted areas, of which we are building a larger programme than this country has ever seen before.

Even with their own Industry Act, the last Conservative Government failed to follow their fine words about small firms by building suitable advance factories. There is a credibility gap between what they say now and what they did then.

I share the concern which has been expressed that adequate assistance should be available to encourage co-operatives and common ownership enterprises. The Government are actively encouraging the setting up of such bodies. We supported the Industrial Common Ownership Act brought in by my hon. Friend the Member for Consett (Mr. Watkins), who is of course here tonight since he takes a deep interest in co-operative endeavour. We have just introduced the Co-operative Development Agency Bill, which has gone through Committee and will shortly be back on the Floor of the House. Both those Bills were widely welcomed.

In addition, such enterprises benefit from the various general powers for assistance to industry, including the Industry Act 1972 and this Bill itself.

The Government have no doubt that co-operatives and common ownership enterprises can be assisted under the Bill on the same basis as any other organisation. Assistance is available to "any person" and under the Interpretation Act, "person" embraces any corporate or unincorporated body. Consequently, I am happy to accept the principle of the new clause.

Some local authorities are assisting co-operatives under Section 137 of the Local Government Act 1972, but a provision in this Bill along the lines of the new clause would give a clear and specific power to designated district authorities for this purpose. No doubt the Co-operative Development Agency would consider, in the light of the experience of the use of such a power, whether similar specific powers should be available to local authorities generally. Hon. Members no doubt remember that the CDA will have a requirement to review all legislation applying to co-operative organisations.

However, the Government need to consider the drafting of the clause. We also want to insert provisions into the Bill such as those in other clauses to enable the local authority to impose conditions, for example to ensure that the money was used for the purpose applied for and to enable the Secretary of State to make directions on the exercise of this power. I think that that ought to answer the point made by the Opposition spokesman. We want to make sure that the Bill falls into line with other legislation and has the same qualifying amendments to the principle of the clause. In addition, the powers of assistance in the Bill were notified to the EEC Commission to comply with all our obligations under the Treaty of Rome. Any substantial addition such as a clause along the lines of the new clause would also require to be notified to the EEC.

I note my hon. Friend the Member for Newham, South (Mr. Spearing) moaning and groaning in the background. His constant critique of the EEC does not go unnoticed. However, we are a member now. It was said earlier that I had raised one or two points in Committee about the EEC. All I do is draw hon. Members' attention to the facts of life that we have to notify the EEC about certain matters that we operate in the United Kingdom. These include such items as regional assistance and assistance to industry. If there are any alterations, we shall have to notify the EEC of them. This is something that we must face now that we are members.

If my hon. Friends withdraw the new clause, I shall undertake that the Government will introduce their own clause embodying the principle of my hon. Friend's clause when the Bill reaches the House of Lords. I am grateful to my hon. Friends for moving their clause and I hope that they will accept my assurance on that basis.

Mr. Clemitson

May I say how grateful I am—and I am sure that I speak on behalf of my hon. Friends—for what the Under-Secretary has said, for his undertaking and for the assistance that he has given and continues to give to the principle and practice of co-operation? I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.