Co-operatives (European Community) (Hansard, 11 May 1993)

§ Mr. Dennis Turner (Wolverhampton, South-East)
The importance attached by the British co-operative movement to a European co-operative statute is shown tonight by the presence of the co-operative parliamentary group, with the exception of one member, from the House of Commons. We have 14 members from this House and four members from the other place.
Our task in this debate is to ascertain the Government's attitude to a European statute and to persuade the Minister to say that the Government have no serious objections to a European legal framework for cooperatives and will ultimately support the approval of the statute in the Council of Ministers.
I hope that it will be helpful if I briefly set out the background to the creation of the European co-operative statute. In 1989, the European commission became aware of a potential problem in the Community for co-operatives wishing to enter cross-border trading under existing and future regulations. It was also anxious to ensure that co-operatives were aware of their eligibility for finance under the co-operative regional and social fund. The Commission stated: the question may therefore arise at Community level of harmonising certain national provisions in order to improve the conditions of access to European markets for mutual societies, co-operatives and similar enterprises. For that reason, it was willing to consider whether a special statute should be set up for the co-operative and mutual sector which would facilitate grouping operations, in conditions similar to those available to public limited companies under the European company proposal. In other words, to use last year's buzz phrase, it would create a level playing field within the single market.
The statute would allow the creation of a supranational co-operative society by two or more existing national co-operative societies as long as each had its headquarters in a different member state and had a minimum of 1,000 ecu. The statute passed through the European Parliament on 22 January, but it still has to go through the Council of Ministers.

§ Mr. Gordon McMaster (Paisley, South)
I congratulate my hon. Friend on his excellent speech. Is he aware that the Co-operative Insurance Society represents 14 per cent. of the total insurance market in Europe and that an astonishing 4 million people are represented by it?

§ Mr. Turner
I thank my hon. Friend for that comment. I am sure that the importance of co-operation in insurance is recognised, as my hon. Friend said.

§ Mr. Alan Keen (Feltham and Heston)
Is my hon. Friend aware that there are 45,000 worker and producer co-operatives in the EC, which employ almost 750,000 people?

§ Mr. Turner
That information speaks for itself and, again, shows the importance of the co-operative sector in our economy.

§ Mr. Barry Sheerman (Huddersfield)
Is my hon. Friend aware that there is a fund under the statute that allows for 777 the development of co-operatives across Europe? Surely the Government would be in favour of that. It would be a fund similar to the Co-operative Development Agency over which the Government presided and to which they gave funds. We want diversity, choice and competition in our economy.

§ Mr. Turner
I am sure that the Minister has taken note of those comments which, again, show the importance of the co-operative system.

§ Mr. Thomas McAvoy (Glasgow, Rutherglen)
Will my hon. Friend press the Minister to ensure that the Government are aware of the innovative proposals in the statute that would allow European co-operatives to issue investors' shares and non-users' shares in addition to the traditional redeemable and transferable power value shares?

§ Mr. Turner
That is an important aspect of the recommendations in the statute.

§ Mr. John McFall (Dumbarton)
Is my hon. Friend aware that co-operative banks have a 17 per cent. share of the market in the EC and that our own, dear Co-operative bank has more than 1.5 million customers?

§ Mr. Turner
That speaks for itself. I hope that the Minister has taken note of that important fact.

§ Mr. Alun Michael (Cardiff, South and Penarth)
I am sure that my hon. Friend will want to draw to the Minister's attention the importance and weight of the co-operative sector, which has been illustrated by several comments. Is it not of the greatest importance that the European co-operative statute would run parallel to the European companies statute? It will therefore create a level playing field between the co-operative and private sector of the economy, which is surely consistent with what we all seek within Europe and the United Kingdom. Will my hon. Friend invite the Minister to mention that aspect?

§ Mr. Turner
I will most definitely take the opportunity to invite the Minister to comment positively on that aspect in his speech.

§ Mr. Ken Purchase (Wolverhampton, North-East)
I thank my hon. Friend for giving way yet again—in the middle of his speech, I hope. May I remind him that there are no fewer than 15 million members of co-operatives in the European Community, owning no fewer than 16,000 shops with an annual turnover—this shows our European credentials of about 25 billion ecu? Some 8 million of those members are in the United Kingdom, and they own 4,650 shops, 90 of which are super-stores. Will my hon. Friend respond?

§ Mr. Turner
rose—

§ Mr. Deputy Speaker (Mr. Geoffrey Lofthouse)
Order. I hope that hon. Members will now act in a more dignified and serious way.

§ Mr. Turner
I hope that we are treating the matter in a serious and dignified way, Mr. Deputy Speaker. I am sure that that is what all my hon. Friends who are here to represent the co-operative movement are doing. The reason why we are taking the matter so seriously is that, as my hon. Friend the Member for Wolverhampton, North-East (Mr. Purchase) has just said, we speak for 8 million consumers—8 million subscribing members of 778 co-operatives who are looking forward to a new development that will extend co-operation across frontiers and enable our co-operatives to meet up with many more millions of co-operatives over in Europe.

§ Mr. George Foulkes (Carrick, Cumnock and Doon Valley)
As my hon. Friend knows, I represent a rural constituency. I am sure that he will be aware that, in the common market, more than half the agricultural production is harvested and processed by co-operatives —indeed, the Co-operative Wholesale Society is the biggest farmer in the United Kingdom. Does my hon. Friend accept that we are talking not just about retail and banking activity but about agricultural production?

§ Mr. Turner
I am grateful to my hon. Friend for those comments, which again explain how important it is that the co-operative statue is granted and that it becomes a reality.

§ Mr. Mike Gapes (Ilford, South)
Is my hon. Friend aware that large numbers of people work in the co-operative retail sector? I understand that there are about 200,000 in the European Community as a whole and that some 81,000 of them work in retail co-operatives in this country.
Unlike my hon. Friend the Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes), I do not represent a rural constituency. We have had a large number of problems in the co-operative movement in recent years, but, despite the recession and the economic problems faced by the whole retail sector, the retail side of the co-operative movement is still there. It is to be hoped that, over the next few years, under a Labour Government, it will be able to rebuild and re-establish itself as it should, not just in Britain but in co-operation with other co-operative retail societies and their equivalents in other European countries.

§ Mr. Turner
I thank my hon. Friend for those comments. With 81,000 employees in Great Britain, the co-operative movement is a very significant employer. It has a great responsibility in terms of employment—not just for those 81,000 jobs but for the many thousands of other jobs throughout the country which are linked to co-operative purchasing or which rely on co-operatives.

§ Mr. Ian Davidson (Glasgow, Govan)
Unlike my hon. Friend the Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes), I do not represent a rural constituency. I represent a shipbuilding constituency, which will remain a shipbuilding constituency, thanks to the co-operation and help of many of my colleagues. Is my hon. Friend aware that 31 per cent. of the food market in Denmark and about 8 per cent. in Great Britain is supplied by consumer co-operatives? We do not agree that those figures are admirable—they should be increased.

§ Mr. Turner
I thank my hon. Friend for his comments. I hope that the Minister has taken note of that significant information, because it has a great bearing on the campaign that we are waging in co-operatives in the United Kingdom to become part of the wider co-operatives movement in Europe.
I hope that the powerful case that has been made by my colleagues from the co-operative parliamentary group has convinced the Minister of the fairness in creating a level playing field between co-operative and mutual businesses 779 and private European companies in the single market. On behalf of all my colleagues in the co-operative parliamentary group and the wider co-operative movement, I sincerely hope that the Minister can support—

§ Mr. Sheerman
I shall comment on not only the content of my hon. Friend's speech but the serious and dignified way in which he delivered it. This Adjournment debate has been used probably in a better humoured and more informed way than most Adjournment debates—it gives credit to the Adjournment debate rather than anything else and I congratulate him on so using it.

§ Mr. Turner
I am grateful to my hon. Friend for his comments.
In all our deliberations in the co-operative movement, I hope that we will approach these matters in a dignified and businesslike way, yet, at the same time, recognise the human side of the way in which our co-operative movement operates. We are about people—we put people first. I hope that the Government will recognise that in their consideration of our needs and that the Minister will support the case that we have made.

§ The Economic Secretary to the Treasury (Mr. Anthony Nelson)
I congratulate the hon. Member for Wolverhampton, South-East (Mr. Turner) on securing this Adjournment debate on the regulation of cooperatives in the European Community. In doing so, I shall add a word of congratulations to the phalanx of supporters who surround him on this occasion. The performance of Labour Members in this Adjournment debate would have done credit to a champion team of tag wrestlers. Although the Labour Benches are more populated than the Conservative Benches, I am sure that the sentiments expressed by hon. Members about the importance and extent of the co-operative movement, the community contribution that it makes in a variety of ways and its size will be echoed and shared by many Conservative Members.
I know about the long interest of the hon. Member for Wolverhampton, South-East in this subject, his life time involvement in the co-operative movement and his continuing strong interest in co-operatives, both in the House and outside. He is still chairman of the parliamentary co-operatives group. In that capacity, he and other hon. Members—it is an all-party group—make an important contribution in making the Government and Parliament aware of the important contribution of co-operatives. I share the hon. Gentleman's view of the importance of the co-operative sector in the United Kingdom and take note of his arguments in favour of the European co-operative statute, which is currently under negotiation.
I am well aware of the success enjoyed by many types of mutual organisations, including co-operatives. As the hon. Gentleman knows, most organisations in Great Britain that conduct their business according to the co-operative principles choose to register under the Industrial and Provident Societies Act 1965. There are more than 11,000 such societies, with a total membership of more than 10 million and total assets well in excess of £30 billion. Retail societies provide services to almost 7 780 million members. They range from corner shops to supermarkets and department stores, as well as public houses and hotels. Other societies cover an enormous diversity of activities.
The traditional values on which co-operatives are based, including the promotion of mutual self-help, may seem to some to be rather out of step with the current highly competitive markets in which many of them operate. But the large number of people who continue to enjoy the benefits of membership clearly demonstrate that co-operatives still have a useful role to play. The Government believe that co-operative values are worth protecting and fostering. Co-operation and competition go hand in hand and history has shown that the movement has faced many challenges and has demonstrated the flexibility, willingness and ability to adapt to those changes.
The hon. Member for Wolverhampton, South-East highlighted the EC proposals, particularly those for a European co-operative statute and the advantages that it may offer to co-operative organisations which operate in more than one member state, or which are contemplating doing so. The statute is one of three related proposals made by the Commission on organisations in the co-operative, mutual, voluntary and charitable sectors—the so-called economie sociale.
The stated aim of the Commission is, as the hon. Member for Wolverhampton, South-East said, to create a level playing field for those organisations by allowing them to take advantage of the single market on an equal footing with companies, without having to convert and so lose their current status and character. The Commission has also made it clear that it believes that the statutes form a coherent package and that it expects them to be implemented simultaneously.
The content of the economie sociale statutes and the speed with which discussions on them proceed will depend heavily on developments on the company statute. However, several working group meetings have already taken place in Brussels and officials have embarked on the first article-by-article reading of the co-operative statute.
A year ago, the Government submitted an explanatory memorandum to Parliament, which set out our preliminary views on the Commission's proposals. We agreed that organisations in the economie sociale should be free to take advantage of the single market, but we expressed some doubts that national bodies wishing to operate in more than one member state experienced difficulties in doing so and that there was a useful role for the new legislation proposed by the Commission to play.
To determine the extent to which there was a need, or demand, for EC legislation on the economic sociale, the Government undertook a consultation exercise last year. A wide range of organisations in the co-operative, mutual and charitable sectors was consulted. About 1,200 consultation documents went out to those involved. Views were sought on a variety of issues including the extent of problems under the existing legal framework, the advantages and disadvantages of the statutes and the likelihood that organisations would make use of them. Comments were also invited on the detailed provisions of the statutes and on their interaction with the current EC and national laws.
The Government are now analysing carefully the responses to the consultative document. Officials in the 781 relevant Departments are considering the policy implications of the comments that we have received. Several detailed responses were received and a few meetings have already been held between officials and respondents, including a particularly helpful exchange of views with the United Kingdom Co-operative Council, which represented the views of the co-operative movement in its submissions.
It is clear from the speech and the interventions that have been made tonight that the consultation document and the future of the co-operative movement have attraccted close attention from Members of Parliament. Judging by the importance which they attached to the size and influence of the movement, I hope that they will continue to take part in the consultation process as the Government work on the policy implications of the statute.
I noted in particular and welcomed the important contributions made to tonight's debate by the hon. Members for Feltham and Heston (Mr. Keen), for Paisley, South (Mr. McMaster), for Huddersfield (Mr. Sheerman), for Glasgow, Rutherglen (Mr. McAvoy), for Dumbarton (Mr. McFall), for Cardiff, South and Penarth (Mr. Michael), for Wolverhampton, North-East (Mr. Purchase), for Carrick, Cumnock and Doon Valley (Mr. Foulkes), for Ilford, South (Mr. Gapes) and for Glasgow, Govan (Mr. Davidson). What a roll of honour. I hope that I have not missed anyone out.
I hope that we shall shortly be in a position to present a further explanatory memorandum to Parliament, reporting the results of the consultation exercise. I am sure that the hon. Member for Wolverhampton, South-East will understand that it would not be appropriate for me to comment in detail on this, or the implications of the exercise for the United Kingdom's negotiating position. I should like to respond, however, to the points that he has raised by making some general remarks about the Government's policy.
Our view remains that co-operatives and other organisations in the economie sociale should be able to take full advantage of the single market. I believe that the hon. Gentleman shares that view. But we need to gauge carefully, by examining the results of the consultation exercise and from our other contacts with the relevant national organisations, whether they are keen to operate throughout the Community, whether they already do so and, if so, what problems, if any, they are facing.
To the extent that difficulties exist in carrying on cross-border activities, we then need to assess whether the Commission's proposals offer the best way of dealing with them. Among other things, we will have to weigh up carefully the perceived advantages of the new legal framework that the statutes offer, against the cost to member states of having to set up and administer separate regulatory systems or tax regimes for European entities.
It is also essential that the legislation does not compromise the checks and controls provided by the present framework of national legislation, nor contain loopholes which could be exploited by the unscrupulous. We need to make sure that the statutes provide adequate protection for members of the new entities, as well as for those who have dealings with them.
I would not want to pretend that the negotiations on the statutes is a straightforward task, but in that connection, we will be looking closely at the responses we have received to questions in the consultative document on 782 transfer of registered office from one member state to another, on arrangements for supervising the new bodies, on accounting and auditing provisions and on insolvency proceedings. We shall also, of course, want to ensure that those organisations that choose not to operate as a European entity do not suffer any unfair disadvantage compared with those that do.
I have already cited the examples of possible drawbacks and dangers. We must try, at all cost, to avoid some of them. The proposals raise many complex issues which need to be discussed and satisfactory solutions found. Moreover, national legislation in this area varies considerably between member states and opinions tend to differ on even the most apparently basic concepts—such as defining the activities and constitution of a co-operative society.
In our negotiations we will need to bear in mind this background of very different national legislation, varying levels of regulation and different types of organisation across the Community. We must be sure that whatever is to be agreed will work well both in the United Kingdom and in other member states.
It might be suggested that the Government are adopting an unduly cautious approach to the Commission's proposals for legislation on co-operatives and other organisations in the economie sociale. But I think that it is vital to establish at an early stage what difficulties the proposals are designed to address, what opportunities they seek to offer to national entities and whether those entities are likely to take advantage of the opportunities made available to them. Having done that, it is only right to try to anticipate the potential dangers and problems which the proposals raise, alongside the obvious advantages, and to provide constructive criticism.
Let me stress, however, that in all our deliberations, the Government are driven first and foremost by a keen interest in the welfare of co-operatives and of other organisations in the economie sociale sector.

§ Mr. Jon Owen Jones (Cardiff, Central)
Can I persuade the Minister to explain to the House some of the dangers that he foresees when co-operatives work across national boundaries, as the Commission has suggested? He has referred to those dangers several times, but I am unaware of them, as, I suspect, are many of my colleagues. It would help the House if the Minister could tell us.

§ Mr. Nelson
I am grateful to the hon. Member for Cardiff, Central (Mr. Jones) for intervening. I have tried to identify some of them during my remarks. There are certain problems associated with the rights of organisations to come into this country under the banner of being a European co-operative organisation under this statute, and we would have to be satisfied that they met the same stringent standards as are subscribed to by the co-operative movement already established in this country. That is one thing on which we would need to be satisfied.
Perhaps more controversially, there are the difficulties that we still envisage within the accompanying directive on worker participation which would go with the statute in this area. Perhaps I could just say a brief word about that in particular, because the experience of the company statute, which has been under discussion for many years now, shows how difficult it can be to reach agreement in this area. The rationale behind the co-operative statute 783 and the two related proposals is to give organisations in the co-operative, mutual and voluntary sectors the same competitive opportunities as companies. Unless agreement is reached on the European company statute, the case for pushing ahead with the economic sociale proposals will be seriously weakened. However, a number of problems remain unresolved on the European statute, including, in particular, important political differences between member states on the provisions for compulsory worker participation in any European company formed under the statute.
The Commission's proposals for co-operatives and other economic social organisations also contain provisions for compulsory worker participation which are likely to cause similar problems for the United Kingdom. These are contained in directives which form part of the three statutes.
The involvement of employees is a vital component in the business plan of all forward-looking companies and organisations wishing to compete effectively in the expanding European market of the 1990s. The United Kingdom is firmly committed to the principle of employers informing and, where appropriate, consulting their employees about matters which affect them. The traditional voluntary approach, which has worked so well for us here, gives employers and employees the flexibility to agree, at local level, the employee involvement arrangements that suit them best.
784 We will take careful note of all the comments that we have received here tonight and also outside the House. As far as possible, and where they are consistent with wider Government concerns, we will try to reflect respondents' views in the stance that we adopt towards the Commission's proposals. In the final analysis, our decisions will be influenced by the desire to avoid adding to the administrative burden on co-operatives and other organisations that come under the economie sociale banner.
Above all, we must avoid falling into the trap of letting a desire for a level playing field overwhelm the need for a practical and workable approach to the regulation of co-operatives and others, both in the United Kingdom and throughout the European Community. In finding a way forward, we will continue to rely on the helpful and thoughtful contribution, as well as the extensive experience, of the hon. Member for Wolverhampton, South-East and his Friends.

§ Mr. Turner
With the leave of the House, Mr. Deputy Speaker, may I, on behalf of all my parliamentary colleagues, express sincere thanks to the Minister for his positive and encouraging speech tonight? We just hope that he will use his good offices to seek to bring to a speedy and successful conclusion the implementation of the statute. I thank him sincerely for his thoughtful and helpful contribution.