Co-operative Movement

HC Deb 17 July 1996 vol 281 cc1059-80

Motion made, and Question proposed, That this House do now adjourn—[Mr. Bates.]

9.34 am

Mr. Ken Purchase (Wolverhampton, North-East)

I must start with a declaration of interest as I am a fully paid-up member of both the Labour party and the Co-operative party. I stand here as an official Labour and Co-operative party Member of Parliament. At the forthcoming election I shall stand as an official candidate of both parties. Indeed, it is my hope that the media will so designate me and my 25 colleagues who will also stand as Labour and Co-operative candidates.

It should not trouble Conservative Members that the Co-op is a loyal supporter of the Labour party. We are not troubled by the firm support given to the Conservative party by its retail friends and other friends in big business. It is not surprising that the people's business should support the people's party via its own political party. The difference is that the Co-op supports the Labour party via the Co-operative party quite openly, whereas one is never quite sure which businesses do or do not support the Tory party, not least because businesses operate under such a variety of trade names.

The Co-operative party was set up in 1917 to put co-operators into Parliament. It is the political party of the co-operative movement. Our first Member of Parliament was elected for Kettering in 1918. We currently have a parliamentary group of 15, with four in the Lords and six Members of the European Parliament. We also have more than 700 local councillors. Our first Member of Parliament took the Labour Whip, and from 1925 the Labour party and the Co-operative party have been linked by a formal national agreement.

I should mention at this point that following the new proposals on openness and transparency in the House, the Co-operative party has just written a new agreement with the Labour party to ensure that that transparency is there for all to see and to understand. It is only the fourth time since 1945 that that agreement has had to be renegotiated.

There are three key concepts of great importance to the co-operative movement. First, the Co-operative party is a political party representing the co-operative movement. Our candidates stand as joint representatives of the Labour and Co-operative parties. That link is also declared in our election literature so there is no pretence or camouflage.

I hope to demonstrate by example what co-operative principles mean in practice. To take a wider view, the co-operative movement in the United Kingdom is significant because of its economic impact and the diverse range of products and services provided by its members. Co-operatives are active in retailing, insurance, banking, agriculture, housing and in a variety of industrial and commercial activities as worker co-operatives and credit unions. Those unions are the fastest growing sector of our movement and they enable members to save together to provide loans at very low rates of interest.

The diversity of the co-operative movement is reflected in the range of services organised co-operatively and include taxi drivers, actors' agencies, general practitioners and even some symphony orchestras. I hope that Members who belong to the Wine Society, which was founded in 1874, will not be too surprised to learn that it is also a co-operative. Tower colliery in south Wales is one of the newest and most successful co-operatives, showing what can be achieved when workers come together for their mutual benefit.

Co-operatives make a major contribution to the economic life of this country. The ubiquitous Co-op, with nearly 5,000 outlets, is a force to be reckoned with on the high street and out of town. It has a combined turnover of about £7.5 billion and employs about 120,000 staff nationwide. Following the creation of Milk Marque, the co-operative that replaced the milk marketing boards, the turnover of the agricultural co-operative movement approaches that of the retail sector.

Other sectors are much smaller but provide the crucial element of choice to their members. Latest estimates suggest that about 10,000 co-operators are working for their own benefit in 2,000 worker co-operatives. I pay tribute to the industrial common ownership movement, which is to be congratulated on the work that it has done since the introduction of the Industrial Common Ownership Act 1976.

Tenants are exercising control of their living environment in more than 530 housing co-operatives. There are 500 credit unions, encouraging their members to save and providing low-cost finance to members, many of whom lack access to traditional forms of credit. For instance, in my constituency, there are now three credit unions, all in what might be termed areas where income is at a premium, where people have often been exploited with high-interest loans. Through the new system of credit unions they are gaining access to low-cost finance. An increasing number of employees of large organisations, such as British Airways, the local authorities and the police service, have joined credit unions or formed credit unions of their own.

Co-operatives are dynamic organisations, responding to their members' needs and gaps in the marketplace and in the competitive environment in which they operate. Imaginative projects are developing in every sector. In the past two years, The Creative Consumer Co-operative Ltd. raised more than £800,000 in a share issue to open a chain of shops entitled Out of this World. These embodied the value of ethical customers—those who want to shop for a better world. Its fourth shop, in Oxford, is about to open, following in the footsteps of Bristol, Newcastle and Nottingham. Four more are planned, responding to the demands of shoppers in towns and cities throughout the country.

In February this year, Lord Merlyn-Rees, with the support of the Co-operative bank, launched the Co-operative Housing Finance Society. It seeks to build on the advantages of fully mutual housing co-operatives, by creating a financing system that will achieve lower funding costs and greater availability of loans to housing co-operatives. Already, agreed facilities of about £24 million have been put in place, with commitments from the Nationwide, Woolwich and Alliance and Leicester building societies.

I mentioned the recent formation of general practitioner co-operatives to respond to the demands of their new contract. Co-operatives of nurses and care workers are also springing up, and a great deal of interest is being shown in co-operatives as a vehicle for delivering health care. That process culminated in a research study by the Department of Health into the relevance of community well-being centres to the objectives in "The Health of the Nation".

Recently, in response to the Government drive towards the total privatisation of residential care for the elderly, my colleague, my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris), launched his co-operative care initiative to set in train the process of setting up not-for-profit day centres and residential homes, to offer a service that responds to the wishes of elderly people, many of whom are anxious that their care is being bartered on the open market.

The first such schemes are due to be announced later this year and will come on stream soon afterwards. In the black country, in Walsall, a carers' co-op, Walsall Carers' Co-operative, has already operated for about five years, employing about 150 workers who also own the business. They have done a splendid job in co-operation with Walsall social services, providing excellent services for many people in that borough.

Credit unions are expanding rapidly. I welcome the discussions between the two organisations representing credit unions nationwide, and hope that they will lead to more effective representation to national Government of their members in future.

Following years of growing disenchantment with agricultural co-operatives, the creation of Milk Marque shows a growing recognition by farmers that their interests in the marketplace can best be represented by the co-operative form of enterprise.

Overlaying all that activity has been the formation of a representative body for the co-operative movement—the United Kingdom Co-operative Council. Established four years ago as a successor organisation to the National Co-operative Development Agency, the UKCC has undertaken many useful studies. It has established a forum for discussion of relevant issues and created a voice for the co-operative movement in its dealings with Government and Government Departments. Perhaps the most beneficial effect of the formation of the UKCC has been the increasing recognition and understanding of the common concerns of each of the different sectors of the co-operative movement and the need for a unified approach to finding solutions.

I shall briefly consider several of these concerns. Much heat—but often, sadly, not much light—is generated when the Government attempt to establish what is commonly called a level playing field. Even a superficial comparison shows that that does not exist between co-operatives and their competitors in the company sector.

Whereas there have been successive Companies Acts in the past 17 years, the Government have not even taken the opportunity to include co-operatives in many of the provisions of those Acts. Administration orders, created in the reform of the insolvency laws, allow companies in financial difficulties the option of continuing trading in a form of receivership which allows the possibility of re-establishing the business as a going concern at some time. That option is not available to co-operatives, which must either merge or go bust when they could be offered an alternative that might lead to a better outcome.

Registration of a co-operative is significantly more expensive than registration of a company, and more bureaucratic and time-consuming. As a result, many co-operatives can and do register as companies under the Industrial Common Ownership Act 1976. In recent years, most new co-operatives have used the company format in preference to the more traditional Industrial and Provident Societies Acts, and this is likely to continue, even with the limited changes made in recent deregulation orders.

That failure adds considerably to the confusion that currently exists between co-operatives and companies. Not all organisations registered under the Companies Acts are companies, and not all organisations registered under the Industrial and Provident Societies Acts are co-operatives. Co-operatives should have a clear identity, which specifies the unique difference between them and their competitors in the company sector.

Many would comment that recent reforms in company legislation and in the legal framework and regulatory regime for building societies and friendly societies, requiring greater disclosure and accountability to members or shareholders, give co-operatives an added advantage. That is not.so.

Member investor confidence is as crucial to the success of a co-operative as shareholder confidence in the company sector. The retail co-operative sector has therefore introduced a code of best practice in corporate governance, which it hopes will achieve the highest standards of transparency and accountability. That followed a report of an eight-member working party which examined the unique features of co-operative organisations. Its key recommendations included the disclosure of contracts and remuneration of chief executives and directors; regular reviews of members' activity, policy and practices; and clear and detailed annual reports, providing balanced and understandable assessment of the society's financial situation, which can easily be understood by its members.

Members welcome the higher standards inherent in current company legislation as a reflection of their commitment to the co-operative movement's ethical values of openness, honesty and social responsibility.

Most seriously, co-operatives are disadvantaged by company law and taxation regimes. In a recent consultation exercise carried out in the co-operative sector, considerable concern was expressed about its future status, arising from the flood of conversions of major building societies. Among the reasons given by the Halifax, Abbey National and the Woolwich for their decision to demutualise were: the need for greater access to capital; diversification; risk; and, in some cases, size. Interestingly, any claims that conversion would achieve greater efficiency have been rather muted. Perhaps that has something to do with the conclusions of the recent Government review which showed that the sector not only ensures diversity and choice but is characterised by organisations that are financially strong, well capitalised and efficiently managed. That has been amply borne out by independent research comparing building societies with their competitors in the private sector.

The consultation document, including the Minister's last-minute additions to it, was published in March and contained proposals for a new building societies Bill. It has proved a disappointment. It certainly does not live up to the claims that it will give equal treatment to societies that remain mutual and those that convert. With the Government remaining deaf to the pleading of the sector for protection against speculative short-term investment, it is clear that if building societies' status is to be assured, that will depend on their own determination.

I remind Members that the original purpose of our building societies was to provide a haven for local investors—in bricks and mortar; to ensure that people who wanted to build and live in houses in their own communities had access to reasonably cheap finance; and to give local trades people in the construction industry an outlet for their work. The system worked remarkably well, and only in recent years has the deterioration in a local approach become apparent.

A recent Touche Ross report highlighted a number of key ingredients for success, among them the leadership and the membership of a building society. That is already recognised by a number of societies that remain committed to their mutual status—most notably, the Nationwide and the Bradford and Bingley, not to mention my local society, the Birmingham Midshires.

I welcome this return to the original objectives on which the movement was founded. Quite apart from the abject failure of the Government to recognise the co-operative sector as a valid and viable form of business, the lessons for the mutual movement, which includes the co-operative sector, must include a recognition of the dangers of losing touch with the membership and of power residing with a management over which members have little or no influence.

Co-operatives are democratic organisations, based on the principle of one member, one vote. As commercial organisations, co-operatives also have to work in a competitive environment; hence they need to raise capital to expand their businesses. These two pressures often conflict and push a co-operative in opposite directions, but both are critical to its success and must be considered as such.

I start from the premise that co-operatives should be financed in a way that allows them to achieve their primary objective of providing benefits to their members. That means that they must remain under members' control. In short, the guiding principle is that labour shall employ capital: not the other way round. But in a world dominated by the owners of capital, co-operators have often been limited by a rigid adherence to the principles of their movement, which call for a limited return on capital.

More recently, there has been a widespread recognition—reflected in the new co-operative principles agreed at the International Co-operative Alliance congress in Manchester last year—that co-operatives must secure adequate finance in a way that does not sacrifice the members' control of the enterprise. That clearly implies change, albeit limited.

Capital can be raised from only three sources: from members, from internal sources, or from outside the co-operative movement. Recognising the limitations on the first two sources, the debate in recent years has concentrated on opportunities to raise capital from outside, and the consequential impact on the organisation and its members. It should be admitted at the outset that a number of recent studies in different sectors have tried to show that there is no shortage of capital, and that the main problem for co-operatives is to make better and more efficient use of the capital already at their disposal. I do not want to enter that debate today, although I recognise that we must all strive towards the most efficient use of available resources. There is broad agreement, however, that if the co-operative form of enterprise is to become more widely accepted, access to new sources of capital must be made easier.

Consider as an example the creation of the permanent interest-bearing security as a mechanism for raising funds for the expansion of building societies. Experience has led to the creation of a specialised market for this type of security, in recognition of the special mutual features of building societies. The same would apply to co-operative societies, which would require a similar type of special security in recognition of their unique co-operative nature. The complex legal requirements and costs attached to raising finance—listing particulars and issuing prospectuses—militate against traditional share offers for the development of co-operatives.

An alternative would be to seek new ways of tapping funds from the retail savings market. Currently, co-operatives, mainly in the retail sector, raise capital both from members and by co-operative bond issues. Both ways encounter increasing difficulty competing in the sophisticated retail savings market. The advent of PEPs and TESSAs, offering tax incentives, is having a devastating effect on this traditional source of income from members' funds—yet when the matter was raised in the House the Minister objected to a co-operative TESSA on the grounds of the costs of compliance with the financial services and banking Acts. Retail co-operatives are already subject to heavy compliance costs associated with the co-operative deposit protection scheme. Indeed, escalating compliance costs have become a political hot potato, especially among smaller financial institutions such as friendly societies.

In any review of compliance costs, recognition of the special features of member organisations might offer opportunities for co-operatives to raise funds in the retail market.

Democracy lies at the heart of co-operative activity, but for that democracy to be meaningful members must be fully informed and in a position to exercise their responsibilities as owners of the business. Hence the importance of member education. In recent years there have been numerous examples across all sectors of the movement of innovative programmes to ensure that members and—especially—directors have the knowledge required to undertake their statutory duties. An interesting case in point has been the formation of the Institute of Co-operative Directors in the retail sector, requiring members to undertake a course of study leading to a diploma and to further opportunities to undertake higher studies. Although membership is by no means universal among directors in the sector, the institute has been judged a success and has made a major contribution to improving the skills of lay members undertaking the stewardship of large and complex retail organisations.

Ordinary members must be kept informed. That may mean members receiving a copy of the annual report—although I recognise that in the agriculture and retail sectors, both of which have large numbers of members, the costs may prove prohibitive. Participation rates in the democratic procedures of co-operatives vary greatly. In worker co-ops rates are generally high, although they decline as organisations increase in size—not invariably, but usually. Credit unions and housing co-operatives tend to have lower participation rates, depending on size and circumstance. Perhaps understandably, retail societies, with their large numbers of consumer members, are at the bottom of the participation league. Rarely do more than one in 100 of their members participate.

I believe that democracy is important enough for co-operative societies to carry out a democratic audit. The registrar should therefore have a monitoring role to ensure that societies are democratically as well as financially sound.

I hope that my remarks have sufficed to show that, far from being a relic of the Victorian era, the co-operative movement is innovative, flexible and responsive to the demands of a changing society. Over the past 30 years, there have been numerous problems, and major obstacles to the movement's success still lie ahead. The movement also has many strengths and opportunities for future expansion.

I remain confident that the co-operative movement will continue to make a significant contribution, not only to the economic well-being of the country but in providing an opportunity for its members to contribute to the social and community objectives that form an integral part of its work.

9.59 am

Mr. Thomas McAvoy (Glasgow, Rutherglen)

First, I declare an interest as a Co-operative party-sponsored Member of Parliament with, as outlined in the Register of Members' Interests, no personal gain.

I congratulate my hon. Friend the Member for Wolverhampton, North-East (Mr. Purchase) on securing this debate. Since coming to the House, he has been a consistent advocate of the principles of co-operation and we in the co-operative movement have every respect for his efforts in that respect. They are much appreciated.

I welcome this debate because it provides me and other hon. Members with an opportunity to speak about the co-operative movement. I shall concentrate on its contribution to the economic and social life of Scotland. Not only do co-operatives make a major contribution but they are innovative and responsive, often developing products and services in sectors of the economy and parts of the country where their capitalist-based competitors fear to tread. The co-operative retail sector, for example, could be regarded as a misnomer as it includes the funeral undertaking service, travel concessions, agriculture, insurance and banking.

Last year, the co-operative movement contributed more than £700 million to the Scottish economy. More than 80 per cent. of that trade came from the two largest societies, CWS and Scottish Midland, both of which show a remarkable resilience to the threats posed by their competitors and the increasing concentration of the major players in the sector. The co-operative movement welcomes competition because, ultimately, it is a consumer movement and competition provides a service to consumers.

The co-operative movement does well in Scotland partly because of the strong relationship between those organisations and the communities that they serve. Long before most of the major retailing groups had established a presence in Scotland, Scottish CWS had committed itself to serving the more remote communities of the highlands and islands. That culminated, earlier this year, in the opening of the first super-store in the Western Isles. Situated in Stornoway, the development will make a major contribution to the local economy, employing 160 staff and providing a wide range of services, with 12,000 different products on offer.

Similarly, Scottish Midland, with some 20 per cent. of co-operative trade, has expressed its confidence in the Scottish economy by re-opening a former super-store in Dundee and purchasing a new fast-growing retail business in the profitable toiletries market. Both organisations considerably increased their investment in new stores and other facilities and are confident that they can continue to improve services and benefits to members in all parts of the country.

Latest estimates suggest that there are some 400 agricultural co-operatives and a multitude of fishing and other related co-operatives in Scotland. Those contribute to the strength and vitality of the farming and fishing industries, which are vital to the Scottish economy's success.

As my hon. Friend the Member for Wolverhampton, North-East said, one of the fastest-growing sectors of co-operative enterprises is the credit union movement. In the past two years, it has grown by 18 per cent. and 15 per cent. respectively. It has 113 member organisations in Scotland, which was more than 20 per cent. of the UK total at the end of last year. Those provide much-needed credit facilities to some 70,000 members. The concept of mutuality suffered a severe blow in the 1980s, which, in years to come, will be regarded as a selfish decade. The credit union movement is a demonstration of practical mutuality, which is commercially successful but also contributes to the social and cultural benefits of those involved.

In the 19 years since its launch in 1977, the Scottish Co-operative Development Committee, recently renamed Employee Ownership Scotland, has played a major part in the creation of some 100 worker co-operatives of which almost half are in the Greater Glasgow conurbation. Its decision to refocus its activities following a major review is a recognition of the new funding regime following changes in Scottish local government and the Scottish Development Agency. It reflects the growing attraction to both sides of industry of giving employees a stake in the workplace and it forms a sensible partnership with its continuing work as a development agency for worker co-operatives. I emphasise the principle of co-operation. Neither side of industry and commerce has anything to fear from advocating the principle of co-operation because everybody then feels that he or she has a stake in the business or enterprise and contributes accordingly.

Scotland is also the home of the business community movement in Britain. That originated from an initiative of the Highlands and Islands development board to set up a community co-operative programme in the mid-1970s. Similar developments followed through the establishment of a specialist unit by Strathclyde regional council, followed by similar units in other regions of the country. As a former member of Strathclyde regional council, I was well aware of that work and participated in it. Obviously, the work ceased with the unfortunate demise of that council, which, in years to come, will be regarded as an act of vandalism.

Although no official statistics exist on the extent of the community business sector—the matter has been raised in questions to the Minister—rough estimates suggest that there are some 400 training enterprises in the United Kingdom and that, remarkably, more than half of those are in Scotland.

My hon. Friend the Member for Wolverhampton, North-East mentioned the lack of adequate sources of capital for the development of co-operatives. The high street banks, with the obvious and honourable exception of the Co-operative bank, do not really understand co-operatives or the motivation of those who set them up. The conventional view is that, with no equity, the balance sheet looks decidedly risky, even when members' financial commitment to the co-operative is substantial. Unreasonable demands for security are often made on members and there is the risk that the bank, through some misunderstanding, will pull the plug in circumstances where the co-operative is still viable. As one would expect, that has led to many co-operatives, even when they have a strong case for support, to be wary of approaching their local banks for loan finance. The venture capital companies are all but cut off from the co-operative sector as they cannot take an equity stake in the enterprise. The experience of convertible preference shares or other quasi-equity has been fruitful for neither party.

Co-operatives do not have access to the long-term capital markets. As a result, a number of co-operative organisations, mainly in the agricultural sector, have converted to company status. But that is not a solution for those committed to the principles and ethos of co-operative enterprise. The picture is similar in the public sector. Last July, I raised the related issue of support for co-operatives in Scotland in a question to the Scottish Office Minister and was referred to Scottish Enterprise. On 18 July 1995, I received a reply from the chairman, Professor Donald MacKay. Although he said that he encouraged the creation and growth of businesses", he saw no difference between co-operatives and what he termed a whole range of structures that can be adopted by businesses". Sadly, that approach is all too common among development agencies, which seem ill at ease with structures that deny them control in circumstances where investment has gone sour.

I fully understand the pressures on Scottish Enterprise and Employee Ownership Scotland to increase Scotland's business birth rate, which languishes at the bottom of the national league tables. However, that could be helped by a more flexible approach that respects the differences in ethos and structure of co-operatives by working with members to achieve joint objectives. Most of my constituency has now moved into the geographical area of Lanarkshire development agency. I certainly detected a more aware and more flexible approach to the principles of co-operative business in my earlier relationships with Lanarkshire development agency and I look forward to a long and fruitful relationship with that agency. Attitudes to co-operatives, in both the public and private sectors, must become more enlightened if co-operatives are to make a more substantial contribution to employment in Scotland.

The recent publication of a resource pack by the United Kingdom Co-operative Council, which my hon. Friend the Member for Wolverhampton, North-East mentioned earlier, describes how to set up and run a co-operative. The pack will be circulated to every Department of Trade and Industry office and business link office and should go some way to breaking down the present barriers of incomprehension.

Mr. Mike Gapes (Ilford, South)

Does my hon. Friend agree that attitudes in this country are way behind those in many other European countries, which have a much more positive approach to financing and supporting co-operatives? The international aspects of the co-operative movement are not properly understood in this country. Tens of millions of people, in Europe and in other continents, are involved in co-operatives, including producer co-operatives and other co-operatives that are at the fore of the economies of those countries, especially those in Europe. We should give greater emphasis to that in our discussions in this country.

Mr. McAvoy

The European Union is having an increasing effect on attitudes in this country and certainly many lessons can be learned from European Union countries from their attitude to the principles of co-operation. I agree with my hon. Friend.

As well as European Union developments, I hope that the introduction of a Scottish Parliament by a future Labour Government, not to mention a Welsh assembly and regional government in England after the next election, will benefit the co-operative movement. I see that the hon. Member for Langbaurgh (Mr. Bates) is in his place. There are not many Scottish Conservative Members and I imagine that the hon. Gentleman will sit on the Opposition Front Bench after the election. I hope that he will tell the powers-that-be about what I have said today. A Scottish Parliament would provide an opportunity more adequately to respond to the opportunities to develop the co-operative sector as a major contributor to increases in the affluence and well-being of the people of Scotland.

10.11 am

Mr. Jon Owen Jones (Cardiff, Central)

I congratulate my hon. Friend the Member for Wolverhampton, North-East (Mr. Purchase) on initiating this debate. Like the previous two speakers, I am a member of the Co-operative party as well as the Labour party. The Co-operative party exists to promote the interests of a different way of arranging industry and retail transactions. Co-operatives provide a different form of ownership from private, Government or local government ownership of industry, because all those who work in a co-operative industry, including sometimes the customers of a retail organisation, share ownership.

I shall refer to a particular form of co-operative that has developed in my region of south Wales. South Wales has seen huge industrial change, more so than many parts of the country, over the past few years and it has seen continual dramatic change for the past 30 or 40 years. Early in this century, the south Wales economy was completely dominated by one major industry—coal mining—in which some 500,000 people were involved. By 1984, the coal-mining industry had shrunk to 20,000 people and, today, the deep coal-mining industry is represented by a single colliery, which is a co-operative.

I shall tell the House a little of the history of south Wales. The National Union of Mineworkers was developed by the strong South Wales Miners Federation, which debated in 1913 what should happen to the mining industry and how it should be developed. We know that the mineworkers eventually came to believe that nationalisation was the answer, but back in 1913 the leader of the South Wales Miners Federation, Mr. Noah Ablett, argued that nationalisation would be bad for miners in the long run and that the workers should be involved in the ownership of the industry—in other words, a co-operative. Sadly, he did not win the argument at that time, but it is interesting that that argument was being made by far-sighted leaders.

We know the sad history of the miners' strike and what followed thereafter. In 1984, 20,000 miners worked in south Wales in 22 pits and, today, we have just one pit. But that one pit, Tower colliery, is now a beacon of co-operation and an inspiration to workers, throughout this country and abroad, who wish to form co-operatives.

Tower colliery became a co-operative venture in December 1995. A few years earlier, the then owners, the National Coal Board, had described that colliery and other collieries in south Wales as fundamentally uneconomic and a waste of Government money because they produced coal that could not be sold. Under the inspirational leadership of Tyrone O'Sullivan, the workers in that colliery have proved that they were being deceived and that those who were running down the industry may have had a political purpose when they deliberately closed pits that would have had a profitable future if they had been run by people who believed in them. Tower colliery has, uniquely, been given that opportunity. It is run by people who believe in the enterprise and who share ownership, so they have a mutual interest in ensuring its success.

There are 235 owners of Tower colliery—the work force of the colliery. Each contributed an initial £8,000 in 1995 to buy the project. It was difficult for them to raise that money because they are not wealthy people, but they made a significant contribution of capital to the project. Of course, that was not enough and they had to raise more capital from the banks. They had to convince capital owners elsewhere that they would succeed and it is to the credit of Barclays bank that it contributed to the setting up of Tower colliery.

Contrary to the expectations of many, and perhaps the hopes of some, the pit has made a profit of £3.5 million in the first 18 months. It is expected that that profit level will double next year. Every single underground worker in the industry is paid at least £20,000 per annum and even the lowest paid surface worker gets £236 a week, which is a significant wage in the top of the Cynon Valley. They are not frittering away their profits on increasing wages—they are investing in new plant and equipment so that they will have a profitable future.

The wage rates have not been achieved by paying bonuses to people who produce faster than others—each and every worker is paid the same wage, and the rate is significantly better than that paid in the private sector. This work force has a common destiny and an interest in ensuring the success of the enterprise. Tower colliery is an example of what co-operation is and can be about. It has been achieved in the face of a hostile Government who closed many pits that could have been successful co-operatives. I am not saying that all of the 20 pits that were in existence in 1984 could have done what Tower colliery has done, but half a dozen could have if they had been supported by a Government who wanted that to happen.

Mrs. Ann Clwyd (Cynon Valley)

Hear, hear.

Mr. Jones

I thank my hon. Friend for coming into the House—I told her that I would mention her constituency. She was instrumental in achieving the publicity and the pressure to make the co-operative movement a success. In 1995, she spent some time sitting underground in the Tower colliery until the Government were forced to see sense. I congratulate her on behalf of the people of the Cynon Valley and the co-operative movement.

Tower colliery is an example of what can be done. I hope that a new Labour Government will understand that co-operatives are there to be nurtured and promoted, and that they are a better way of arranging industry than the old-fashioned nationalisation which has often proved not to be the success that was hoped.

10.22 am

Mr. Dennis Turner (Wolverhampton, South-East)

I declare an interest as a Labour and Co-operative Member of Parliament, and I shall be standing as a Labour and Co-operative party candidate in the next general election. I am chairman of a co-operative in my home town of Bilston.

In this expansive debate on the values and the principles of the co-operative movement, I shall dwell briefly on the promotion of housing co-operatives as an ideal way of harnessing personal responsibility in meeting housing need and the right of all people to participate in the key decisions affecting their home and environment, which should be available to all through a strong housing co-operative movement playing its part in the sustainable regeneration of urban and rural communities.

It saddens me to tell hon. Members that the Government have failed the housing co-operative sector. As chairman of the all-party parliamentary group for housing co-operatives, I am extremely disillusioned with promises that have been made by successive Ministers. In 1992, the "Time for Action" campaign was launched with the prime objective of reversing the decline in investment in housing co-operatives by securing positive support from the Government and the Housing Corporation. The campaign was launched against a background of declining investment in housing co-operatives.

In 1975, the Campbell report recommended that 10 per cent. of the Housing Corporation's annual development programme should be used to fund new co-operative housing development, but the best that was achieved was 6 per cent. in the early 1980s. Hon. Members can judge the steady rate of decline for themselves. In 1990–91, 4.3 per cent. was dedicated by the Housing Corporation; in 1991–92, the figure was 2.4 per cent.; in 1992–93, it was 1.94 per cent.: in 1993–94, 2.7 per cent.; in 1994–95, 1.8 per cent.; and in 1995–96, 0.6 per cent. That is despite the fact that in 1993–94 the Housing Corporation set a target of 3.44 per cent. of the approved development programme for rented housing co-operative development.

In the local authority sector, the rapid growth in tenant management co-operatives and other forms of tenant control is being slowed down by the inflexible arrangements for administering the right to manage granted by leasehold reform through the Housing and Urban Development Act 1993. In the year of the introduction of the right to manage, 32 proposal notices were served by tenant management organisations, compared with 80 to 90 new prospects in the preceding 12 months.

Tenant management organisations are threatened again by the Housing Bill, which fails to take account of them in the local housing company provisions. I am meeting the Minister for Local Government, Housing and Urban Regeneration and members of the all-party group on this issue later today, and I hope that some progress can be made.

I draw hon. Members' attention to this lack of positive support for housing co-operatives and other forms of tenant control. Even though there is growing acknowledgement of the benefits of this potentially dynamic third force in meeting our country's housing need, what better evidence could there be than the recent Price Waterhouse report, entitled "Tenants in Control", which concluded that housing co-operatives and other tenant management organisations were very effective mechanisms for securing improved housing services, higher levels of tenant satisfaction and more economic running costs. It is time that the Government gave this sector of housing the positive support that it needs.

10.28 am

Mr. Barry Sheerman (Huddersfield)

I congratulate my hon. Friend the Member for Wolverhampton, North-East (Mr. Purchase) on introducing the debate. He made a comprehensive speech and referred to every aspect of co-operation that I can think of. I congratulate him on getting the debate and on its content—a remarkable survey of co-operation and what it can contribute to the British economy and British social life.

I have a double whammy of a declaration of interest. Long before I joined the Co-operative party, I lived in south Wales—there seems to be a south Wales connection today—and I started what I think was the first co-operative development agency in England and in Wales: the West Glamorgan co-operative development agency. I also started a consultancy that gave advice to workers' co-operatives. I have been a consultant for 20 years and I run my own consultancy, giving advice to co-operatives both at home and abroad. I am particularly interested in industrial or worker co-operatives. The day after I joined the Co-operative party, I became the secretary of the Swansea Co-operative party. I am now a sponsored candidate and I have been closely associated with the co-operative movement for a long time.

This morning's debate illustrates the belief that co-operation can play an important part in our economy. I have given advice to overseas countries which are often looking for ways of breaking through a tidy retail sector where there is no competition and where agreement between a group of stores keeps prices high for the consumer. Such countries are looking for an alternative that will provide real competition. Many people fear that, if there were no co-operative presence on the high streets in the United Kingdom, the big five retail supermarkets would have a stranglehold on the British consumer. We play an important role in the retail movement.

My attitude to co-operatives is sometimes considered quite radical. I believe that, if we achieve a synthesis between consumer and worker co-operation in the retail sector, we will have a more effective co-operative system. I argue within the movement—in the good co-operative tradition—that we should change the nature of co-operation to involve the workers more fully.

I am always pleased to point out that there is a workers' co-operative in one of the smartest areas of London. The Peter Jones store, which is part of the John Lewis Partnership—a workers' co-operative—dominates Sloane square. When hon. Members look for new initiatives for good-quality shopping centres—as I am now doing in my constituency—and for an anchor tenant that will bring prestige to a shopping development, they look to the Co-operative Wholesale Society, the Co-operative Retail Society, an independent co-op or the John Lewis Partnership workers' co-operative, which is one of the most successful, high-quality retailers around.

Workers' co-operatives are exciting. I agree with the Leader of the Opposition's continued emphasis on stakeholding: it is a genuinely exciting idea. As a co-operator, I believe that the people of this country are missing out. Co-operation is a tried and tested way of giving people a stake in society. The hon. Member for Langbaurgh (Mr. Bates) smiles, but he should visit deprived estates where poverty really exists—and it is present in every constituency represented by 651 Members of Parliament. We can offer people hope by giving them a stake in society.

One way to do that is to get people involved in credit unions so that they are not abused by those who offer exploitative terms of credit. Some people cannot obtain credit: the high street banks will not allow them to open accounts. Increasingly, the poor in our country have no access to the usual means of finance and they are prey to ghastly people who ratchet up interest rates and force them into a cycle of poverty and debt. Many people do not understand how deep the problem goes. Credit unions present the opportunity to borrow money at reasonable rates of interest. I believe that the Government have a strong responsibility to open up the credit union sector in order to combat poverty in our country. An incoming Labour Government would address that problem.

Co-operation can also help to break the cycle of welfare dependency. All parties recognise that the welfare system has gone wrong in some areas, and the way in which we tackle the problem is crucial. If we introduce people to co-operation, they could set up small co-operatives and take charge of their own lives—whether running small workers' co-operatives, running housing estates or owning houses in small housing co-operatives. They are ways of giving people a stake in society and of returning to a participatory style of life that has been lost.

I think that all hon. Members share in the excitement about what co-operation can achieve. How exciting it would be if we had a Government who believed in co-operation, in breaking the cycle of poverty and in giving people a stake in society and allowing them to become fully democratic. I have been a Member of Parliament since 1979 and I have witnessed a worrying slide away from democracy. A large percentage of the population do not vote. They do not care about democracy: they think that it is not for them. If we get people involved in the community and give them control of their lives, we will break through and they will become democrats again.

Many co-operative opportunities are available, but the Government must speak with a firm voice and say, "We will do something about this." We have some of the best ideas around—other countries desperately want to see what we have to offer. We have the necessary mechanisms in place. Why do training and enterprise councils not back co-operatives? They are supposed to support enterprise. They do that in other sectors—sometimes they do a good job—but they are doing very little to assist with co-operation.

I approve of business links—I think that the scheme is doing a fair job. However, it would do even better under a Labour Government, who would give it more power and energy. We want to help co-operatives as well as other enterprises. My hon. Friend the Member for Wolverhampton, South-East (Mr. Turner) spoke of housing and my hon. Friend the Member for Cardiff, Central (Mr. Jones) referred to the Tower colliery. This country can achieve many things because we have a culture of co-operation: we do not have to invent it. New, exciting, relevant and up-to-the-minute ideas are waiting to be nurtured.

10.36 am

Mr. Alfred Morris (Manchester, Wythenshawe)

I want most warmly to congratulate my hon. Friend the Member for Wolverhampton, North-East (Mr. Purchase) on his initiative in securing this important debate. He appreciates that I could not have been here from the outset without cancelling, at very short notice, a commitment to constituents that I made more than two months ago.

The House will have sensed that, for many of us, this is a familial occasion. Many of my hon. Friends will have declared their interest in the debate as co-operatively sponsored Members of Parliament. I declare my interest, with legitimate pride, in a movement that has achieved so much for people all over this country and all over the world over the past 150 and more years.

By securing this debate, my hon. Friend is focusing parliamentary and public attention on a movement that is as admirable an example of principle and achievement as Britain has to offer. I have the great good fortune of having been sponsored as a Member of Parliament by the co-operative movement for 32 years and as a co-operative parliamentary candidate for 41 years. I rejoice in that—more especially since most of the federal institutions in the co-operative movement in this country are based in my native city, Manchester, and because I am the city's first ever co-operatively sponsored Member of Parliament.

I am delighted that my hon. Friends the Members for Edinburgh, Central (Mr. Darling) and for Middlesbrough (Mr. Bell) are here on the Opposition Front Bench. Both of them have given long and devoted service to the co-operative movement. I know, as a former president of the movement, in what very high regard they are held by co-operators in Scotland and in the north-east of this country. I am very glad as well to see that my hon. Friend the Member for Cynon Valley (Mrs. Clwyd) is with us for the debate. Again, she is someone who has taken a lifelong interest in the co-operative movement. I hope that the Minister, when she replies, will do so helpfully, by which I mean positively.

10.40 am

Mr. Alistair Darling (Edinburgh, Central)

It is a pleasure to follow my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris), who has made a long and distinguished contribution to the co-operative movement over the years. My hon. Friend the Member for Middlesbrough (Mr. Bell) and I are grateful to him for his kind remarks. He will know from his own experience of speaking from the Front Bench that it is nice when kind remarks are aimed in our direction. We are most grateful and we shall make the most of it.

I congratulate my hon. Friend the Member for Wolverhampton, North-East (Mr. Purchase) on the debate. He raised a number of important points on which I want to touch. Our colleagues, the hon. Members for Glasgow, Rutherglen (Mr. McAvoy), for Wolverhampton, South-East (Mr. Turner), for Cardiff, Central (Mr. Jones) and for Huddersfield (Mr. Sheerman), made useful contributions and emphasised the importance of co-operation, to which I shall return in just a moment.

People who follow these matters will see that, on the Opposition Benches, there is substantial interest in the co-operative movement. It is far from being something from the past. As my hon. Friend the Member for Rutherglen said, we believe that co-operation is a model on which we can build in the future.

It is important to emphasise the value, the importance, of the co-operative movement and the ideals behind it. As my hon. Friend the Member for Ilford, South (Mr. Gapes) said, there are lessons to be drawn from Europe on this. My hon. Friend the Member for Wolverhampton, North-East emphasised the importance of demonstrating the value of co-operation not just to the general public but to the members—the co-operators. Indeed, many of the speeches dwelt on what has happened to the building societies in the past two to three years, and we now have an opportunity to learn from that. It is important to demonstrate the benefits of mutuality and of co-operation before the movement transforms to more conventional types of ownership.

People who have listened to the debate will see that the importance of the co-operative movement is there for all to see—perhaps we should shout about it more often—for example, in the credit unions. As my hon. Friend the Member for Huddersfield said, too many people do not have access to conventional financing from banks, because banks are losing interest. Ironically, with all these conversions and changes, there will be an increasing temptation for the institutions to cherry-pick—to pick the people with the best prospects—and those who need the benefit of finance at a price that they can afford will be turned away from many of the institutions. It is tragic when former mutual societies—now public limited companies—do that, as I fear some will.

As my hon. Friend the Member for Wolverhampton, South-East said, the importance of the co-operative movement is there in housing co-operatives, in retail, agriculture and others parts of industry. These are excellent examples of where co-operation works. It is important that we encourage this form of ownership, and Government policy should be directed towards such diversity. We live in a changing world. We live in a dynamic economy, and any dynamic economy should have different forms and models of ownership that are able to be operated on a level playing field, and then people can choose which form is appropriate for the venture in which they are engaged.

As was emphasised by every hon. Member who spoke in the debate--I think that I am the only hon. Member who is not a Co-operative Member of Parliament, so in that sense I have no interest to declare—the ideals of the co-operative movement and the Labour party are almost identical. Indeed, the Labour party has always recognised that individuals prosper best when they co-operate together. That is what socialism is about. That is what the ideals of the Labour party are about. We want to encourage co-operative endeavour for the benefit of members. As has been said, it is an integral part of our view of a stakeholder economy: where people come together and have a stake in the enterprise in which they are engaged, and everyone, whether in management or on the shop floor, is bonded together in the same endeavour—the success of the company or institution.

More than that, it is a direct form of ownership. It is like partnership or employee share ownership. It is an opportunity to ensure that people who work in an enterprise feel part of it and committed to it. As my hon. Friend the Member for Cardiff, Central said, it has moved on from the old models of nationalisation, which did not provide direct ownership. Indeed, one reason why nationalisation lost support was that many people did not have that intimate relationship between themselves and the institutions in which they worked. I believe that co-operation, having a stake in the place where one works, is vital, and that is very much at the core of the Labour party's philosophy.

I said that we should learn from building society experience. It is a great pity that the benefits of mutuality were never passed on, never demonstrated, to members of building societies. Ironically, only recently have building societies realised that they have to show their members that there is value in mutuality. Many now pass on the benefits of mutuality in the shape of lower interest rates; others give re wards for long service to savers who stick with them for a long time. The co-operative movement has to learn from that. It is best to show the benefits of co-operation before people start talking about conversion to plc status. If mutuality has benefits, let us hear about them now. Do not wait until there is pressure to convert.

I understand the pressures to convert. Many hon. Members referred to the understandable concern about access to capital. I understand those difficulties, and we certainly do not take the view that the co-operative model, the mutual model, is the only one. In any economy, a variety of options should be open. We should not get ourselves into a position where people do not feel that there is any value in maintaining the co-operative because the benefits of it have not been passed on to them. It is a great pity that building societies did not demonstrate the value of mutuality long before now. It has come very late in the day, and that is a great pity. As my hon. Friend the Member for Rutherglen said, in years to come, many people will regret the passing of many of the substantial building societies.

As my hon. Friend the Member for Wolverhampton, North-East said, much work has been done to demonstrate how the Government could assist the co-operative movement, and we look forward to hearing what the Minister has to say about that.

My hon. Friend mentioned a number of issues, including access to capital, taxation and, in particular, compliance costs, about which I feel strongly, particularly for the financial services industry. The Economic Secretary and I have had many debates about this, and I do not suppose that we shall see eye to eye on it today, any more than we have in the past, but I believe that, as part of reforming and simplifying the Financial Services Act 1986, we could help many institutions that find the compliance costs out of all proportion to the benefits that are gained. That point does not apply only to co-ops and credit unions, as it is happening right across the industry. That is an example of where the Government could assist.

It is important that, if the Government are to encourage more co-operative endeavour—they should regard it not as something from the past, some quaint model, but something that is quite normal and wholly beneficial—they must do so not through subsidies or intervention but by ensuring a climate in which the co-operative movement can flourish.

I hope that the debate will ensure that the next Parliament, if not this one, will address some of the problems. The Labour party knows where it stands. Perhaps we shall find out whether the Government understand the value of co-operation. Sadly, I do not think that they have been converted to that cause.

10.48 am

The Economic Secretary to the Treasury (Mrs. Angela Knight)

I congratulate the hon. Member for Wolverhampton, North-East (Mr. Purchase) on raising this important subject. It has been a wide-ranging debate, and I suspect wider than many people who have no knowledge of the co-operative movement would have expected. It has become clear that not only is the co-operative movement well represented and very active throughout the country but there is a strong co-operative presence in the House.

I also congratulate others who have taken part in the debate, including the right hon. Member for Manchester, Wythenshawe (Mr. Morris) and the hon. Members for Wolverhampton, South-East (Mr. Turner), for Glasgow, Rutherglen (Mr. McAvoy), for Huddersfield (Mr. Sheerman), for Cardiff, Central (Mr. Jones) and for Edinburgh, Central (Mr. Darling).

As has been pointed out today, considerable benefits are being experienced because of the strength and diversity of the co-operative movement. As the hon. Member for Wolverhampton, North-East knows, most co-operatives in Great Britain choose to register under the Industrial and Provident Societies Act 1965. He may be interested to learn that, while the links between the Labour party and the co-operative movement are well known, many Conservative clubs are also registered under the Act.

There are some 11,000 industrial and provident societies, with 10 million members and assets well in excess of £30 billion. Retail societies provide services for nearly 7 million members. Many of us who live in towns are used to shopping at the Co-op: the suit that I am wearing was bought from the Ilkeston Co-op, and I am sure that, if any hon. Gentlemen wish to improve their sartorial elegance, the Ilkeston Co-op will be only too happy to oblige.

I am pleased that attention has been paid to credit unions, which is a strongly growing sector. They provide a source of finance that would not otherwise be available. Their activities are enormously diverse, and a large number of people continue to enjoy the benefits of membership. That demonstrates that the co-operative movement has a valuable role.

I was interested to read about the aims of the United Kingdom Co-operative Council, to which I think we can all subscribe. The council proposes to provide for discussion and debate in the wider co-operative sector, to seek to represent the interests of co-operatives, to raise the profile of the sector, to maintain and develop contacts with co-operative organisations outside the United Kingdom and to initiate and support study, research and other activities consistent with the council's aims. I wish it well. It recently produced a considered report relating to primary legislation for co-operatives. I fully understand the thinking behind its approach, and appreciate the amount of effort that went into formulating the report. As hon. Members will know, the Government do not propose to introduce a new co-operatives Bill, but we are considering the content of the council's proposals very carefully.

One of those proposals is the establishment of a co-operatives commissioner, originally as head of a new statutory body, but now, it seems, as someone who would continue to be served by the staff of the Registry of Friendly Societies. The commissioner would have one role supervising co-operative societies, and another as the Government's chief source of advice on the sector. It appears, however, that we already have such a figure in the Chief Registrar of Friendly Societies. The registry is a statutory body—a Government Department—and it advises us.

Since the publication of the UKCC's proposals, it has become clear that there is no consensus within the sector on what new powers or responsibilities the commissioner should have. I feel that, for the moment, our attitude should be, "If it ain't broke, don't fix it"; but some aspects clearly need to be addressed. I hope that we are already addressing them in part with our deregulation proposals, which are contained in the Deregulation (Industrial and Provident Societies) Order 1996.

The order was made on 3 July this year, and will come into force on 1 September. It will give effect to seven proposals. The first is to reduce the minimum number of members required to form a society from seven to three. The hon. Member for Wolverhampton, North-East expressed concern about the fact that there was a difference between registering as a co-op and registering as a company, evidently feeling that it was easier to register as a company than as a co-operative. By reducing the minimum to three, however, the order should encourage small, new mutual organisations to adopt the industrial and provident legal structure that they may well consider appropriate to them. I believe that we shall start to see the benefits of that at the beginning of September, and I hope that the measure will resolve the problem identified by the hon. Gentleman.

The order makes other proposals that are appropriate to the co-operative movement, and will make it easier for it to flourish with as few unnecessary rules and regulations as possible. The order will reduce the requirement for up to nine signatures when a federal society applies for registration: only the secretaries of the first two corporate members will be required to sign the application. It will allow more time for societies to submit their annual returns: they will now have seven months from the end of the year. That will reduce some of the pressures that some societies experience.

The order will extend the deadline for recording a charge against a society's assets from 14 days to 21, and will allow societies to submit late charges without a High Court order, subject to the protection of third parties. That proposal brings societies into line with companies. The audit requirements for non-deposit-taking societies under the 1965 Act and the Friendly Societies Act 1974 will be relaxed, and that too will bring societies into line with companies. I hope that that, in conjunction with the preparation for group account changes, will remove some of the barriers that the hon. Member for Wolverhampton, North-East identified, and will give us—if I may use that corny old expression—more of a level playing field, so that co-operatives will not feel forced to go down the road of company registration if they do not wish to.

The principle of mutuality has featured in much of what has been said today. That principle is very strong in co-operatives. For once, I agree with the hon. Member for Edinburgh, Central: it is essential that co-operatives show the benefits of mutuality first. They must ensure that those benefits are tangible, and that their members are aware of them. Many building societies have woken up to that need rather late. If people are not aware of its benefits, mutuality may disappear, and those people will say that they wish that they had some form of mutual organisation. In the case of both building societies and co-operatives, mutuality in its numerous forms has served the country well for many years, and will continue to do so.

Points were raised about the availability and employment of capital. That is, of course, a complicated subject. If the rules allow it, a member can take up to £20,000 in share capital: that limit is laid down in the 1965 Act. As for commercial borrowing, societies' own rules will specify what they can do.

Wider issues were raised, including the issue of tax-exempt special savings accounts. It is proposed that, if a society's rules are silent on the subject, the society cannot offer TESSAs. If it wishes to do so, it must comply with the appropriate Acts. There must be regulation to govern such matters; if there were not, we should have a free-for-all rather than the investor protection that we all want. I assure the House that the Government are actively considering financial services regulations that are as appropriate as possible. The minute I sit down, I shall run from the House to give a speech on regulation and its future in this sector, because there is a need to ensure that it is more appropriate, better targeted and less bureaucratic, not just for the co-operative movement but for the wider financial services industry.

Other points were raised by hon. Members. The hon. Member for Rutherglen mentioned the importance to the Scottish economy of credit unions and a new store that is being set up there. He was concerned in particular about banks' attitudes to co-operatives and thought that their value was perhaps not as well known as it should be. I will take that matter up in my meetings with banks because I want to ensure that there is a variety of structure in this country and that, if people want to form a co-operative and if that co-operative will benefit, they can do so.

Mr. Deputy Speaker (Mr. Michael Morris)

Order. We must move to the next subject.