CO-OPERATIVE DEVELOPMENT AGENCY BILL

HL Deb 24 May 1978 vol 392 cc982-1013

3.36 p.m.

Lord WALLACE of COSLANY

My Lords, I beg to move that this Bill be now read a second time. Before I get into the general discussion and my remarks on the Bill, I should like to declare an interest, in that I have been a member of a co-operative society for well over 50 years, having been entered by my mother at, I think, the age of 17 or 18. Ever since I have kept my membership in my married life, and my wife and my children are members of the co-operative society, and we are all part of a share-owning democracy; but I do not profess to be a tycoon as I appear to be one of about 10½ million members. Having declared that interest, I think that I had better get on with the Bill.

I should like to say something first about the background to the Bill. It is a very significant Bill, and before I briefly describe its content and what it aims to achieve, I should say something about the general background which has led to the Bill. Some of us, at least, and I suspect a substantial proportion of your Lordships' House, are already well aware of the long co-operative tradition in this country. We have among us a number of noble Lords who have made a notable contribution to the record of co-operative endeavour and achievement. Very briefly I think it would be rather appropriate at this time, particularly as this morning we paid tribute to the work and life of the late Lord Peddie, that we should acknowledge the monumental contribution that the late Lord Peddie made to the co-operative movement.

The origins of co-operation are obscure and perhaps even debatable. I have seen suggestions that they may be traced as far back as 3,000 BC to co-operative tenant farming in Babylon and the burial benefit and craftsmen's societies of ancient Greece. Therefore, it would appear that the Prudential had prodecessors. That is as it may be. Certainly the earliest co-operative shop was opened in Toad Lane, Rochdale, in 1844, when the Rochdale Society of Equitable Pioneers was first registered. From these small beginnings a worldwide movement developed.

The range of co-operative activities is very large. In many minds the word "co-operative" conjures up the image of the High Street shop of the retail consumer society. There are some 200 such societies in membership of the Co-operative Union, with some 10½ million members. The Co-operative Wholesale Society is the central organisation set up by the retail societies to buy collectively on their behalf, to engage in manufacturing and to provide technical and advisory services for them. The Co-operative Bank and Co-operative Insurance Society are wholly owned subsidiaries of the CWS. These are large and successful organisations.

At the other end of the scale are the relatively small organisations in the industrial field. First, the Co-operative Productive Federation, which is the trade association representing a number of traditional producer co-operatives. There is also the more recently formed Industrial Common Ownership Movement (ICOM), inspired by the very successful Scott Bader Commonwealth at Wollaston, Northamptonshire. In agriculture, we have the Central Council for Agricultural and Horticultural Co-operation, which was set up in 1967 as a statutory body to encourage and promote co-operation in production and marketing, and to act as agents of the Government in administering a grant scheme. Over 400 agricultural co-operative societies in Britain belong to the Federation of Agricultural Cooperatives (UK) Limited. Other central organisations represent the interests of co-operation in the fishing industry, housing and credit unions.

There are, thus, a number of representative organisations in the various cooperative sectors. However, in recent years the co-operators have expressed the view that something more is now required a new new body to keep a general watch over the whole range of their varied activities, to provide a perspective and co-ordinate a co-operative viewpoint. This need was discussed at successive Co-operative Congress and has led to a call for the Government to establish a Co-operative Development Agency. In March last year my right honourable friend the Minister for Industry set up a working group to develop further the idea of a Co-operative Development Agency as a body to give advice and guidance to co-operatives of all kinds and to speak for the Co-operative movement as a whole. The members of the working group came from many sectors of cooperative activity and from Government Departments interested in various aspects of co-operation. They set obout their task with due diligence and urgency and their report was published last October—Cmnd. 6972.

The report did not contain unanimous recommendations. Possibly that was to be expected, given the very different natures of the co-operative organisations participating. But there was a good measure of agreement among the Cooperative movement representatives on the working group. It is perhaps not entirely surprising that there should be two views on some of the detailed recommendations. These were published side by side in the report, and both were very carefully considered by the Government. The Bill now before your Lordships' House seeks to implement the recommendations of the majority report.

The essential point of difference between the majority and minority points of view concerned the method of appointing the members of the agency. Four members of the working group from some of the smaller, relatively recently founded and less developed sectors of co-operative activity—namely, housing, credit unions and common ownership—proposed that not less than one-half of the members should be appointed by participating co-operative organisations on an equal basis. This minority suggested that each organisation, regardless of size, should appoint one member. All the larger, longer established organisations objected to the proposal on the grounds that it ignored the disparities of size between them and would require too large and unwieldy a membership.

The majority view was supported also by some of the organisations representing the less developed sectors of activity—producer co-operatives, credit unions, agricultural co-operatives, fisheries cooperatives—and by the member from USDAW representing the trade union viewpoint. After very careful consideration of both reports, the Government decided to accept the majority recommendation that the power to make appointments to the agency should vest in the Secretary of State, who would have to consult with and seek nominations from all classes of co-operative organisation to ensure so far as possible that the governing board of the agency comprehends the whole range of the movement's interests. It is important to set into context the background of what has led up to the drafting of this Bill.

I turn now to the Bill itself. The object of the Bill is to establish a Co-operative Development Agency. Clause 1 provides for the Agency to be established as a corporate body to perform the functions specified in Clause 2. The clause provides that the Agency will have a chairman and between four and eight other members who will be appointed by the Secretary of State. Before making such appointments, he must consult with persons appearing to him to represent the interests of the Co-operative movement. But there is no requirement to appoint only people thus nominated.

The essential substance of the Bill is in Clause 2, which specifies the Agency's functions. These are designed to further the interests of the Co-operative movement generally and are based on the majority recommendations of the working group report. The need is for a new body which will work with the existing co-operative organisations to co-ordinate and facilitate the development of co-operative activities both in the existing areas of economic activity and in possible new ares. The Agency will not be expected to duplicate functions already being carried out by existing representative organisations. It will gather information from co-operative undertakings at home and abroad. It will undertake research studies to show how the co-operative approach might serve the public interest in particular circumstances. It will have power to propose co-operative projects wherever its studies and research show that there is a worthwhile opportunity.

The role of the Agency is advisory, promotional and representational. It will be able to give guidance to individuals, co-operatives and co-operative representative organisations. It will appraise and evaluate projects and give advice accordingly. Its aim will be to encourage the development of successful co-operatives. Co-operation is not seen as a cure-all in every circumstance. The emphasis will be on founding co-operatives after a thorough appraisal of the prospect for viability, taking into account the importance of ensuring proper organisation, management and financing. The Agency will not dispose of public funds for investment in co-operative ventures, but it should be able to facilitate finance for sound co-operative projects by helping with the applicant's presentation of his case to the source of finance appropriate to his needs.

The Agency will have also the important task of providing a forum for discussion and debate within the Co-operative movement. If the Agency is to achieve its representational objectives, it will be necessary to reconcile differences of interest and approach. The Working Group was confident that the Agency would be able to represent a common co-operative viewpoint on matters of major importance and to exercise a strong and persuasive influence in resolving differences of opinion and conflicts of interest.

Clause 3 of the Bill gives the Agency the ancillary powers necessary to discharge its functions and in particular to borrow money to do this and to meet its obligations. It also prohibits the Agency from doing certain specified things. The Secretary of State is authorised under Clause 4 of the Bill to make grants to the Agency up to a maximum total of £900,000. The working group estimated the annual cost of running the Agency to be about £300,000 and recommended that the Government should bear as launching finance the whole of the estimted cost of establishing and running it for three years. The Government accepted that recommendation. After this formative period, during which the Agency should develop its own sense of corporate purpose, its finances will be expected to derive from voluntary contributions from the Co-operative movement and income generated by the charging of fees for the Agency's services. The Secretary of State is also empowered to increase the maximum total grant within a ceiling figure of £1.5 million by order made by Statutory Instrument which will have to be approved by Resolution in another place.

Clause 5 and Schedule 2 contain provisions concerning the accounts and auditing arrangements relating to the Agency. By virtue of Clause 6 the Agency will have to make an annual report on its operations to the Secretary of State, who will be under a duty to lay copies before both Houses of Parliament. The remaining clauses deal with the technical and financial provisions, the Short Title, and the extent of the Bill.

That, very briefly, is what the Bill is all about. I hope that your Lordships will agree that it is a worthwhile and useful measure, deserving of our support and encouragement. One of its many merits —or, at least, it seems so to me—is that it is relatively simple and uncontroversial. The Bill received an unopposed Second Reading in another place, and I am sure that the Co-operative movement will be greatly heartened by the good will expressed on that occasion, as well as that which I am sure will be expressed in your Lordships' House. This is a simple Bill, but the idealism behind it has its practical use. The Bill contains a tremendous opportunity, given good will from this House, together with the efforts of the newly formed Agency. I beg to move.

Moved, That the Bill be now read 2^a. —(Lord Wallace of Coslany.)

3.51 p.m.

Viscount LONG

My Lords, I am sure that the whole House is most grateful to the noble Lord, Lord Wallace of Coslany, for explaining this very important but small Bill concerning the Co-operative Development Agency. First, I want to pay my tribute to Lord Peddie. Though I was never in the position in which I had to oppose him from this side of the House, I well remember him, and I recall in particular the amount of work he did on the insurance Bill, and I know also of the amount of work he did in the Cooperative movement. I also want to pay tribute to another very great friend of your Lordships, Lord Rusholme. He was one of the first, and one of the outstanding, members of the Co-operative movement. He was a personal friend of both my father and myself, and it was a sad clay when he left this House a year or more ago.

We are extremely interested in the Bill, and we on this side of the House will do whatever we can to assist its passage. Part of the importance of the Bill derives from the question of the competition which has arisen in the past few years. I notice that the co-operative shops have had a very hard hammering from the large chain stores throughout the country. The co-operative shops have had to enter into competition with the large chain stores. I recall, during the time that I was a member of the co-operative society, the small butchers and other retailers whom I knew. The noble Lord said that he, too, was a member. I recall in particular my local cobbler, who, during the war, gave me an excellent service keeping my shoes repaired.

Like other noble Lords, I consider this Bill to be important. I am interested to probe into it, but I hope that your Lordships will find that I am not controversial in doing this. Through many generations small groups of people in these islands have set themselves up in business or in agencies, and quality in both goods and manpower has been built up through these small firms: the co-operative society is but one of them.

I feel that I am wearing two hats today —and I have a small head, I hope. I am concerned with completely backing the Bill in every way possible, as well as improving it, and assisting its passage. I believe that during the Second Reading, as well as the Committee stage, we can do much good to help the proposed Development Agency. The first hat that I am wearing is concerned with what I regard as the sensible idea in the Bill to form a new body to extend the interests of the co-operative society. This will be dealt with under the Bill by the Secretary of State, and there will be a membership —I believe the noble Lord said—of over 400. I am sure that in the long run this will he a great help for the future.

A number of new situations are developing within the country, and I believe that as long as the Development Agency is viable it will serve a good purpose. However, if inexperienced people, who do not know what they are dealing with, join the Agency it might run into danger, which it can ill afford. I think that the United Kingdom will benefit from parts of the Bill.

The second hat that I am wearing is a hat of suspicion. I said earlier that I was probing into the Government's intentions to find out more about what is proposed for the future. Here I have in mind the possibility that the co-operative society could link up with, or buy up, or move into, another company through politics, and I should not regard that as very safe. I feel that a danger could possibly arise here. I sincerely hope that the noble Lord will forgive me for saying this; indeed, I hope that he might correct me. But a possible danger I see is that a group of people could purposely damage a firm or company, which could then become a member of an agency within the co-operative society. Such people could do that because they were embittered with the small firm concerned, or for other reasons. A small group of embittered members of the working force of a concern might run it down, and then go to the Secretary of State and say, "We can go on if you give us the money". I should like to be told that giving money in such a situation is not in the Government's mind. However, that is one of the worries I have regarding the Bill.

Co-operatives are well known throughout the world. Yugoslavia is well known for its co-operative society. China and Russia also have co-operatives; some work, and some do not. The Chinese agricultural communes or co-operatives are working self-sufficiently. I doubt that the Russian agricultural co-operative groups are working as well as that; nevertheless, they are well known. I believe that so long as there are no politics being operated within the movement, it can work to a good end, provided that there is a viable situation under which the movement can go into an agency of one form or another.

The noble Lord referred to the board, and said that the Secretary of State would probably he given a list of people to go on the board. Some questions arise here. Let us suppose that the Secretary of State was not happy with the situation; or let us suppose that a Conservative Government were in power. Would there be a problem here? Alternatively, let us suppose there was a Left-Wing Government. Would a problem arise in such circumstances because nobody would agree, and because some people wanted certain political figures to go on the board? I wonder whether the noble Lord can enlighten me on how the board will be brought into being, and how it will work.

Clause 4 worries me. This relates to finance, and subsection (1) states: The Secretary of State may make grants to the Agency not exceeding in aggregate £900,000 or such greater amount not exceeding £1,500,000 as the Secretary of State may by order made by statutory instrument specify". That is very big money, but how is this money going to be handed out? Suppose —and I hope I am right on this—one particular agency went to the Secretary of State (that is, only one agency within the Co-operative society) and wanted £1.5 million. Would that be possible? Would that be allowed?

Lord JACQUES

My Lords, would the noble Viscount give way? All the money specified in the Bill is for the administration of the Agency. The Agency has no power to make grants or loans, or to give guarantees.

Viscount LONG

My Lords, I am most grateful to the noble Lord for that. Therefore, if we are not careful we are going to have a heavy cost in administration. Would I be right in that?

Lord M URRAY of GRAVESEND

No, my Lords, Could I intervene? This £900,000, the original figure, is in fact over three years, so we are talking about £300,000 a year, or a maximum of £500,000 a year, over the first three years; and, in view of the fact that we give £3 million a year to British industry in one way or another, that does not seem to me an exorbitant amount.

Viscount LONG

My Lords, I am most grateful to the noble Lord, Lord Murray, but so far as I am concerned any money which is handed out can be an enormous amount, whether it is a fiver or £500,000. I quite agree; but I am only probing. I am trying to extract from the Government how this money is to be dealt with. If the noble Lord can assure me on this, I am quite prepared to accept it, but I cannot allow this Second Reading to go through without questioning whether it be one firm or several firms, whether it is one year or three years. But I am getting the gist of it from several noble Lords on the opposite side. Equally, I must now look at Clause 7 on the financial side. It is on page 4, and it is line 16. I am worried about the words "any sums". If we could just look at that, the word "any" seems to me to be somewhat too flexible. If the noble Lord could advise me on that, I would be most grateful, but if I find I am not happy we shall have to go into the word "any" in Committee. It might be too flexible to be allowed to remain there.

These are my criticisms. I hope I have not been too controversial, but I have been trying to probe into this Bill; and the more we do that during Second Reading and in Committee, I am sure, the more useful it will be in protecting the co-operative societies. I am very much in favour of co-operative societies, so long as we can get the right board and the money is correct. I have nothing further to say, because I want to listen to what other noble Lords have to say on this; but I sincerely hope that we are going to make a useful job of this Bill and bring about an improvement in the co-operative societies through what we are going to do today.

4.3 p.m.

Lord ROCHESTER

My Lords, we on these Benches would wish to be associated with the tributes paid by the noble Viscount, Lord Long, to Lord Peddie, and also to Lord Rusholme. Unlike the noble Lord, Lord Wallace, I do not think I have any interest to declare in relation to this Bill. It is true that I am sometimes sent out to shop at the local Co-op, and I come back with stamps and with goods that often seem to me to be of rather better value than those sometimes to be acquired in rather more elaborately constructed premises; but I think that is the extent of my personal link with the movement. I, too, should like to thank the noble Lord, Lord Wallace, for the way in which he has introduced this Bill; and we, too, should like to give it a general welcome.

Specifically, we support the proposal in Clause 1 that it is the Secretary of State who should appoint the chairman and members of the Agency. I was not quite clear where the noble Viscount got his figure of 400 from, but I may have misunderstood him at that point, and no doubt the noble Lord, Lord Wallace, when he comes to reply, will speak more authoritatively, if he can, to that. We support this proposal because it seems to us that it will not give too much weight, on the one hand, to large well-established co-operative organisations, nor, on the other hand, to multifarious small ones. We also support it so that the members of the Agency can regard themselves as being responsible, as it were, for co-operatives in general, rather than as representatives of particular organisations.

As to subsection (3) of this first clause, however, we have noted that these appointments are apparently to be made by the Secretary of State, … after consultation with persons appearing to him to represent the interests of the co-operative movement". I was pleased to hear the noble Lord, Lord Wallace, say that the people to be appointed will not necessarily be drawn from such representatives, but I hope that this consultation will not be so exclusive as the wording of the clause suggests, and I hope that the Secretary of State will prove willing to consult with others who have the interests of co-operatives at heart even though they may not themselves be members of the movement. When the noble Lord comes to reply, perhaps he will be kind enough to say precisely what the position is in this respect.

Under Clause 2, we agree with the proposed co-ordinating and advisory function of the Agency, and with the rôle marked out for it in establishing and developing co-operatives. We particularly welcome the recognition that a primary function of the Agency will be the promotion of better understanding of cooperative principles and what in Clause 2(b) is now called, "the evolution of cooperatives". We gladly acknowledge that the inclusion of words such as these seem to represent an attempt on the part of the Government to meet views which were put forward by honourable friends in another place as to the desirability of making rather more explicit reference to the need for the Agency to have an educative function and for it to explore and encourage the development of new ventures in the co-operative field. In the same connection, we are glad to see the emphasis given in paragraph (h) of Clause 2 to training; and, indeed, in the last paragraph of that clause, to research.

We are sorry that the Government have not taken the opportunity provided by the findings of the majority report of the working group, to which the noble Lord, Lord Wallace, referred, to define rather more closely what is meant by co-operative principles—that is, the principles referred to in Clause 2(a)—because we fear that this omission may give rise to problems between the Agency, on the one hand, and bodies which genuinely believe that they come within the unspecified definition of co-operatives but then find that they are turned away by the Agency on the grounds that they do not come within that definition. However, we also recognise the force of the view which is expressed in the majority report of the working group, if I may quote it, that: Limited and realistic objectives are to be preferred at the outset, for the detailed definition of an Agency's purposes would be more a matter of proof in practice than of prior prescription". We believe that the Government are right to have resisted any pressure under which they may have been to use this Bill as a means of giving commercial advantage to co-operatives which is not enjoyed by other enterprises that have to operate under normal market conditions. In that respect, it seems to me that the Bill affords a very welcome example of how it is possible to introduce legislation on the basis of a broad consensus among all political Parties. How I wish that this could be done more often for the sake of the industrial stability that as a country we so desperately need! I hope very much that the Agency will prove successful in encouraging the development of cooperatives as small, new ventures in which disadvantaged young people—and I am thinking particularly of those leaving school in inner city areas—may find adequate motivation and job satisfaction in working alongside skilled people in both the manufacturing and service sectors in accordance with objectives with which they can identify and which, indeed, they will presumably have helped, presumably, to formulate.

In that respect, may I say that I see a close connection between this Bill and the Inner Urban Areas Bill which was debated in this House at Second Reading only last Friday. It is precisely with this in mind that it seems to us most important that the Agency should proceed with its tasks as a matter of urgency. That is why we should like to see some provision in the Bill for the operation of the Agency as such to be reviewed after some appropriate period to make sure that it does not, under any Government, grow into yet another bureaucratic body which simply moulders on, its funds supplemented from time to time by further financial grants; or, alternatively, that it does not simply die of inanition at some time along the way. I hope that, when the noble Lord, Lord Wallace of Coslany, comes to reply, he will be able to give me some assurance which is rather more satisfying than the provisions contained in Clause 4 concerning the limitations and safeguards under which the Agency may receive financial grants or under Clause 6 relating to the Annual Reports of the Agency itself —some assurance that the way in which the Agency actually operates will after a time come under positive Parliamentary review.

In regard to the powers of the Agency under Clause 3, as I have already indicated, we understand and, indeed, sympathise with the reasons why limitations have been placed on those powers in Subsection (3), but, as the House knows, we place great emphasis on the need for the provision of adequate facilities for education and training. We think they are just as important in this field as in any other and we are not at all confident that, in its present form, the Bill necessarily meets this need. Perhaps I can best indicate what I have in mind by way of illustration. Along with others, I have been trying in a particular part of the North-West to ensure that fuller advantage is taken of another new Government scheme, the Youth Opportunities Scheme; we are already concerned that full use may not be made of that scheme simply because of lack of knowledge of the opportunities under it. In the district to which I refer, the local manpower committee (of which I am chairman) is seeking to remedy that potential deficiency by running a seminar to which we plan to invite, particularly, small employers in order to make sure that they are aware of precisely what is available to them under that scheme. I see the need for similar informative exercises in this field of co-operative enterprise and it seems to me to be important that the Agency should be in a position to make the promotion of such activities one of its prime tasks.

As the Bill stands, however, it would appear that the Agency is, under Clause 3, prohibited from making loans or grants to set up such educational and promotional activities. I think I am right in saying that, when the Bill was last debated in another place, the Minister held out some hope that it might prove possible to frame an Amendment to the Bill empowering the Agency to do more in this way to finance educational activities without, as it were, opening gates to other fields. Again, I should be grateful if the noble Lord, Lord Wallace of Coslany, when he comes to reply, would tell me what progress has been made on this point and, in particular, whether there is any prospect of the Agency being able to finance by loan or grant the kind of informative activity to which I have referred.

My Lords, to summarise, we see this Bill as a great opportunity to give speedy and practical help in providing information and expert advice to assist in reducing unemployment by promoting the development of existing small co-operatives and encouraging new ventures in this field; and, subject to the qualifications to which I have given expression, we very much welcome this Bill and look forward to its early implementation.

4.18 p.m.

Lord JACQUES

My Lords, as many noble Lords are aware, I have to declare an interest. Until I retired in 1965, I was chief executive of one of the larger co-operative societies and, until 1970, I was chairman of the Central Executive of the Co-operative Movement. This Bill seeks to create an Agency which will have two main purposes: first, to promote the adoption of co-operative principles and, secondly, to advise and represent the interest of co-operative societies.

The first question which, I think, arises is this: what is a co-operative society? A co-operative society has three essential elements. First, it is a voluntary association; that is to say, members can come and go as they think fit. Therefore, many of the so-called co-operatives in some other parts of the world are not co-operatives in the sense that we see them in Britain. Secondly, the members associate as equal partners. Consequently, their decisions are made on the principle of "one member, one vote" quite regardless of the financial stake. Thirdly, they associate for their common good. They have no equity capital. Share capital receives a fixed rate of interest in the same way as loan capital receives a fixed rate of interest. Any profit or surplus is devoted to the common good of the members.

It follows from those three essential elements that one can define a co-operative society in one simple sentence: it is a voluntary association of equal partners for their common good. We have cooperative societies in many spheres of our activities. I know that when we speak of co-operative societies our minds go at once to the high street and the co-op shop. But, in addition to retailing, we have co-operative societies in wholesaling, banking, insurance, industry, agriculture, fishing and housing. We also have several hundred in the form of workmen's clubs. They are able to provide social amenities for members and, at the same time, charge prices which are much lower than those of private trade competitors because they are working as equal partners for the common good.

In this country we have the largest volume of co-operative retail trade. But I would remind the House that two or three Scandinavian countries have a co-operative movement which has a bigger share of the market. This is particularly so in Finland and in Sweden. The co-operative movement in those countries has a much bigger share of the market than the British co-operative movement has in its market. We have always had co-operatives in industry but they have never been very significant. Some of the best examples of industrial co-operatives today are perhaps to be found in northern Spain. We have done exceptionally well in agriculture but we still have a great deal to learn from Denmark. In housing co-operatives, we are lamentably behind and we could indeed learn a great deal from the United States of America.

However, for the next two or three minutes I should like to turn to the aspect of the Co-operative movement in which we have been most successful—that is, the retail trade—and try and find out some of the reasons for that success. I think that this is the moment to do it because it can give us lessons for the future. The retail Co-operative movement has a membership of 10½ million, and in 1976 had a turnover of £2,500 million, representing 7½ per cent. of the market. It has associated with it a wholesale society with a turnover of £1,300 million. It has an insurance society with a premium income of £200 million and a bank which has current and deposit account balances of £350 million, and that is quite separate from and in addition to the £300 million which members of co-operative societies provide for the financing of the retail shops.

The journalist who a little more than a decade ago described it as the "dying giant of the high street" had only a superficial knowledge of the movement. He did not understand its problems; he did not understand its inner strengths or the determination of its leaders. In the past decade the Co-operative movement has increased its market share and has added more to its reserves in real terms—not in terms of inflated money values—than at any other time in its history. We have in the retail sector a flourishing Co-operative movement.

There are four reasons why it has made progress over its long history of 130 years. First, because its own members provided its market. Therefore, it was free from all prejudice, which was vital because in the 19th century there was considerable prejudice against the co-operative movement; indeed, there is some prejudice even today but it is very much diminished. There have been occasions during the history of the movement when we have made goods which have been winners in our own shops and we have been approached for supplies by the buyers of other firms. In some cases, when the masters of the buyers found out where the goods were coming from, the orders ceased, but in other cases we continued to supply for many years to the satisfaction of both parties. However, because we provide our own market, that has not been a problem. Our great problem, especially in the early years of the Co-operative movement, was not in finding a market, but in getting supplies. That is why the Co-operative movement in Britain at one time had 200 small factories supplying its shops: it could not rely upon supplies from private trade.

There are many instances of boycotting the Co-operative movement. One of the most notable was when mass-produced radio sets were first introduced to the British market. The manufacturers of the radio sets said to the Co-operative movement: "Unless you will sell at the price we lay down and pay no dividend and give no discounts, we shall not supply you." That was a monopoly; they combined together to form a monopoly. They refused to supply us.

We declined to give way but instead joined with Plessey, co-operated with them and made our own radio sets. For 40 years "Defiant" radio and television sets were sold in co-operative stores. I like that name, my Lords! That has been our leading sale even in recent years. That is an example of the kind of problem that the Co-operative movement has encountered in its history.

The second reason for its success is that it attracted to its service working men and women of great ability and drive. I say that with very great feeling. There were people living in the past century who did not have educational opportunity not the opportunity of promotion at the place of their employment. They devoted their considerable ability to the Co-operative movement. They did many things for which they have never received credit. For example, they devised in the 19th century control methods—especially stock control—for shops which were afterwards picked up and copied by the multiples which came in in the 20th century. Those were devised by working-class people who were confronted with the job of organising retailing.

The third reason why the movement has been successful is that it has looked after the consumer. Because it has gone out of its way to look after the consumer, it has received the support of the consumer. A particular example of that is milk. The co-operative movement led the way with bottled, pasteurised milk. Even today it has 29 per cent. of the liquid milk market, because of the lead that it took and the consequential support that it received from consumers following its interest in protecting them.

At this point, I should like to say this to some noble Lords who, when they speak of trade unions, suggest that militancy came along with trade unions. I should like to give them an example of the kind of militancy against which we had to try to protect ourselves. In the society I managed, though long before my time, it was decided to start a dairy department, to sell bottled pasteurised milk. Early in the morning when the dairy was to be opened for the first time, the private traders in the area got out all their spare vehicles and blocked up the road to the dairy so that no milk could get out; they started delivering their milk early, all the time knowing that the co-operative milk would be late because they were blocking the road, and we had to get the police to move the vehicles. So one can say that all the militancy does not lie with the trade unions; some resides with private traders.

The fourth reason why the movement has been successful is that it has recognised and co-operated with trade unions. For instance, in the large co-operative society that I managed all employees were required, as a condition of employment, to belong to a trade union. That was known in advance—they were given it in writing; and it was not one-way traffic, because we had an agreement with the trade union that any dispute would go to conciliation rather than involve industrial action. Consequently, we did not have strikes. We had two employees on the board; we had a consultative committee in each department with the departmental manager as the chairman, and we had at headquarters a centralised consultative committee to which we fed far more information than we did to the shareholders, because it was the employees' daily lives that were at stake. They needed to have more information and to know where they, as well as the society, were going. That did not adversely affect our profitability; it helped it. Our profitability could be compared favourably with that of Marks and Spencer; so we believe that these things can be done without sacrifice and with advantage.

I should like to see the development of co-operative societies, particularly in industry. Here we have a gulf between management on the one hand, and the shopfloor on the other. We need to experiment to bridge that gulf. I believe that the co-operative idea is one way of experimenting in order to bridge the gulf. I want to see the encouragement not merely of the small business but also of the small co-operative society, because I believe that the co-operative society would, in the long run, give a far greater incentive to the people who have to do the work.

I come now to what I regard as the controversial issue behind the Bill: the question of whether or not the Agency should be able to make grants or loans and to give guarantees. Several Government supporters in the other place took the view that the Agency ought to have those powers. Under the Bill the Agency does not get them, and that was welcomed by the Opposition in the other place. In welcoming the absence of such powers, they made very great play of the need for financial discipline, for expertise in management and for a personal financial stake. I would wholly accept all those things. I have no objection whatever to them, but I would point out that in raising capital the co-operative society, particularly in the early stages and in industry, can be seriously handicapped. First of all, it has no equity capital that it can put on the market; indeed if it did, it would cease to be a co-operative society. Furthermore, a capitalist capital market does not take kindly to the principles upon which a co-operative society is based, and in most cases I think there will be some slight, even if unconscious, bias against it.

Of course, societies which are fostered by the Agency will be able, like anybody else, to go to those Government Departments and agencies which have the power to make grants and loans and to give guarantees. I would hope that those Departments and those agencies will try to give a little bias the other way, so that we get some balance. If they do, I think the present position could be accepted. If they do not, then I think that in the future, we shall have to look at this Bill again to see whether or not we need to give the Agency powers, which it could use with the consent of the Secretary of State, at least to guarantee.

My Lords, this is a red-letter day so far as I am concerned. I welcome this Bill. I believe that the organisations which can result from it can be a third force in our economy between, on the one hand, nationalisation and, on the other hand, private enterprise. Whether or not it is will depend upon us and upon the people who man the Agency. I commend the Bill to the House.

4.37 p.m.

Lord DARLING of HILLSBOROUGH

My Lords, I feel that I shall be the odd man out unless I, too, declare an interest. Mine is a third-generation interest, beginning about 110 years ago, when my grandfather, a railway worker, became a founding member and a member of the committee of his local co-operative society. My father worked for the Co-operative movement all his working life and he started work with the Co-operative Wholesale Society in 1930. It was then that I met Lord Peddie and Lord Rusholme, and, given the time to do so, I could explain what a remarkable contribution they both made to the Co-operative movement, because they were initiating new ideas in what was at that time a rather stuffy organisation, which did not take kindly to new ideas.

Today, however, we must talk about this Co-operative Development Agency Bill, which incidentally many of us, even in the 1930s, were trying to promote, or at least we were trying to promote something in this form—believing, I think quite rightly at the time, that one way to overcome the many economic difficulties then facing us was for the Government to take an initiative and do something in a really practical way towards the development of self-help co-operatives.

I am very grateful to the noble Viscount, Lord Long, for enabling me to win a bet, which I hope will be paid off shortly. I bet a noble Lord five to one—actually it became evens in the end—that in the end the noble Viscount would give his blessing to the Bill and would say, I am sure quite genuinely, that he was in favour of the Co-operative movement developing but that he questioned the financial aspects of the Bill. I also ventured to think that he would get the financial aspects wrong, and I have won my bet because, as I hope everyone now knows, the Agency will not be in a position to advance any money for the development of co-operatives, in the sense of putting money into a co-operative society. It is there for the purposes which are laid out very clearly in Clause 2. As my noble friend Lord Jacques has just said, there is a controversy here about whether the Agency should have the authority—and it would require far more money than is laid down in the Bill to do this—to make grants to co-operative enterprises that it wishes to sponsor, or to be in a position to guarantee loans made to co-operative enterprises of that kind.

The noble Viscount, Lord Long, talked about politics interfering in the work of the Agency. That is a legitimate point, but I do not think there is any danger there. First, I do not believe that any Government will make the mistake of putting on to the Agency itself what, in this sense, will be called political appointees. He then went on to say that there might be a danger of companies that are running into difficulties having embittered employees going to the Agency and saying: "We want to change our company into a co-operative. Will you help us?" I do not think there is much danger of that happening.

There is some point in trying to find out why the employees are embittered. If they are embittered because of stupid, inefficient management of their company, possibly with the threat of their losing their jobs through that inefficiency, then I believe that the employees have a perfect right to begin to suggest that their company, in that form, should be wound up and, possibly, that the employees should go in and take it over as a workers' co-operative. That is a perfectly understandable development and one that I should certainly support.

However, there is a safeguard, which the noble Viscount apparently missed. To operate in the way he was talking about would, of course, also require the approval of the shareholders. The decision could not be taken by the employees alone. Anyhow, I am all in favour of developing workers' co-operatives, when companies—I shall not mention any names at the moment—get into difficulties, possibly through inefficient management and when a very good way out of those difficulties is to turn the companies into workers' co-operatives.

I should like to touch on one point that I raised in a previous debate not long ago, when we were talking about tax relief for profit-sharing schemes. I said then that what we need in this country is a new type of company, particularly for the small firm, and even for the individual who has an idea that he wants to develop, but who must start some kind of business enterprise in order to develop it. As a private company, at the moment, he, or the group which he collects together, suffers financial disabilities, difficulty in raising money on reasonable terms, as my noble friend Lord Jacques said, and of course fiscal disabilities under the tax system.

I welcome this Bill, and the development of co-operative societies, not merely as an alternative to the new type of company which I was advocating then, but because this is the better way of doing it. It is a good beginning—if it works out as we hope it will—for a wider expansion of co-operative enterprise, and offers to a company the legal background and the fiscal situation of the co-operative society, for which I argued previously.

To me, the main part of the Bill is Clause 2 and, however well advertised the Agency's services may be, in recommending how co-operative societies might be set up, and advising and evaluating projects that come forward, there are other considerations that are essential which have already been touched upon. To succeed, it is most important that the group or firm which is starting the co-operative should have access to capital. Although it has been mentioned before, it is well worth stressing that in getting the capital to run the business, to buy the equipment, the tools and anything else that they need, as well as the cash flow that they require to get going, companies must have better terms than are now offered by most of the banks. Something must be done to help the financial institutions, which have been set up to help business, to seize the opportunities which I hope will flow from the Development Agency that is now to be set up. In addition, of course, they must have access to managerial advice.

There were many small groups, of which I knew in the years when I was associated with the City of Sheffield. That city breeds craftsmen who want to do jobs of work, who want to get out of the steelworks or whatever it may be, and start up their own little businesses. I understand their difficulties very well. They have the ideas, they have the skill and they have the ability to do the job that they are proposing to do, but keeping the accounts, dealing with banks, dealing with the taxman and dealing with management ideas are things which come very strangely to them. It is on matters of that kind that I hope the Agency will be able to support the projects that it has, as the Bill says, evaluated.

It is not only the small firms, although I agree with the noble Lord, Lord Rochester, that there is probably a great field for development here, particularly in areas where there is considerable unemployment, especially among young people; this is not necessarily a problem only in the inner cities, but I appreciate the problem there. I am sure that there are many young people in the country who would be very happy indeed to start their own little businesses. They will not make much money out of them, but they will have jobs and interests and they will not be in the dole queue. It is in this field where a great deal of help can be given, and I hope that when the Agency gets to work, as quickly as possible, it will pay a great deal of attention to that field.

As I said, I am not concerned only with small firms, or with the kind of social development which the noble Lord raised. I see our economic situation, at the moment, in rather grave terms. We are at the beginning of changes in our industrial and commercial concepts of how we should organise the economy. Unfortunately, it is not that most of the people are turning Socialist—I wish they were—but I think that a lot of capitalists, or at least supporters of the capitalist system, are getting worried about that system and how it operates. We have seen, in articles in the Guardian and The Times this week, the criticisms that are developing of the powerful corporations, the multinational companies, and the enormous power that is now placed in the hands of very few people, because of their investment power and the investment institutions. The control of our lives is now, very largely, going into the hands of these small, powerful groups of people, the interlocking directorates of the powerful corporations.

I think that there is a feeling growing now that we must break away from this. We must have much stricter anti-trust laws in this country, and, in the public interest, break up some of these corporations. But I also think that, in any attempt to curb the power of these small groups, we have to create new enterprises. We have to give more opportunity for people to come along with new ideas, and we must give the backing that they need to work out those ideas. This is where the co-operative idea is so important, because when a successful group gets together in a co-operative society—and, incidentally, I hope that there will be not the one co-operative society which the noble Viscount, Lord Long, spoke about, but 10,000 co-operative societies; I do not want any limit to this—and brings people with new ideas together, it counterbalances the giant corporations. The co-operative society cannot be taken over. As has been mentioned more than once, it has no equity capital. It is not subject, and cannot be subject, to take-over bids. It cannot be clawed by the asset strippers.

I agree with the noble Viscount, Lord Long, that in promoting and helping these bodies the Agency will have to make sure that they provide good management, otherwise they will fail. However, given good management, I believe that they will be a counter-balance to the giant corporations. It will take a long time to work out, but I see no other way round it, unless we transform our capitalist system into something nearer to the social democracy in which I believe, with public enterprises of a different type. Given our mixed economy, I am quite sure that co-operative societies of all kinds will, if promoted in a very big way, give to the people of this country a better opportunity to take part in their own affairs, to be managers of their own enterprises and to provide real industrial democracy. The sooner we can get on to that path in a much bigger way than we have managed so far, the better it will be.

4.52 p.m.

Lord MURRAY of GRAVESEND

My Lords, having only a 30 years' membership of the movement, I hesitate a little to join this co-op hall of fame, surrounded as I am by my noble friends Lord Darling of Hillsborough, Lord Jacques and Lord Oram, all of whom have played such a tremendous part in the development of the Co-operative movement in this country. I should like to congratulate the working party which initiated the report upon which this Bill is based. It was a very thorough piece of work which put forward many ideas that gave rise to food for thought, not only so far as this Bill is concerned but so far as one's ideas relating to the Co-operative movement are concerned. This Bill was an Election Manifesto commitment of the Labour Party, and I am glad that it is now being given its Second Reading. The Co-operative movement has been pushing for such a Bill at its congress for at least the last 10 years, and I welcome it very much indeed. The Opposition, both in this place and in the other place, have accepted the inevitable need for the Bill, and that is to be welcomed. Since the Opposition have accepted the need for this Bill, I hope that they realise the value of co-operation at every level.

It is good to realise, not only by what is contained in this Bill but by what we see throughout society, that there is a renewal of interest in the Co-operative movement, whether they be housing co-operatives or agriculture co-operatives, and that, as was pointed out so well by the noble Lord, Lord Jacques, people are trying to see whether they can get together for their mutal interest and benefit. The Bill is no panacea, however. It does not need to be a panacea, because the Co-operative movement is a thriving movement.

Although people have been prophets of doom about the Co-operative movement and have said that it is a giant which is dying on its feet, it has shown over the years that in fact it is thriving and improving and that it gives good service to its many customers. In this connection, I disagree with one of the points which are made in the minority report, where it is stated that many customers do not regard the co-op as being different from any other store in the high street. I believe that they are wrong. I have experience only of London co-operatives, but the members of the Royal Arsenal Co-operative Society genuinely feel that they are part of that movement. The movement is strongest in South-East London, particularly in the Woolwich area, and at one stage a whole estate of co-operative houses was built by the RACS. The people in that area feel that they are a very real part of the Co-operative movement.

When we are speaking about the Co-operative movement we ought also to remember some of the subsidiary activities which it has introduced over the years. Its educational services are second to none. It gives all kinds of opportunities to people to further their interests and ambitions through evening classes and week-end schools.

Clause 2 of the Bill spells out very clearly what the objectives of co-operatives should be, particularly in paragraph (f) which states that one function of the Agency will be: to provide a forum for discussion and debate within the co-operative movement". It is necessary for the Co-operative movement to discuss different forms of working and the way that affairs should be run. As one or two of my noble friends have mentioned, when it comes to industrial disputes the movement has a very good record. My guess is that it has achieved industrial relations which are as good as these in any of our industries, or sections of industry. This is because the people who work for the Co-operative movement are co-operative members as well. This has been the great advantage of the movement.

To set up co-operatives is not the easy option that many people believe. In the past couple of years certain difficulties regarding the Kirkby co-operative and the Meriden co-operative have been highlighted. They have received a great deal of adverse publicity. Every move they have made has been put under the microscope. This has created difficulties and has led to people pouring scorn upon the Co-operative movement. I mentioned in an intervention during the speech of the noble Viscount, Lord Long, that these people do not remember that we are giving £3,000 million a year to industry. I doubt whether many of the industries which have benefited from that sum have been subjected to such searching probes as these two co-operatives have had to endure.

Turning to the £300,000 a year which has been allocated for running the Agency, the noble Viscount, Lord Long, suggested that I did not seem to think that it was a great deal of money. In fact, I think that it is a great deal of money, but it is relative and has to be looked at in comparative terms. The Agency will, I hope, be encouraged to co-operate with departments and organisations such as the National Enterprise Board to find out how they can get off the ground some of the co-operative ventures that will need to be tried. It takes more than money to run a co-operative. Both experience and ability are needed, and, as all of my noble friends have shown, dedication to the Co-operative movement.

I believe that in the other place the Minister mentioned that the period of three years will represent the formative stage. I should like to know, if possible, what the Government think should happen after that formative stage and how they foresee the development of the Cooperative Development Agency. I was persuaded in some ways by the minority report which spoke about guarantees and about money being made available to ventures. I can see the difficulties involved. It seems to me that because of the difficulty of raising capital, particularly for the Co-operative movement, some of these co-operative ventures will be put on an unequal footing. It is not a question of such ventures being given preferential treatment or more favourable treatment than anybody else. In some ways they will be given unfavourable treatment when they are trying to raise capital.

I had hoped that perhaps the Government might have some ideas on how they see the future, after the first three years of the formative process and when, as was suggested in the other place, the Agency had got on to its own feet and was running its own affairs; and perhaps my noble friend might consider that point. My Lords, I consider this to be a fine Bill. It is the dream of many co-operators and it is the framework for the dedicated co-operators in this country—the members of the co-op.—to go forward to another stage of co-operation.

5 p.m.

Lord WALLACE of COSLANY

My Lords, I am very grateful indeed to all noble Lords who have made their contributions to this debate. Although few in number, we have undoubtedly heard the voice of experience today so far as the Co-operative movement is concerned. I thank noble Lords on all sides of the House for the positive way in which they have dealt with the measure. Although there have been few speakers it has probably been one of the best informed debates about co-operation for a number of years. Some of the speeches have been based on practical experience and ideas from which we can all draw enlightenment and learn useful lessons.

I should like to discuss some of the points that have been made in the debate. First, I can definitely give the noble Viscount, Lord Long, the positive assurance that there is nothing in the Bill which will make it easier for disaffected people to sabotage existing firms in order that they should be turned into co-operatives. In other words, the noble Viscount can be assured that there are no "Reds under the beds", so far as the Agency is concerned.

On appointments, the Secretary of State is not bound to accept nominations, nor can any nominated body insist on any particular appointment. The noble Viscount and other speakers referred to finances. The sum of £300,000 was the working estimate of the cost of administration for three years, including offices, staff and some research. The estimate is based on expert advice from the Government Departments concerned, the Civil Service Department and the Public Services Agency. In fact, a most careful estimate has been made that £300,000 would cover the administration for one year; and that figure, multiplied by three, for three years is £900,000, which is quite a simple sum.

The Agency is certainly not a political organisation and is not intended to be. In fact, in making his selection of nominations the Minister will have an embarrassment of riches. We have heard the voice of experience from behind us, but I can assure your Lordships that there are people of even greater experience outside. Many of them are now prominent in the movement, as has been stressed by some noble Lords this afternoon; they have come from the ranks as members of the societies or even as humble workers in various society organisations. So I do not think the noble Viscount need be too worried on that score.

The noble Lord, Lord Rochester, with his usual thoughtful and constructive contribution obviously showing a very deep and great interest in the Bill and the movement, posed a number of questions, of some of which with his usual courtesy he had advised me, albeit at short notice. However, I can also give him an assurance that the last thing that the working party wanted—and this was fully endorsed by the Government—was that the Agency should be a large bureaucracy. The working party expressed the view that it should be a small but well qualified group with a minimum of clerical support, and it had in mind a total of about 20. On this point I ought to correct the noble Viscount, Lord Long. I think he probably made a slip in his speech when he referred to there being about 400 members; actually that should be "4 to 8" and not "400", otherwise we should have something more like a demonstration or a Party conference than an Agency.

The noble Lord, Lord Rochester, made a number of other points on appointments. This is an important matter, and of course as may be expected, this House and another place will carefully watch it. I can assure him that the Government are sympathetic to the views that he expressed with regard to the appointment of members of the Agency. I am pleased to confirm that the Secretary of State's consultations on this will not necessarily and exclusively be restricted to those having a formal connection with the Co-operative movement. A number of helpful suggestions have already been made, not least by members of the noble Lord's Party in another place. All of these will be given the fullest possible consideration.

The noble Lord, Lord Rochester, touched on the very important matter of review. Parliament will have an ample opportunity to review the operations of the Agency. Clause 3 provides for the Agency to make an annual report to the Secretary of State, and copies of that report will be laid before each House of Parliament. So, too, will the annual statements of account and the associated report of the Comptroller and Auditor General, by virtue of Clause 5. Grants by the Secretary of State under Clause 4 reflect the working group's recommendation that the Government should bear as launching finance the whole of the estimated cost of establishing the Agency and running it for three years and, as I have already indicated, the cost was estimated at £300,000 a year. There is, however, some flexibility in that the clause provides for the aggregate amount to be increased by order by Statutory Instrument from £900,000 to £1½ million. Broadly, this would be subject to the approval of the necessary order by Affirmative Resolution in another place to extend the life of the Agency to five years. Further legislation would then be necessary if the Agency were to continue to be funded by the Government. I can say that the objective of the Agency is to get on its own feet after three years, and we wish it well in that endeavour. As my noble friend Lord Murray of Gravesend said, it is not likely that it will cut off its own life at the end of five years. We hope this will be a continuing and successful operation, growing in strength to the advantage of the nation as a whole.

The noble Lord, Lord Rochester, made an interesting and useful point about the question of educational grants. The problem that he has in youth employment is getting people to know about the available facilities, and so on. This matter was raised at the Committee stage in another place by the Liberal spokesman, Mr. Wainwright, and the Minister of State will be meeting Mr. Wainwright, who put forward this interesting proposal, at the earliest opportunity to consider whether the provision of educational assistance could in some way be incorporated in the Agency's functions. However, there may be difficulties in achieving that without changing the basic nature of the Agency from a purely advisory representative body to one with executive powers; but I undertake, in view of the information which I have just given, to inform the noble Lord of any developments on this topic as they proceed.

What can I say about the contribution of my noble friend Lord Jacques? The House has had a very experienced and potted history, if I may put it that way, of the Co-operative movement, based on his wide knowledge and experience. When I referred to several noble Lords in this place having had great experience and service in the Co-operative movement, certainly the noble Lord, Lord Jacques, was one that I had in mind. I hope that he will be able to give us a great deal of assistance on the Committee, Report and Third Reading stages of the Bill.

The same applies to the noble Lord, Lord Darling. I was very attracted by his vision of helping young people to set up firms and giving them every possible assistance. This is a very useful field where this Agency can be of service to the nation. Again we have in my noble friend Lord Darling a person who has contributed considerably to the Co-operative movement, and I have no doubt will continue to do so. Turning to the noble Lord, Lord Murray, we have something in common, in that we are both members of the Royal Arsenal Co-operative Society; an excellent society, incidentally, which has many aspects of this work apart from training and education in many other fields, and whose committees and board of management are elected by the alternative vote method, a fact which no doubt will be received with appreciation in certain parts of this Chamber this afternoon.

I do not think there is much more I need to say now, The spirit in which this Bill has been received is very warming to me and to many others who welcome the Bill and who fervently hope it will succeed. We have lived through some depressing days in the last few years. There is a ray of hope on the horizon. The nation itself needs shall we say? a thread of idealism. Here, may I say with all humility, we have a Bill which expresses, in the formation of this Agency, this very strong thread of idealism; but idealism allied to practical ideas and practical action, some of which has already been taken, which has advanced prosperity and a better standard of life through co-operative activities abroad, especially in developing countries. When we talk about the Co-operative movement and its extension here, in providing assistance to small firms and so on, do not let us overlook the fact that abroad a tremendous opportunity still exists.

Great work has been done which, like much other great work, has never been adequately publicised. At least today we make a start. I hope the House will give every possible assistance towards getting this Bill through in the quickest possible time, in order that this practical measure can have its effect in assisting the nation to progress and in raising the standard of life, not only of our own people but of many thousands overseas.

On Question, Bill read 2^a, and committed to a Committee of the Whole House.