Co-operatives

HL Deb 17 January 1996 vol 568 cc651-80

6.34 p.m.

Lord Carter rose to call attention to the benefits of co-operative action in the provision of social policy and in business, and the case for a new co-operatives Act to assist in such provision; and to move for Papers.

The noble Lord said: My Lords, in introducing this debate I should declare an interest as the chairman of the United Kingdom Co-operative Council which is the single representative body for the whole co-operative movement in the UK. It has in its membership representation of consumer co-operatives, insurance, banking, agriculture, housing, credit unions, worker co-operatives and the co-operative development organisations for Scotland, Wales and Northern Ireland. I should also say that I have been a secretary and director of a major agricultural co-operative for nearly 30 years. There are many speakers in this debate who have had great experience of co-operation in all its forms. I know that we are all looking forward very much to the maiden speech of my noble friend Lord Sewel.

The purpose of this debate is to draw attention to the relevance of the co-operative model in both social and economic organisation and the need for a new Co-operatives Act to secure a modern and effective legal framework for co-operation. I am sure that different speakers will describe a wide range of co-operative activity. In opening the debate I shall try to set out a general overview, to give some examples and to conclude with the case for a new Co-operatives Act.

The topic of co-operation is particularly relevant to the current discussion of, to coin a phrase, the "stakeholder society". The debate will, I am sure, demonstrate that the co-operative model is an excellent example of stakeholding in practice. On the subject of stakeholding I was a little surprised to note that Mr. Michael Heseltine recently included co-operatives in his faintly ridiculous fulminations against "corporatism". I could not help wondering whether this was the same Mr. Heseltine who, as President of the Board of Trade, sanctioned a substantial grant to the UK Co-operative Council to produce a resource pack showing how to set up and run a co-operative. The resource packs are now in every DTI and Business Link office and have received a wide circulation beyond the Business Links. To be charitable one must assume that Mr. Heseltine was suffering from pre-election amnesia.

This is neither the time nor the place for a detailed history of the co-operative movement in all its forms. However, it is worth pointing out that the co-operative model is older than either the capitalist or the public ownership models. The earliest traces of a modern type of co-operation occur in Britain in the 1700s. There were 500 co-operative associations already in existence when 28 Rochdale weavers formed the Rochdale Society of Equitable Pioneers in 1844, which eventually became the major consumer co-operative grouping that we know today. Of course we also know that co-operation was not purely a British phenomenon. There were many examples of co-operatives in Europe and in America in the 18th and 19th centuries.

To bring matters right up to date, it has been estimated that nearly half the world's population is now involved in some way in co-operative activity either as members, customers or suppliers. So what is the relevance of the co-operative model to social and economic organisation today? Is it a way—not the only way but one way—to achieve the inclusion and empowerment of individuals so that they truly feel they have a stake in society? All of us involved in co-operative activity would argue that it is, and today's debate will, I hope, show there is a solid basis for our belief. However, this belief is not only held on the Left. The Daily Telegraph of 12th January published, for the first time, the last article written by the late Lord Joseph before he died in 1994. The article included praise for the concept of mutuality in delivering pensions and other social services. Lord Joseph stated in the article, I believe the small mutual status of friendly societies keeps the quality of co-operative intimacy".

Mutuality goes to the heart of co-operative activity. A recent report on the mutual status of building societies remarked that mutuality is an attitude of mind as much as an institutional form. What has happened recently in a number of building societies might be taken as a warning by the co-operative movement. The decision to relinquish mutuality and to seek the status of a bank or a public limited company illustrates graphically what happens when large organisations lose touch with their members and their original objectives and the executive management becomes very powerful in relation to those individual members.

The sheer diversity of co-operative organisation beyond the traditional consumer and agricultural co-operative is perhaps not recognised widely enough. I shall give some examples of that. Taxi drivers, actors' agencies, market traders, the Wine Society and some symphony orchestras are just a few of the many activities and organisations organised on a co-operative basis. There are some recent examples of co-operation which underline its relevance to modern problems. The recent success of the Tower Colliery in South Wales shows what can be done when a group of workers band together for their mutual good. Tower Colliery is, I believe, the only coalmine in Europe which is run entirely by the miners who work in it and also own it. Even Mr. Michael Heseltine described it as "a model of common ownership"; or, as one of the miners put it rather well, it is "ownership by the commoners".

Credit unions are another example of co-operation. Formerly seen as relevant only to small groups of relatively poor people. they are now expanding rapidly. British Airways' employees now have a credit union, as do a number of other large organisations in, for example, local authorities, the police and transport services.

Another growing and interesting field of co-operative activity is in the delivery of health and community care. GP co-operatives, co-operatives of nurses and care workers and other groups involved in the delivery of healthcare, are springing up. One particular initiative in this field which actually resulted from a debate in this House, introduced by the noble Lord, Lord Donaldson, is a research study by the Department of Health involving the UK Co-operative Council into the relevance of community well-being centres to the objectives in Health of the Nation. Community well-being centres are, in effect, if not in legal form, community health co-operatives offering a holistic rather than a treatment-based approach to good health. I should pay tribute to the assistance of the Minister, the noble Baroness, Lady Cumberlege, in achieving that research study.

However, an important area of economic activity where I believe the co-operative movement has missed an opportunity is that of the public utilities. Even the most vehement defender of the privatised utilities cannot argue that they have yet found the right form of organisation fully to serve the public interest. Indeed, I would define them as public interest corporations which have much wider responsibilities than those set out in the Companies Act. There is increasing interest in the possibility of some form of mutual status, or for some other quasi co-operative structure which would better reflect the public interest than do the present organisations. I know that my noble friend Lord Haskel has some interesting ideas on the subject. As a recent article in the Guardian pointed out regarding the water companies, Any manager of a mutual will tell you that he does not have to worry only about the people who provide the capital, the shareholders. He has to worry about the customers or 'members' too. Indeed, they may he the same people. The same two-handed approach should be used in the water industry". There are some who would argue that that should also apply to the other utilities where there is a public monopoly.

The Coin Street housing and development programme on the South Bank has been aptly described as a, not-for-profit project … advanced by means of a balanced and mutually supportive programme of commercial and community developments whose first objective is to serve the public good". As a tenant of one of the housing co-operatives in the development put it, "It really is like making a whole new start". Similar imaginative co-operative projects are developing in Manchester and elsewhere.

With the advent of Milk Marque the total turnover of agriculture co-operatives is now approaching that of the consumer co-operative movement. It is fair to say that farmers in the UK have traditionally been rather more reluctant to join co-operatives than their counterparts in Europe and America, but I suspect that this may well change as new systems of agricultural support make farmers increasingly dependent on the market place for their returns.

This very rapid over-view of a huge and diverse field of both social and economic activity has shown, I hope, that co-operation is much more than the Co-op shop or the Co-op funeral parlour—although the Co-operative Wholesale Society is the largest undertaker in the country, conducting one in four funerals.

There is a growing demand for people who are seeking to take a greater control of their lives in organisations which are better able to respond to their needs. Inclusion and empowerment are the terms which express that ambition. There is dissatisfaction with many aspects of the investor society. Public ownership structures in this country and abroad have been, or are being, dismantled. The co-operative model in a modern form could meet many of the objectives and aspirations of those who seek a better organisation of society, both socially and economically. But how should that be expressed in terms of legislation?

Some four years ago, when the United Kingdom Co-operative Council was founded, to succeed in some part the old Co-operative Development Agency, one of its first decisions was to set up a legal working group which is representative of all economic sectors of the co-operative movement. Some extremely useful work has been done by the legal working group with the Registry of Friendly Societies on the European co-operative statute but its main activity has been the drafting of a new Co-operatives Act. The work was completed last autumn and a very substantial piece of work it is. The UKCC is a representative and not a political organisation. As chairman I submitted the proposal for a Co-operatives Act for the United Kingdom to the Chancellor of the Exchequer, Mr. Kenneth Clarke, and the Secretary of State for Trade and Industry, Mr. Ian Lang. We know that both departments have overlapping responsibilities for co-operative matters. I am sorry to say that I have not even had the courtesy of an acknowledgement of receipt of the document. It seems that old-fashioned good manners are singularly lacking nowadays in government circles. However, I have made sure that the Minister, the noble Lord, Lord Mackay of Ardbrecknish, who will respond to the debate, has a copy. Courteous as he always is, I am sure that he will be able to give the Government's considered response.

Time does not allow me to go through the proposal in detail but it covers all those aspects where we feel that co-operative law needs to be brought up to date fully to reflect the role that co-operatives can play in both social and economic organisation. The sections of the proposal follow the form of an Act of Parliament and cover the following: a Co-operative Commissioner to succeed the Registrar of Friendly Societies, being responsible for the registration and supervision of co-operatives; the rules for forming a co-operative; its legal capacity; the membership; the rules; the shares and the capital; the management and administration; accounts and audit; supervision and disputes; conversion, amalgamation and transfers of engagements; insolvency and dissolution; and offences and proceedings to enforce the Act.

As I said earlier, it is a substantial and responsible piece of work. It was conducted by a group expert in co-operative law, and fully endorsed and supported by all the representative organisations in the co-operative movement in the UK. It deserves better than to be ignored by the Government. I look forward to the Minister's response.

In essence, the proposal sets out the arguments for a new Co-operatives Act to replace the Industrial and Provident Societies Act as the basis for the registration and supervision of co-operatives. It goes into great detail about what should go into the new Act.

I am glad to say that the Labour Party has accepted in principle the need for a new Act to provide co-operatives with a modern and effective legal framework, without necessarily endorsing all the detail in the United Kingdom Co-operative Council proposal. But work is continuing on that.

I hope that I have said enough to show that co-operation, far from being a relic of the 19th century, is still a vibrant form of organisation, well suited to the social and economic demands of a modern society. It was G.K. Chesterton who observed, Let us look to the future because that is where we are going to he". I am confident that co-operation has a significant role to play in developing a society where ordinary people feel that they have a genuine stake in the social and economic prosperity of that society. I beg to move for Papers.

6.48 p.m.

Lord Sewel

My Lords, some 20 years ago, when I was vainly attempting to become a semi-respectable academic—that is before being seduced by the delights and subtle nuances of the Scottish Rate Support Grant Order—I was a member of something rather exotically called the Institute for the Study of Sparsely Populated Areas. I am afraid that that is why my speech will he somewhat off-centre this evening.

At that time one of the issues that most interested me was community development policy, in particular in relation to the more remote and so-called peripheral areas of northern Scotland. Many of the communities of north and north-west Scotland are economically and demographically among the most fragile in Britain. They are communities which have historically experienced high levels of out-migration, especially among young people entering the labour market, high levels of unemployment, a distorted age structure, and, regrettably they have too often exhibited the more depressing features of a dependency culture.

In 1976, the then Highlands and Islands Development Board, under the leadership of Sir Kenneth Alexander and with the inspiration of Mr. Robert Storey, introduced into British rural development policy the innovative idea of multi-purpose community co-operatives. There is some truth in the claim that previous conventional approaches to rural development have been excessively top-down, where development was something that was done to you, not always a painless experience. This had led in some communities to local cynicism, passivity and low morale.

Perhaps for the first time in rural development policy, the community co-operative approach allowed local people to be the active subjects of their own development. They were encouraged to have a stake in the future well-being of their own communities. I do not wish to overstate the case: there were failures and disappointments. Rural development is not an area in which prizes come easily. In total, I believe that somewhere around 30 community co-ops have at one time or another operated, engaged in a wide range of activities from running community and mobile shops to craft marketing and from tourism to knitting. By about 1990 there were in the Highlands and Islands of Scotland 24 community co-ops employing 375 people with an annual turnover of £3.5 million; and, perhaps more importantly, with 3,500 local shareholder members who on average had invested £100 each. This had been achieved in some of the most remote, most peripheral and most fragile rural communities in our country.

Creditable though those achievements were, I am convinced that the major contribution of the community co-ops has been in the way they changed the communities themselves, and above all in the growth of community self-confidence and self-belief. It is not coincidental that many of the communities that have subsequently benefited from the EU's LEADER rural development programme are communities that had the previous experience of community co-ops. That is at least in part because community co-ops, often for the first time, successfully developed enterprise skills. I had better confess that LEADER is a particularly difficult French acronym and I trust that on this occasion I may be excused from attempting a full pronunciation.

It is a delight to read in the White Paper, Rural Scotland: People, Prosperity and Partnership, the approving reference to the Laggan Community Co-op. The White Paper itself places considerable emphasis on partnerships, and partnerships are a good thing so long as they actually mean something and are not just formal and bureaucratic. I very much hope that the emphasis will be on creating partnerships which will provide a framework within which local activity, locally determined activity can flourish.

Rural development will not be achieved through sterile partnerships between the formal agencies, important as it is for those agencies to work together. It will not come through opening up our most fragile communities to the harsh winds of the market place. The best bet for strong, active, vital communities—especially in our more remote and peripheral areas—is through nurturing the social and human capital of those communities through co-operation and mutuality.

6.55 p.m.

Lord Rochester

My Lords, it falls to me to congratulate the noble Lord, Lord Sewel, on his maiden speech. We have listened to an interesting and informative speech, buttressed by the noble Lord's interest in community development. He also has experience of university teaching and administration and, I believe, of local government. With that background, I am sure that all noble Lords will agree with me that we look forward very much to further contributions from him to our proceedings.

For my part, I wish first to thank the noble Lord, Lord Carter, for having given us the opportunity to debate this important subject. I am especially glad that he has framed his Motion concerning co-operative action so widely. I propose to call on my industrial experience to speak mainly on the benefits of co-operative action in business.

It was in 1978 that the Co-operative Development Agency was established under the last Labour Government by the Bill passed that year. Its aims were to advise and encourage the development of co-operatives and to co-ordinate their activities. Speaking from these Benches at that time, I welcomed the Bill at its Second Reading. One of those taking part in the debate was Lord Jacques, a lifelong battler for the co-operative movement, whom I greatly admired. I know that all noble Lords will join me in taking this opportunity to pay tribute to his memory. In 1984 the Co-operative Development Agency and Industrial Development Bill provided further funding for the agency. At its Second Reading, Lord Grimond said that he attached the greatest importance to the furthering of the co-operative movement in all its forms. He considered that industrial organisation was one of the most serious problems facing the country. He did not accept that the only alternatives were state socialism or the creation of large conglomerates in the private sector: he believed that a third and very important method was to involve the workforce in the ownership and running of businesses.

Jo Grimond's last public affirmation of that belief came in a debate in this House on employee share ownership, in which I took part, only a few days before his death two years ago. I was much struck by something he then said: that we were watching an immense change in the balance of power between capital and labour. In the old days, mass labour, organised through its unions, exercised considerable influence; but now the way to get on in the world was to have some access to capital or to own capital. That being so, he thought it essential that the nation as a whole should have a share in the capital it possessed and that capital should not be confined to a small elite. He felt—and this is highly relevant to the Motion we are now debating—that this now permeates everything, not only businesses but also the social services, in which the clients are clearly distinguished from those who actually dish out the money. So he hoped that employee participation would also be considered possible in the running of the social services. Otherwise, in his view we would have a highly divisive structure and an extremely inefficient one. Coming from such a wise and far-seeing man, that certainly bears more thinking about.

The other day the Leader of the Labour Party came out in favour of what he called the "stakeholder society". Some of the media have fastened on that phrase as a new and exciting idea. It is nothing of the sort. I should remind your Lordships that ever since the publication of the Liberal Yellow Book in 1928 decentralisation of the structure of industry has been a major theme in my party's policy. The most significant advance in encouraging employee share ownership came from our initiative during the Lib-Lab pact when the 1978 Finance Act introduced tax relief for approved schemes. However, this form of ownership does not necessarily lead in reality to an increase in employee participation. Management has sometimes seen it merely as a means of bolstering incentives. In my view, therefore, measures to increase employee shareholdings should go hand in hand with action to develop employee involvement more widely.

In that connection I take pride in having "fathered"—if I may so put it—in 1982 the statutory requirement which now forms part of the Companies Act 1985 and prescribes that directors of large companies should include in the reports accompanying their annual accounts a statement describing the action taken during the preceding year to develop employee involvement in a number of specific ways. I am sorry that there is not time for me to enumerate those now.

In welcoming the Government's decision to continue and provide further funding for the Co-operative Development Agency in the 1984 Act, we nevertheless expressed scepticism about the way in which the Government then took power to wind up the agency by order. That of course is just what happened six years later. I therefore fully understand how it came about that as chairman of the UK Co-operative Council, which superseded the development agency, the noble Lord, Lord Carter, this evening put the case for a new co-operatives Act.

I appreciate that in introducing the debate today the noble Lord approached the subject from an angle differing from that which I have taken. Even so, I confess that I was surprised and a little disappointed that, unlike the noble Lord, Lord Carter, this evening, in giving the background to the project the UK Co-operative Council's legal working group made no mention of the excellent work done earlier by the Co-operative Development Agency. That is not to disparage the proposals of the working group—far from it.

I hope indeed that I have said enough to demonstrate that in earlier supporting the establishment of the Co-operative Development Agency and encouraging through suitable legislation the development of employee share ownership schemes and employee involvement generally, my noble friends and I have done all in our power, where appropriate by statutory means, to further co-operative action in the provision of social policy and in business.

The noble Lord, Lord Carter, will not, however, expect me at this preliminary stage to commit myself and my party to supporting the kind of co-operatives Bill for which, as chairman of the UK council, he canvassed this evening. If and when such a Bill is introduced, however, it will be plain from what I said that on these Benches we shall give it sympathetic consideration.

7.1 p.m.

Lord Gallacher

My Lords, the ending of mutuality by large building societies places co-operatives in an even more important social position. The Building Societies Act 1986 gave societies most of what they asked for. Yet in under 10 years major societies seek banking status. They will doubtless say that they must compete with banks and other financial institutions. Mutual insurance societies also seek to change.

Parts of the co-operative sector may be small by comparison with building societies. But, in total, co-operatives constitute a very large movement, with several growth areas and international status.

Her Majesty's Government seem to leave growth of the co-operative sector to mainly voluntary bodies. That may not be enough in certain cases. Agricultural co-ops were once promoted by a government funded central council. The council's functions were subsumed into the Food From Britain organisation, but have since been dropped. Preference appears to be for non-co-operative agricultural organisations. Is that a long-term prospect, and how does it compare with structures in other European Union countries?

The Housing Corporation is a major public and promotional body, and is much used by Her Majesty's Government. Par value management co-operatives are in evidence, as is the transfer of housing functions from local authorities to housing associations. Equity housing co-operatives, owned collectively by members who share in the equity, have diminished since the 1980 Housing Act enabled members to buy their homes at their outstanding debt. The co-operatives are usually registered under the I&P laws and are not in general grant aided. The Housing Corporation seems passive in its attitude to equity co-ops. Yet there must be a role for them, even in today's climate of negative equity. Cannot the Housing Corporation be encouraged to become more active in this area?

The Labour Government that ended in 1979 had two significant co-operative achievements to their credit: the creation of the Co-operative Development Agency, which operated from 1978 to 1990; and the passing of the Credit Unions Act 1979. The Co-operative Development Agency tackled the re-establishment of workers' co-operatives in Britain and, although modestly funded and devoid of either loan or guarantee facilities, it succeeded in resurrecting the self-employed concept which inspired the 19th century Christian Socialist Movement. Though individually small, workers' co-ops are large in total. It was a harsh decision by the present Administration to wind up the CDA, but growth continues and local authorities in particular have been very helpful with promotion and in other ways.

Credit unions were about the last legislative creation of the Labour Government. Based on Northern Ireland law, the 1979 Act was geared to small sized credit unions. Recent changes should allow larger unions to be formed. The World Council of Credit Unions is a major body, making significant social and economic contributions in both developed and emerging countries. It is to be hoped that growth in the United Kingdom will soon compensate for our late start in this area.

The noble Lord, Lord Sewel, spoke eloquently about community co-operatives. These co-operatives can take almost any form their members desire, whether in urban or rural areas. In a debate in this House on rural policy on 10th May last, I suggested that there was scope in rural areas for all-purpose community co-operatives. These could embrace a shop, pharmacy, sub-post office, pub, health centre, and even a village hall. A successful rural community co-operative would be able to cross-subsidise different enterprises, provided there was viability overall. Retail co-operatives have operated in this way for a century. The Rural Development Commission has shown commendable interest in village shops and has given grants to village halls. Her Majesty's Government recently expressed willingness to follow the Norwegian example by abating rates liability on village shops. That opens up co-operative possibilities which did not exist when I spoke in May.

In addition, the December issue of the newsletter issued by the National Lottery Charities Board includes in grants programmes for 1996–97 two themes which are an open door for an experiment in rural community co-operatives. These are concerned with improving people's living environment and community involvement. I suggest that the Rural Development Commission and the United Kingdom Co-operative Council might jointly and usefully encourage a village to apply for a national lottery grant with the object of establishing a community co-operative on a trial basis. We may not achieve what has been accomplished in the Highlands and Islands, but the opportunity is there.

So far as a new co-operatives Act is concerned, I prefer to see a draft Bill to give effect to the wide-ranging proposals that the United Kingdom Co-operative Council put forward following extensive consultations with representative bodies and persons.

While co-operatives, irrespective of type, have a common idea, their diversity is astounding. Legislative harmony in these circumstances may not be easily achieved. The Credit Unions Act 1979 sits well with the main Industrial and Provident Societies Act of 1965. This fact may not escape the draftsmen when they begin their task of drafting a new law to take account of modern co-operative requirements. That law is due. I hope that, in the light of what my noble friend Lord Carter had to say this evening, consultation upon it will not he unduly delayed by the present Government, who profess sympathy for and interest in the co-operative idea.

7.7 p.m.

Lord Sefton of Garston

My Lords, it is natural when speaking on a subject such as this and looking for an example of co-operation that one looks to home. People who visit Liverpool, especially by sea, will remember the Liver Building. It is the headquarters of one of the largest friendly societies in the world. The theme to which I address myself is the effect that mutual societies and friendly societies have on community, and the opposite—how, if one moves away from mutual aid and co-operation in society, one gets a different attitude entirely. Therefore I start with the Royal Liver Friendly Society. I am quite certain that if there is any attempt to convert the RLFS into a plc it will be resisted strongly, mainly because of the underlying belief in the idea of mutual aid that exists at its very heart.

The society started after the Irish famine, when members of the Catholic Church, who of course have a very keen interest in how children are treated after death, were appalled by the fact that small babies were being buried in margarine boxes with hardly any ceremony at all. They started a burial society. It became the largest friendly society in the world. That ethos is still there; the community is still there; and it still believes implicitly that that is the way to move forward. I do not think anybody, even given all the persuasive powers possible, can convince its members to become a plc.

That is the important point when debating co-operation. Like others, no doubt, I had a list of points but they have already been disposed of in the speech of my noble friend Lord Carter. I have no intention of going through them again except to mention once again the Tower Colliery, the National Freight Corporation and the Co-operative Retail Societies. Those are all examples of co-operation. As I said before, they lead to a belief in activity in the society for the society's benefit.

There were other forms of co-operation. They were called public utilities. The co-operation which existed in setting up the water supply for all the major cities in this country was a tremendous form of co-operation. Not only did they co-operate within their own boundaries; they co-operated beyond them. Liverpool in particular had to go to Wales because geographically that was where the water was found. Liverpool had to convince the people of Wales that they should have a partnership and should co-operate, which they did. Now there are two very strong communities in North Wales which owe their very existence to Liverpool Corporation.

Then there is the electricity board in Merseyside. I have spoken about it before and I shall do so again in this House. If we ignore what it did, we shall pay a very heavy price indeed. Mutual aid and reliance on one's neighbour to create a better society are on the run. They are on the run because some people believe that money is the one essential. If one has a lot of money in the bank one is called successful. We have now reached the stage where money has replaced any desire to do good. Nowadays we hear footballers who have been brought forward on a little football team and grown big on football say that they are very keen on football and like British football. When they are offered millions of pounds to go to Japan or somewhere else, they say that they are not going for the money but because they are facing a challenge. That is tripe. They are going there for the money.

One sees in the press and on television that such and such a mutual society has decided to become a plc. Has it? I do not think so. The society has not consulted the members. The bosses at the top—the £4 million men, like the man who, it was reported in today's Guardian, earned in the City of London £11 million in one year (it was thought fantastic to have a lottery prize of £11 million but think of being paid £l1 million in a year)—decided that it would be better to have a plc instead of a mutual society, because that would leave them free to do whatever they wanted with it. What is the net result? The net result is that all kinds of glorious offers are made to the members, offers such as, "If you vote as we want you to vote, we shall give you £500". That has become so rooted in our society that some of those members do not even realise what they are doing. They are being bribed with their own wealth to move the society into the ownership of a few individuals. That is the net result when the operation is carried through.

Only today I picked up a box of matches and read on it "England's glory". They once said that once matches were manufactured in Liverpool. The box says "England's glory" and in the small print "Made in Sweden". In this country today one cannot buy a match made in England. Guest, Keen & Nettlefold does not make screws any more in this country. Rover cars are made in Germany. I could continue with a long list.

In conclusion, it has now been established that 80 per cent. of our manufacturing industry is to be found in a colony—a colony controlled by foreigners. There is a hard fight in front of us to reconvert this country to the principles that we held dear, to return to the principle that we in this country should be the ones who control the country. Let us look after our own affairs.

7.15 p.m.

Baroness Nicol

My Lords, until a moment ago I thought that I would have the unique experience of addressing completely empty Conservative Benches, apart from the Minister and his Whip. I am very glad to see that a couple of noble Lords have now arrived.

I too was interested to learn from the deputy Prime Minister last Thursday that co-operatives have now joined the Conservative Party's hate list. He said: The stakeholders that the Labour party would bring back are all our old familiar Labour friends—the unions, the single-issue pressure groups, the local authorities and the co-operatives".—[Official Report, Commons, 11/1 /96; cols. 328–329.] He then listed those who enjoyed the support of his party—a list which, needless to say, did not include the co-operatives or the local authorities.

I am aware that the Conservatives have never been very keen on co-operatives, except at one point when they decided that co-operation did not involve the unions and therefore it could be a good thing in certain circumstances. But I have not before heard quite such a bald statement of opposition from a senior member of the Government. I look forward to hearing whether the Minister feels that that is Conservative policy.

There are many reasons why any government of the United Kingdom should give positive encouragement to the formation of co-operatives. The attitude of the Conservative Party, if it is as expressed by the Deputy Prime Minister, is hard to understand. My noble friend Lord Carter has given us the history of the movement and I shall not go over it again. But I understand that there has been a marked growth in the number and variety of worker and other co-operatives in the past decade or so.

Worker co-ops are formed for many different reasons. Sometimes it is because those involved have found difficulty in breaking into the labour market, for reasons of race or disability. However often we may say otherwise, it remains true that people of different race or those who have disabilities do not find work so easily as their white or able-bodied counterparts, especially in the present situation of high unemployment. There are also those who, as my noble friend Lord Sefton of Garston, indicated, prefer the ethics of co-operation and are not happy with the increasingly competitive and selfish society in which we are now obliged to live. Yet they have skills to offer and they have the will to work. Worker co-ops can give them opportunities to use those skills and retain their independence; and, incidentally, they can also remove them from the unemployment register, which I am sure is attractive to the party opposite.

However, there are other benefits. Worker co-operatives are usually local enterprises which remain local. They bring stability to the community in a way that outside business investment does not always do. We are all familiar with the factory built on the greenfield site which flourishes for a couple of years and then is left derelict and empty. That does not happen with most local co-ops. Stable local communities must in the end help to bring a nationally stable society. A population on the move is destructive of social cohesion and is a factor in the weakening of so many family ties.

Farmers and fishermen are increasingly discovering the advantages of co-operation in marketing their products and in many other ways appropriate to their industries. Farmers find that it pays to apply the principle to the purchase of feed and fertilizer and to the acquisition of expensive machinery which otherwise would be beyond the reach of many smaller farms. In mainland Europe, that particular movement in co-operation has progressed very much further than Ours.

There are many different ways of organising co-operatives, and they provide a wide diversity of products and services. But the golden thread uniting them all is that they are run by and for those who do the work rather than for investors and shareholders. And because the employees own the business, they can and do take pride in their work. Many of them give a service which could not be provided in any other way.

Not all co-operatives are small. For example, Heathrow Airport Licensed Taxis has 2,500 members. There are numerous examples of co-operatives which can wield considerable buying power. One of my noble friends mentioned the Wine Society, which brings comfort to many thousands of people, not all of them realising that they are supporting a co-operative.

I am delighted to learn that in Boston in the United States co-operatives have been formed via the Internet. That provides interesting possibilities. If that takes off worldwide, who knows how powerful the co-operative movement will become? An idea which is 150 years old in this country since it began in Rochdale may become the way of business for tomorrow worldwide.

I hope therefore that the utterance last Thursday was evidence that the Deputy Prime Minister was again carried away by his own rhetoric and was not suggesting a Conservative Party policy to oppose co-operation in all its forms. Such a policy will fall foul of many prospective Conservative voters and, though I might welcome their disillusion from a political point of view, I would not welcome attempts to make life more difficult for existing co-operatives or to discourage the establishment of new ones. The co-operative way of doing things is a valuable part of our lives; it should be encouraged and not denigrated.

7.21 p.m.

Lord Monkswell

My Lords, we all owe a debt of gratitude to my noble friend Lord Carter for introducing this debate and for so effectively explaining the background and the current reality of the co-operative movement. When I saw the terms of the debate I immediately felt that I had to contribute to it. As a member of the co-op party, a supporter of the co-op movement and a practical co-operator, I felt honour bound to take part.

I planned to speak on three main themes. The first was the result of competition as opposed to co-operation when military action is undertaken. A prime example of that was the lack of planning and co-operative action between different elements of military forces in the Dardanelles campaign, which resulted in the horrors and agonies of Gallipoli in the First World War. The benefits of combined co-operative action were demonstrated in the Normandy landings on D-Day. Of course, we must recognise that the ultimate result of competition rather than co-operation is war itself.

I also intended to talk about the problems for society, the individuals in society and the relationships between individuals when men and women are pitted against each other in competition instead of realising that they are different and are designed to complement each other and to work and live in co-operation with each other. However, this is a time-limited debate and it will come as no surprise that I do not intend to elaborate on those matters. I felt that it may be useful for me to concentrate my remarks on the situation and the need for co-operative action in the field of industry and commerce.

One of the most salutary aspects that we need to appreciate is the purpose of enterprise. We have been led to believe—I feel erroneously—that the object of a company is to maximise returns for its shareholders. That is wrong. To understand an enterprise, whether it be a school, a hospital, a railway or an industrial company, we need to look at what it is doing. The object of a school is the education of children, not the return on capital investment; the object of a hospital is the care of the sick; the object of a railway is to move people and goods in trains between A and B. The object of a water undertaking is to supply water. We can see that recently, with the changes that the Government have engendered in the water industry. The water companies seem to have lost track of that requirement and to be concerned only with dispensing money to shareholders, senior managers and directors of the companies. The object of an industrial company is to produce the goods.

Perhaps I can take an example from my own experience. For 20 years I worked for Massey Ferguson, the largest tractor manufacturer in the western world—that may be familiar to my noble friend Lord Carter. When I joined the company in 1969 I was told by members of the company that they were proud to be involved in an enterprise that produced the best tractors in the world; in fact, some described it as the "Rolls Royce" of tractors, though I am not sure that that was a good allusion. However, I had a strong feeling that people involved in the enterprise were proud of building tractors and mechanising agriculture. The company was working with its suppliers, its distributors and customers in a kind of gigantic co-operative enterprise through co-operative action to produce the goods to mechanise agriculture.

For the first 10 years with that company I saw it grow and expand. We opened new factories; we took over other companies; we expanded production. We were not only supplying machinery to mechanise and improve the mechanisation of agriculture in this country, but we were also exporting around 80 or 90 per cent. of our product overseas, much of it to developing countries to improve their agricultural standards. We employed thousands of people in a number of factories in this country and thousands of people around the world in different factories.

One of the sad things that happened with the election of the Tory Government in 1979—it was immensely shocking to me—was that the reaction of management was to turn round to the unions, their suppliers and customers and say, "It is our job to manage and we shall run it all ourselves. We shall tell you what to do". The concept of co-operation that had existed in the 10 years previously completely went out of the window. From that point on the company deteriorated. When I left the company 10 years later we were producing one-third of the product that we had produced in 1979 and the number of employees in the company was reduced commensurate with that. We closed factories not only in this country, but throughout the world.

It is a salutary lesson that when that industrial enterprise lost track of the need, first, to produce the goods and, secondly, to work co-operatively with suppliers, distributors, customers and its workforce, it went downhill.

7.29 p.m.

Baroness Dean of Thornton-le-Fylcle

My Lords, I join with other noble Lords in thanking my noble friend Lord Carter for initiating this debate. Co-operatives arc little discussed and it is true that the public perception and the reality are miles apart. Quite often people think about co-operatives as the co-operative movement which has affected many of the lives of British citizens with the growth of the movement itself.

My noble friend Lord Carter called for a new law, and he is right. This is a growing area which needs to be more clearly defined and needs to have a better structure in law than it has at the moment. My short contribution to the debate will be based upon my experience in the employment field. Traditionally, co-operatives have grown up in small communities, in urban and rural areas. That has been my practical experience. Many people become co-operators not for any ideological reasons or because it was ever their intention, but quite often because the organisation in which they worked has closed down. They had a choice between dependency on unemployment benefit or trying to do something for themselves by forming a co-operative. That often happened with small numbers of people. Indeed, the developments in new technology, particularly in the publishing area, have encouraged that. Extremely far flung communities join together in co-operatives to create employment which otherwise would not exist.

One area of success has been women returners. One can see examples of women who have perhaps married and have young children. They cannot get a job but want to be independent; they may not have transport and there is no work in their area. Such women join together and start to become independent. That should be encouraged. In my experience, many of the people working in co-operatives would otherwise be dependent on the taxpayer. But they are not.

As co-operatives have grown they have gone out and created jobs and have in many areas become part of what I would loosely call the establishment. The Wales Co-operative Development and Training Centre has support from the Welsh Development Agency, the Development Board for Rural Wales, the European Union and local authorities. It has created 450 jobs. I should like to give another example, one from which the Minister will take great satisfaction if he does not approach this topic with a closed ideology. I am sure the noble Lord does not. The employee ownership scheme in Scotland, which was formed in 1977, is the largest in Europe. Until recently all the co-operatives in Scotland had a combined turnover of £40 million. The sum now is £200 million.

I raise that point particularly because of an interesting development in Scotland. One of my roles as a trade union officer was to represent people working in the paper-making industry. Paper mills need to be near water. Quite often one would find that a paper mill was of' itself an identifiable village. There would be no other work in the area. Indeed, it was one of the last industries to have tied cottages. The Minister will know that there is lots of water in Scotland and so there are lots of paper mills in Scotland. There are also in the water lots of salmon which go by paper mills. In Scotland there is a paper mill called Tullis Russell. It was a very successful family company which employed hundreds of people in a large acreage of plant. When the company, through hereditary means, was taken over by the grandson of the original owner, he decided that although it was a successful company the way forward was to hand it back to the workforce. It was not done as cleanly or as straightforwardly as that but, in effect, that is what has happened. The company today is part of the Employee Ownership of Scotland. It has a £200 million a year turnover and maintains its independence, but it uses all the values of the co-operative movement.

Large organisations like that are not the norm in the co-operative movement outside of—my noble friend Lord Graham may correct me later on this—the Co-operative Society itself, which is an enormous organisation. Small businesses need business skills. That is where the structure of the co-operatives comes in. They often need training. That is another area where the structure of the co-operatives comes in. They need financial advice. That is a further area where the structure of the co-operatives comes in. As employment and work structures in Britain are changing, and will continue to change, as people look for different ways of working and living, we will find that co-operatives increase in number. I believe that the call by my noble friend Lord Carter is timely and I hope that the changes in law which he proposed will gather wide support.

7.34 p.m.

Lord Taylor of Gryfe

My Lords, I, too, must declare an interest. I am a member of the co-operative party and I am a member of a co-operative society. The noble Lord, Lord Gallacher, who is sitting in front of me, and I started as boys in the co-operative movement. My original commercial and industrial experience was gained as a member and as an employee of the Co-op.

In those days it was a considerable organisation in Scotland. Co-operative trade at the moment is around 6 per cent. of national trade. It was not uncommon in Scotland to have more than 20 per cent. of the national trade in co-operative hands. In fact, the co-ops preceded some of the modern industrialists. We took two items, bread and tea, and said that they were the basic items. We established a vertical integration, bringing wheat from the co-operative wheatfields of Manitoba, milling it in co-operative mills here, baking it into co-operative bread in co-operative bakeries and putting it on the counter of the co-operative housewife. They preceded the modern industrialist by many years. They did the same with tea. It was a delight to go out to Sri Lanka to see the Scottish Co-operative Wholesale Society tea plantations. Such was the power and authority of co-ops in those days.

I regret to say that co-ops—everyone will admit this—were a little reluctant to adapt to change. As co-operatives, we have to confess our weaknesses in that regard. It is a sad sight to travel around Scotland and see the familiar co-operative premises now closed or being taken over for other purposes. But that should not minimise the considerable contribution which co-ops have made, and will make, to our social well-being.

I congratulate the CWS on taking the initiative in consumer protection by insisting on the honest labelling of products. I pay tribute also to the vast and powerful Co-operative Bank which has initiated a policy of ethical investment of Co-operative Wholesale Society or Co-operative Bank funds. Those two institutions are certainly maintaining the traditions and some of the ideals for which the co-operative movement was established.

It would be wrong to discuss the weaknesses and strengths, the difficulties and the past of the co-op at this stage. I am concerned about supporting the Motion of my noble friend Lord Carter. I believe that the co-op idea is appropriate for the present. We are facing a situation in our society of power becoming increasingly centralised—in government, in industry, in communications and so on. This means that citizens feel powerless and alienated. Democracy is suffering from the size of institutions and organisations. I very much regret that some of the mutual organisations, like the building societies and the insurance societies, are now finding their way into being limited liability companies at a moment when the need to involve people is more and more necessary.

I remember that we debated in this House the Trustee Savings Bank, which was taken over and is now part of one of the leading clearing banks. We were given certain assurances about retaining the integrity of a mutual organisation. That has since disappeared. Society will he poorer if one has a continuing decline of the mutual organisations like the co-operative societies in all their varieties, in agriculture, in retailing and in credit unions. Society will be poorer if these institutions decline. So it is important that this debate today should concentrate on that problem. We should give full support to the work of the agency over which the noble Lord presides and get increased support for the co-operative idea.

7.40 p.m.

Lord Rea

My Lords, I shall speak for a very few minutes only about the scope for co-operative action in community care. As a general practitioner, I was not actually involved in the setting up and running of care services provided by social services departments—the home help services, meals on wheels, residential accommodation, sheltered employment or social care for mentally ill and mentally handicapped people in the community—but I frequently called on those services for my patients.

However, even in the London boroughs of Camden and Islington, which used to have a good reputation for care services, these services have become less adequate in recent years. The result is that elderly or mentally ill patients discharged from hospital are not getting the package of home or community care that they need. Too often they have to he readmitted as emergency cases. That is not the entire reason, but it is part of it, why the proportion of emergency admissions is increasing, since Camden and Islington are not isolated examples.

The social services are now required to purchase—which is the term usually used—rather than themselves provide, most of their community care services. The debate about whether that was a correct part of the community care Act continues. However, on the principle that if you can't beat them, join them—referring to my Unstarred Question of last night, that is something which the Chechens seem not to be very willing to do—there are big opportunities not simply for the private sector but also for the voluntary and co-operative non-profit-making sector, as my noble friend Lord Carter and other noble Lords have pointed out.

The co-operative sector has the added advantage of including the carers and the clients, when they are able, as part of the caring service. In his maiden speech, the noble Lord, Lord Sewel, pointed out how communities grow in stature when they are involved in their own development. At present the Community Care (Direct Payments) Bill is passing through your Lordships' House. In answering this debate I wonder whether the noble Lord, Lord Mackay, can tell us whether the direct payments envisaged could, with the carer's or client's permission, be channelled into co-operative schemes as outlined by my noble friend, to provide care in the community for disabled or elderly patients. These are developing in various parts of the country, particularly in Scotland, and they are also common in Scandinavia and particularly in Italy.

I suggest that non-profit or shared profit community care schemes not only have the advantage of involving the clients and the carers, but they have the potential for providing better value for money than the private sector, where the profits of shareholders or owners tend to take top priority. Co-operative schemes will make the welfare of the patient in the community their top priority because patients and their relatives will themselves be directly involved in running them.

7.45 p.m.

Lord Haskel

My Lords, I am most grateful to my noble friend Lord Carter for giving us this opportunity to debate co-operatives. I should like to speak on how they measure up to modern business pressures and I hope that I shall do so in a more balanced way than the Deputy Prime Minister did last Thursday.

Business is rediscovering the co-operative ideal in new forms and new ways. Stakeholder economics go back to the roots of co-operation. Some of the modern ideas in management are returning to the basic principles of the co-operative. As the noble Lord, Lord Carter, told us, what we used to call "co-operation" we now call "empowerment". As my noble friend Baroness Nicol said, that motivates both management and work people to rise above themselves to produce extraordinary results.

Nobody can disagree that over the years co-operatives have been wonderful for motivating people and providing incentives. But, sadly, motivation does not ensure success. One of the greatest fallacies in modern business is the idea that motivation and incentives ensure competence. This is proven by the large number of co-operative companies which have failed, and the large number of businesses run by highly motivated and dedicated families which fail every year.

That is because, like all businesses, co-operatives have to ensure that the essential competences of a business are maintained at all levels. Often that must be done by bringing in outsiders and relegating many of the originators of the co-operative to a subsidiary role. The notion that ownership should entitle members to a management role is as flawed in a co-operative as in a traditional family business.

Then there are the practical difficulties regarding the supply of sufficient capital. Some enterprises require little capital to start up and can operate as co-operatives on the savings of its members, but a co-operative soon runs into difficulties when more capital is required. If a co-operative has to seek loans or external equity, the full notion of the co-operative will be undermined unless it can come to some special arrangement.

Perhaps the John Lewis Partnership is a case in point. It has not issued equity for many years; nor has it gone in for excessive borrowing. The result is a well-run business with a sound but unspectacular rate of growth, which satisfies the customers, satisfies the partners, but would not perhaps satisfy the City.

Here we have the crux of the matter in business terms. The City's current obsession with shareholder value as a first priority is in stark contrast to the best management practice in a co-operative, which is first and foremost to look after one's customers and market. As Professor John Kay has pointed out, there is no clear link between shareholder value and customer satisfaction. Clearly, then, British industry has a lot to learn from the co-operative movement about shared risk and reward, and about incentives and motivation. But, equally, co-operatives have a lot to learn from other sectors of industry about capital flexibility.

Nevertheless, the question of the distribution of earnings can also be a tricky problem for co-operatives. In any business in the early stages there is generally little room for distribution as earnings must be retained. Co-operatives are no exception. The members have to be patient and this can be either a happy or unhappy experience. For some of the founder members of the National Freight Corporation, it was clearly an unhappy experience. The survival of the enterprise required that some of the founder members be made redundant. Certainly working in a co-operative gives you a say in your destiny at work, but the pressures of the market nowadays are inexorable, and the say you have in controlling your destiny may be to make yourself redundant or, indeed, to close down the enterprise.

Yet, although co-operatives must compete in the market and get all the dynamics of management right in order to succeed, they have two great advantages over their competitors. The first is the spirit and commitment of the members. The fruits of co-operation from the greater involvement and participation of the members, the consultation which takes place, and the broadly based remuneration schemes which spread the fruits of success throughout the enterprise, all have a significant effect on the business.

The second advantage is quite simply that the business is owned by customers or employees and there is one stakeholder fewer to satisfy. This means that the others can have better returns or that more money can be retained in the business.

I agree with my noble friends Lord Gallacher and Lord Monkswell that perhaps the local electricity and water companies should have become co-operatives. They are natural monopolies and would perhaps operate with more concern for the consumer as consumer co-operatives and thereby require less regulation than PLCs. Having missed the opportunity in past privatisations, perhaps the Government will consider that alternative in the future.

As many noble Lords have said, co-operatives have performed well as local enterprises. That is why they should be encouraged by the local development agencies. I hope that the Minister can assure us that the business links and DTI agencies are fully briefed on the advantages of co-operatives and will encourage them. After all, the prime determinants of any business enterprise are the competence and vision of all those working in the business, the adequacy of finance, luck and good motivation. Without doubt a co-operative ethos wins every time as far as motivation is concerned.

7.52 p.m.

Lord Graham of Edmonton

My Lords, I begin by saying that my noble friend Lord Peston would very much have liked to participate in this debate, but I am glad that he asked me to do so on his behalf.

We have had a valuable short debate which was clearly needed not least by those who claim to assert that the co-operative idea is a good one and can be extended into many fields of economic and social activity.

My noble friend Lord Carter got us off to a splendid start with his tour d'horizon touching on significant areas of co-operative enterprise. His prime credential as the chairman of the United Kingdom Co-operative Council equips him to lead this debate and we are indebted to him for that. His call for a future Government to assist the co-operative sector by legislating for a Co-operative Act is soundly based, well argued and deserves to be taken seriously.

Alas, this debate was cruelly deprived of a certain participant with the death of our parliamentary colleague, the late Lord Jacques of Portsea Island. The reference to him by the noble Lord, Lord Rochester, was deeply appreciated and very touching to many like myself. For much of his life, Lord Jacques was "Mr. Co-op", especially in his fiefdom, the Portsea Island Co-operative Society. There are too few genuine original thinkers in business or in community affairs today. Just such a man was John Jacques. He personified the good qualities outlined by many speakers in this debate as epitomising sound co-operative practice and principles. His death has robbed the nation of a great public servant and the co-operative movement of a true co-operator and a leader of exceptional worth. We shall miss him greatly.

This debate has helped to underline that co-operative action has been, is, and will continue to be, the way out of many social and economic problems facing, in the main, the poorer sections of society. The idea of mutuality is not new, nor is it revolutionary. It is plain common sense that those in need should have access to a source of help in one of many ways. We have heard tonight of the wide spread of co-operative ideas, the application of co-operative methods, the easy adaptability of the co-operative ethic to many of the problems facing the world. This debate seeks no more than to bring to the attention of a wider audience the fact that by itself the existing co-operative movement can do, and is doing, much but, with a little help from its friends, can do a great deal more.

I am so glad that through the medium of this debate it has been shown that co-operatives are not exclusively "the Co-op shop on the corner". In the aftermath of the celebration of being in the high streets of the nation for more than 150 years now no one can take away from the consumer movement the fact that it has made and is making a tremendous contribution to the economic and social fabric of life—not only here in Britain, but throughout the world. The idea that it need not be capital, not employees, not government but consumers who are in the driving seat is a concept given to the world stemming from those same Rochdale pioneers—a concept that can never be erased. But it is high time that the contribution made by the co-operative principle in many other spheres of human activity was properly highlighted.

One thing is for sure: the amateur, sincere, but often inexperienced trading concepts displayed by those early pioneers have no place in modern society. That which we know as "the Co-op" may have, more painfully than others, come to accept that in the 21st century there is no place for the second best. That point was made effectively by my noble friend Lord Taylor. To strive for the very best practice must be the guiding light in all forms of co-operative.

In Britain today such elements of the British co-operative movement will not survive unless the consumer chooses the co-operative alternative in preference to any other. The days of absolute loyalty or devotion are in the past and, although every company yearns for that support, it has to be won, kept and nurtured. Again, that point was underlined by my noble friend Lord Taylor. To have that loyalty expressed in cash to the value of £14 billion in trade per year is no mean achievement, but in today's markets no one rides on the back of others. That is why those like myself who are intimately associated with current co-operative practice accept their responsibility for making what we have as efficient as can be, and accept our role as proselytisers the better to widen the co-operative net. And why not?

The Minister may support a thesis which asserts that there are only two ways of organising life—by the state or by capital. We say that there is a middle way, where the individual need not be a slave to either, but can enjoy the benefits of both and forge an even better alternative.

What a joy it was to listen to the maiden speech of my noble friend Lord Sewel. His decision to dive in at the deep end a week after his introduction took courage, and to have done so with the style and authority that he displayed encourages us to believe that he will speak here often. We all look forward to that.

My noble friend Lord Gallacher stressed the wide application of the co-operative idea in many spheres of non-retailing activity, housing, credit and rural life being but a few. My noble friend Lord Sefton showed his deep understanding of human needs and his feel for what makes Liverpudlians tick. Mutuality was the talisman which he proudly held aloft. My noble friend Lady Nicol reminded us of the value of worker co-ops and gave many interesting illustrations, relating not only to Britain but to countries throughout the world. My noble friend Lord Monkswell effectively gave us practical examples of co-operation. My noble friend Lady Dean brought her industrial experience before the House and told us how co-operatives had served many workers and communities. My noble friend Lord Taylor strongly pledged his continuing support for the co-operative idea after his lifetime of association with the co-op. My noble friend Lord Rea gave us yet another dimension of co-operative practice when he referred to its application in health provision and my noble friend Lord Haskel talked of the powerful force of co-operation in motivating business and people at work.

More than one speaker referred to the fact that in a parliamentary exchange last week the deputy Prime Minister saw fit to take a swipe at co-operatives. On 11th January, at col. 328, he sought to denigrate them, listing them as one of the usual suspects, the "old familiar Labour friends". The bile of the deputy Prime Minister notwithstanding, the co-operatives were in very good company; the unions, the single issue pressure groups, the local authorities and the co-operatives.

The House will know that, besides being friends of Labour, they also have in common the fact that they represent many, many disadvantaged people and communities, all of whom have learnt to regret the fact that we do not have a Labour Government and will be grateful to the deputy Prime Minister for grouping them together as "familiar Labour friends".

The deputy Prime Minister compounded his ignorance as well as his prejudice when he went on to say: A stakeholder society in a Conservative world … is all about home owners, share owners, pension owners, choice, freedom and a competitive society".—[Official Report, Commons, 11/1/96; col. 3291 That is what co-operatives are all about too. Thanks to the deputy Prime Minister, we know not only where our friends are but where they are not. Stakeholding is as old as—well, at least as old as the principles of the Rochdale pioneers in 1844. Co-operatives are proud, as are co-operators, to be stakeholders. The case for a greater public awareness of the value of the co-operative tool should not be in dispute. This debate has clearly demonstrated that the co-op is alive and thriving and can be even more so in the years that lie ahead.

8.2 p.m.

Lord Mackay of Ardbrecknish

My Lords, my first task is to undertake two pleasant duties. I congratulate the noble Lord, Lord Carter, not so much on having this debate but on his birthday today and on sharing at least a small part of this evening with us. Whether his belief in mutual co-operation will extend further than the debate to an invitation to help him celebrate his birthday remains to be seen.

My second pleasant task is to congratulate the noble Lord, Lord Sewel, on his maiden speech. When he mentioned the rate support grant at the beginning of his speech there was a small hint of a connection with local authorities. In making that one small mention he slightly underplayed his important role in Scottish local government for many years. He was the leader of Aberdeen District Council. Unfortunately, the Labour group tends to run Aberdeen District Council more often than not. That does not prevent me from saying that Aberdeen is one of my favourite cities in the United Kingdom and, despite its administration, it is always a joy to visit the city.

The noble Lord was also the president of the Convention of Scottish Local Authorities. I suppose that that is where his knowledge of the rate support grant comes from. During my time in the Scottish Office it was said—I cannot quite remember the precise phrase—that only two men understood the rate support grant. I certainly was not one of them and I cannot recall the noble Lord being one of them either. However, his interest in the remoter communities in Scotland and in the co-operative movement there brought him to make his maiden speech in this debate. Coming as I do from the West Highlands, I can certainly echo the importance there of community co-operatives of various kinds. Perhaps the reason why the noble Lord made little mention of local government was that sometimes there is little co-operation there.

This week I have been privileged to hear three maiden speakers. I was not present during the earlier debate today, otherwise I should have heard five. All three have been Scots, which has given me particular pleasure. Indeed, one was my noble and learned friend the Lord Advocate, who joins the Government. Some of your Lordships may be forgiven for coming to the conclusion that one has to be a Scot to join the Government and that it certainly helps if one's name is Mackay. After the noble Lord, Lord Sewel, the noble Baroness, Lady Smith, and my noble and learned friend the Lord Advocate, it may look as though one has to be a Scot to get to the House of Lords too.

That leads me to the inevitable conclusion, which I am sure the noble Lord, Lord Sewel, will also come to quickly, that with such strong Scots representation in this House and down the Corridor there is no need to go down the dangerous road of devolution and remove the Scottish influence from this Chamber and from the other place. However, that is a debate for another day.

Perhaps I may say on a serious note that, although I did not know Lord Jacques, I understand the affection in which he was held by many Members of your Lordships' House. I looked quickly at Dod, and it is sad that he is not present for a debate such as this which would have been very close to his heart.

Lord Graham of Edmonton

Hear, hear!

Lord Mackay of Ardbrecknish

My Lords, my right honourable friends the Chancellor of the Exchequer and the President of the Board of Trade are sorry that the noble Lord, Lord Carter, feels slighted by their not having replied to him. I cannot speak for the President of the Board of Trade because I am not responsible for that department. However, from time to time I come before your Lordships wearing a Treasury hat and I can assure the noble Lord that eventually the document reached the Treasury. I believe that it was lost somewhere in the postal services of the House of Commons. The noble Lord should not be too upset because my Christmas cards, which I ordered some time in November, arrived yesterday. I assure him that the two departments involved are studying the document most carefully. Indeed, they will soon begin to discuss the details of the proposals in the document, largely via the Registry of Friendly Societies, in order to allow us to come to a detailed conclusion. I shall return to the document and make a few comments about it.

The co-operatives have a valuable role to play in our modern economy. As I mentioned when I referred to the speech of the noble Lord, Lord Sewel, I appreciate their importance in many rural areas of the country where, for example, the village shop may no longer be the kind of economic proposition that would encourage someone to try to make a living out of it. We have heard examples of large and small co-operatives meeting a wide range of needs; for instance, social needs and economic needs. At the risk of going over some of the ground again, perhaps I may point to some excellent examples.

In many ways the biggest is the Co-operative Retail Society, which for many years has had considerable links with the party opposite. It is the biggest in the retail sector, which I suppose goes all the way down to many small shops. Indeed, I can think of at least one village pub which is a co-operative. The last time I visited it it appeared to be quite successful. Obviously it depends heavily on the owners taking a fair share of the space at the bar and a few visitors passing by. The noble Lord, Lord Graham of Edmonton, asked whether I got a dividend. I did not notice that drink was any cheaper in the co-operative but the surroundings were most pleasant—the geographical surroundings certainly were.

Many organisations such as the Northern Clubs Federation Brewery, the Co-operative Press and even the Morning Star newspaper—I notice that no one on the Benches opposite mentioned that, and I am not surprised—are part of the co-operative movement. There is a wide range of co-operatives in agriculture and fisheries. There are co-operatives which provide goods and services to farmers and large co-operatives such as Milk Marque, the former Milk Marketing Board. There are also co-operatives such as the Rabbit Clearance Society and the like.

I know a little about the fishing societies from my former position as chairman of the Seafish Industry Authority. Up and down the country and in the ports there are co-operatives which supply gear and various equipment to the fishing industry. The largest society is the Shetland Salmon Group which has a turnover of £14 million. I hope that occasionally some of your Lordships help in the consumption of its product.

There are many other clubs. Indeed, I am surprised that the party opposite did not pull my leg by reminding me that the Association of Conservative Clubs is a co-operative, as indeed is Surrey County Cricket Club, and there are the credit unions, which play an important role in many parts of our country.

Most co-operatives in Great Britain chose to register under the Industrial and Provident Societies Act 1965. There are more than 11,000 industrial and provident societies. They have a total membership of 10 million and their assets are in excess of £30 billion. Retail societies provide services to almost 7 million members.

One of the important proposals made in the document referred to by the noble Lord, Lord Carter, and other noble Lords is that there should be new co-operatives' legislation. Noble Lords put the case for primary legislation for co-operatives. The UKCC has worked hard to produce a considered report as regards which new provisions would serve the societies that they represent. I understand fully the thinking behind that approach and I appreciate the amount of effort that has gone into formulating the report. However, as noble Lords will know, the Government have no proposals to introduce such primary legislation. But we shall consider very carefully indeed the contents of the council's proposals.

Perhaps I may address two particular issues that arise from the report. The first is the idea of a co-operatives commissioner. The UKCC has proposed the establishment of a co-operatives commissioner—originally as the 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. This commissioner would have one role supervising co-operative societies and another as the Government's chief source of advice on the sector.

It appears to the Government that the co-operatives sector already has such a figure in the Chief Registrar of Friendly Societies. The registry is itself a statutory body, with a registration and limited regulatory role which it exercises independently. It is also a department of government, advising my right honourable friend the Chancellor.

Since the UKCC published its proposals it has become clear that there is not a consensus within the sector on what new powers or responsibilities the commissioner should have. Until one has emerged it will be difficult for the Government to form a view on how to respond to the sector's concerns. For the moment, our attitude remains, "If it ain't broke, don't fix it".

Much has been made of the principle of mutuality in co-operatives. When people decide to set up a co-operative, or to join one, they have made a deliberate choice that this is the appropriate structure for the business they want to be in. Co-operatives are run for the mutual benefit of their members, who have a direct and equal say in decisions.

The UKCC has proposed making it possible for members setting up a co-operative to direct, in the society's rules, that the co-operative should never change its original, mutual form. This contrasts with current legislation which allows a society to convert into a company should 75 per cent. of members voting at a general meeting support such a change.

That is relevant to the regrets expressed by, for example, the noble Lords, Lord Carter, Lord Gallacher and Lord Sefton, regarding building societies and some of the "demutualisation" that has taken place. I believe that, as those changes can proceed under the law only if a substantial majority of members support them, that is mutuality—that people have reached a decision that they wish to change the form of a society. We are, of course, willing to consider detailed proposals for societies' constitutions, but there are difficulties in principle with allowing current members to limit so fundamentally the democratic rights of their successors.

There may be times when a co-operative structure, because of a changed local business climate or a reduction in the number of members, ceases to be the best option for meeting the needs of its members. In such a case a significant majority of members may consider that putting the business on a different footing is essential if it is to adapt effectively to the new environment.

In more extreme circumstances it may be that the natural life of an enterprise has expired. In these cases, the best course for the current members may be to wind up the co-operative before its business difficulties erode its asset base to the detriment of everyone involved. It would be most regrettable if the co-operative were bound by statute to continue into insolvency, so wiping out the worth it had built up over the years and to which current members had contributed.

Therefore, while the Government are willing to consider whether a co-operative might place limits on its eventual destiny, there are strong reasons for not trammelling unduly the freedom of current members. The rights of members is, after all, itself at the heart of mutuality. Future members, as much as present ones, should be free to exercise their democratic vote as the owners and ultimate custodians of the co-operative's identity.

But, although the Government have no plans for new primary legislation, much can be achieved by other means. The Deregulation and Contracting Out Act allows us to remove burdensome rules and regulations which stifle enterprise and initiative, provided we maintain necessary protection. We intend to make full use of this order-making power to improve the regulatory environment for co-operatives. Last year we completed a consultation exercise on proposed amendments to the Industrial and Provident Societies Acts 1965 and 1967. The measures will reduce the legislative burden on co-operatives registered under the 1965 Act, enabling them to make meaningful administrative savings. For example, the audit thresholds for non-deposit-taking societies will be raised in line with those for companies, easing the burden on societies with an annual turnover of less than £350,000.

The consultation period has been useful and constructive, and we will do what we can to accommodate the views of those who responded. We will announce our revised proposals when we bring a draft deregulation order before the House, which we intend to do shortly.

I know also that the comments of the UKCC and a number of organisations have been extremely helpful in formulating other proposals. Among the other proposals which have been suggested or supported by the co-operative movement is a proposal to reduce from seven to three the number of members needed to set up an industrial and provident society. We very much hope that that will be of assistance to the movement.

The noble Lord, Lord Rea, asked me about the scope for shared-profit community care schemes in a co-operative structure. One of the strengths of the Industrial and Provident Societies Act is its ability to encompass a wide variety of different types of organisations, as we have heard in all the speeches this evening. I do not wish to commit myself too far without checking, but I can see no reason why a number of people should not come together to do what the noble Lord suggests.

Secondly, he asked me whether such a body would be in a position to take payments under the Community Care (Direct Payments) Bill. The best person to ask may be my noble friend Lady Cumberlege during the next stage of the Bill. But I shall try to find out and write to the noble Lord with the answer to that question.

I believe that it was the noble Lord, Lord Gallacher, who urged encouragement of credit unions in order to facilitate their growth. Measures for the encouragement of the growth of the credit union movement are included in the draft Deregulation (Credit Unions) Order, which is another deregulation initiative. That was laid before the Parliamentary Deregulation Committee in July of last year and the committee reported on it in December last. That measure is expected to make further progress through the various deregulation procedures in the near future.

I enjoyed many of the speeches. For a few moments, when the noble Baroness, Lady Nicol, mentioned Boston, I thought that she was going to claim that the Boston Tea Party had been a co-operative venture. But tea was not left out of the contribution of the noble Lord, Lord Taylor of Gryfe.

Lord Graham of Edmonton

He was stirring it!

Lord Mackay of Ardbrecknish

My Lords, the noble Lord must not accuse the noble Lord, Lord Taylor of Gryfe, of stirring. I would never accuse him of that. But I know that in addition to an illustrious career in both the public and private forestry sectors, the noble Lord, Lord Taylor, had his roots in the co-operative movement. I listened with great interest to what he had to say.

I intended to resist the temptation to join in some of the slightly more controversial points put by noble Lords opposite. However, those noble Lords who have had occasion to hear me perhaps will know that I am not very good at resisting those temptations. Your Lordships will he familiar with the game in which one sits down and writes down those words that come into one's mind when a word is heard. I played that game with the interesting word "stakeholders". The first word I thought of was "vampires". I wrote down "dinner", because my spellcheck was not on. I then wrote down "betting", "horses" and "lottery". I also wrote down "fencing". We do quite a lot of that both in this House and in the other place. I believe that in today's papers Mr. John Monks let the cat out of the bag when he said that one of the major stakeholders would be the TUC. That took me back—as the noble Lord, Lord Monkswell, had already taken me back—to 1978 and 1979 when we saw that particular stakeholder co-operate so successfully with the last Labour Government.

Baroness Dean of Thornton-le-Fylde

My Lords, I also heard that interview. My recollection is that the General Secretary did not claim that the TUC was a stakeholder but that individual employees of companies, who might also be trade union members, were stakeholders.

Lord Mackay of Ardbrecknish

My Lords, I did not hear the interview. I believe that I read a press report of it. The noble Baroness makes a fine distinction. I suspect that the TUC jolly well do believe that they are stakeholders. Of course, the real stakeholders are the people of this country. When I look back to the 1978 Parliament and the huge opposition of the party opposite to giving the people of this country the right to buy their own homes, and therefore to be stakeholders in a property-owning democracy, I wonder whether we do not have a Johnny-come-lately in this matter. I also have in mind the privatisations that the party opposite have opposed in every case. They always said at the time that they would be reversed, but now they will not reverse any of them, as I understand it. That extended shareholding to vast numbers of people, both directly and indirectly, through the major stakes which many people had in shares.

Baroness Seear

My Lords, would not "Tony come tardily" be better?

Lord Mackay of Ardbrecknish

My Lords, I am delighted that the noble Baroness has intervened to help me. The expression "Tony come tardily" will do very well indeed. If the noble Baroness had heard her noble friend Lord Rochester, he claimed that the whole idea was a Liberal idea which went back to the 1920s. I suspect that the parentage of this idea will be claimed by almost everybody by the time we are finished. Essentially, I believe it to be a neat buzz word.

Having not resisted the temptation to have a little knock about, I should like to conclude by thanking the noble Lord, Lord Carter, and other noble Lords for their interesting and valuable contributions to the debate. The co-operative sector in the United Kingdom is varied and thriving. Co-operative arrangements continue to appeal to all kinds of people with many different objectives. They provide a way of organising business for mutual benefit. The Government are committed to preserving and promoting an environment in which co-operatives can flourish and prosper. Through deregulation and all our other work, informed by the contributions of the UKCC and debates such as this, we aim to ensure that this friendly environment remains one that is fully alive to changing trends in our society and economy in which co-operatives and all United Kingdom businesses have to operate.

8.24 p.m.

Lord Carter

My Lords, I am extremely grateful to everybody who has spoken in the debate. We have had some excellent speeches, but none better than the maiden speech of my noble friend Lord Sewel. We all look forward to hearing from him on many occasions in the future.

I will not attempt to summarise the many strands of thought that have characterised a very good debate. I am a little disappointed that the Benches opposite have not provided a single speaker for the debate, other than the Minister, which is perhaps indicative of a failure to understand the importance of the co-operative movement. I am grateful to the Minister for his reply to the debate and his kind reference to my birthday, although I have reached the age where repeated references to the event are unnecessary. He had to have a go on stakeholders. I am delighted that the Tory Party is now debating our agenda. I believe that the matter can be summarised in a few words. The party opposite see it only in terms of the ownership of property, whereas we see it in terms of the community.

This is not the place to deal in detail with the Government's response to proposals for a co-operatives Act, but the Minister is correct that discussions are planned with the Registry of Friendly Societies, who have been extremely helpful in the matter. I repeat my thanks to all who have spoken in the debate, and beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.