---

31 Jan 2003 : Column 1113

House of Commons

Friday 31 January 2003

The House met at half-past Nine o'clock

PRAYERS

[Mr. Speaker in the Chair]

Orders of the Day

Co-operatives and Community Benefit Societies Bill

Order for Second Reading read.

9.34 am

Mr. Keith Simpson (Mid-Norfolk): On a point of order, Mr. Speaker. Have you been advised whether any Minister, possibly the Deputy Prime Minister, is going to come to the House at 11 o'clock and make a statement about the inability of the Government and local government to respond to the recent extreme weather conditions? Nobody can legislate for the weather conditions, but a creaking, broken-down transportation system, which is not working, has literally been brought to a halt on the roads, rail, underground and at our major airports, and it is a disgrace. Labour is not working, nor is the country. Is the Deputy Prime Minister coming to the House?

Mr. Speaker: No Minister has approached me this morning.

9.35 am

Mr. Mark Todd (South Derbyshire): I beg to move, That the Bill be now read a Second time.

Attendance in the Chamber may have been inflated by the weather conditions, but I hope that it is because of enthusiasm for the Bill. I begin by declaring the assistance that I have received from the Co-operative party and its advisers. I have chosen to promote this Bill, in part, because I served as a director of the then Cambridge and district co-operative society between 1987 and 1990. There are other Members in the Chamber who have had experience of that society. I have been a member of various societies, including those that served my constituency for many years.

Co-operatives and community benefit societies have their roots in the self-help tradition of the Victoria era. Their origin dates in part from the beginning of company law in this country and the incorporation of legal bodies, which first became possible with the establishment of joint stock companies in 1844. Incorporation allows an organisation its own legal personality. It can sue and be sued, own property, enter into contracts and enjoy the privileges of limited liability. As we all know, the company is the commonest form of incorporated body. The number of registered companies runs to many millions, more than 1 million

31 Jan 2003 : Column 1114

of which are currently trading. The company continues to be a highly effective means of attracting investment, generating rewards for entrepreneurs and for those who are prepared to take risks with their capital, and will rightly continue to play the dominant role in the development of our economy.

The advantages of the company are reflected in the registration figures for various forms of organisation. Each year, over 200,000 companies limited by shares are established; about 6,000 charities; over 5,000 companies limited by guarantee, a common charity model; but only 200 industrial and provident societies are registered in any one year. When the company was emerging, different legal forms of business ownership were emerging to meet other needs. The co-operative society emerged as a trading vehicle through which people could meet their basic requirements to buy food at a fair price. Their purpose was first established and protected in law in 1852. The preamble to the Industrial and Provident Societies Partnership Act 1852 notes:

"Associations of Working Men have been formed for the mutual Relief, Maintenance, Education and Endowment of the Members, their Husbands, Wives, Children or Kindred, and for procuring to them Food, Lodging, Clothing and other Necessaries by exercising or carrying on in common their respective Trades or Handicrafts."

Building societies emerged at the same time as a vehicle to help those who lacked the means to purchase their own home. Friendly and provident societies were also established at that time to offer mutual insurance against sickness or unemployment.

All those organisations, together with trade unions, were established on the principles of self-help and democracy—still novel in a world where hierarchy, patronage and either benevolent charity or exploitation were the means of control and service provision for working people. Since then, those principles have remained relevant and been applied by our citizens to found organisations relevant to almost every part of our economic and social life.

Co-operatives and community benefit societies are incorporated under the Industrial and Provident Societies Act 1965, which consolidated various changes since 1852. While company, building society and friendly society law has changed substantially in the past 150 years, with the exception of certain consolidating statutes and specific narrow issues, industrial and provident society law had not, until last year, changed fundamentally since 1862.

Fascinating and inspiring as the history of the co-operative and mutual sector is, it is important that we should not just simply admire the sepia images or the marvellous examples of surviving organisations. Mutualism has a robust future, relevant to the lives of all our constituents. If we reflect on the themes that inspired the brave, imaginative founders of those societies, we can see that they are just as central now—a desire for more control of our lives; recognition that membership and involvement can add quality to service; and acceptance that services for a community can be best managed by that community.

31 Jan 2003 : Column 1115

As one author considering the role of mutuals in the future has written:

"One of the most important issues facing the Government at present"—

he referred to this Government—

"concerns the appropriate mechanism for delivering public services. In the UK we have moved from transport and utilities services owned by private enterprise, through nationalisation to state-owned and controlled services; and then back again in a number of areas to privately-owned services with a state-appointed regulator. The latter has not been an overwhelming success"—

nor were some of the former experiences—

"and there are those who believe that further transition is necessary. A move to a community-based form of ownership is one possibility."

I have on another occasion in the House reflected on what seems to me to be a conundrum. As some hon. Members know, my grandfather was a Member of the House in the 1930s. At that time, few would have expected Governments to provide administrative or legislative solutions to all their problems. If my father's recollection is anything to go by, an MP's caseload was tiny, yet respect for the work that Parliament did, for Government institutions and for politics appears to have been immeasurably greater than it is now. Yet now Governments seek, at the request of citizens, to intervene more and more. The more laws we pass and the more institutions we establish to solve perceived problems, the less our efforts are regarded.

When I reflected on the subject of this Bill, I was approached, as one can imagine, by many organisations wishing to pass laws that would restrict other people's freedoms in various respects, often for sound reasons. However, I firmly wished to see a measure in my name that permitted people to do something that they are currently not able safely to do. That was my choice in the matter, and I shall expand a little further on that point.

There are many possible explanations for the conundrum that the more we do, the less we are regarded, and the more the state provides, the more suspicion in which the state is held. It is not appropriate for me to dwell on that now, but one part is touched on in the foregoing quotation, which rightly reflects the disengagement of most citizens from state-owned or controlled services. Transferring ownership and control to the community served by the service can add quality to the service itself, by improving its reflection of user needs, and strengthening the value that the community places on that service.

There are suggestions that the Government may be prepared to entertain such ideas for their reform of public services. It is partly for that reason that I am promoting the Bill, as it will, as I shall outline, remove one weakness in the current model of ownership and control of community benefit societies, a possible vehicle for public sector management reform.

The out-of-date framework for industrial and provident societies is recognised in the Government's

31 Jan 2003 : Column 1116

excellent strategy unit report, "Private Action, Public Benefit", which was issued last autumn. It remarks:

"Industrial and Provident Society legislation has not kept pace with changes to company law. A fundamental overhaul of the structure is long overdue."

Last year my hon. Friend the Member for Harrow, West (Mr. Thomas) promoted a Bill with that aim, and I pay him great credit for his efforts. The measures in this Bill were contained in the Bill last year and were the subject of considerable debate at the time. They were deferred, partly because of the need to consider further their possible impact. My hon. Friend's Bill, which became the Industrial and Provident Societies Act 2002, was the first update of industrial and provident societies legislation since 1965. In summary, it gave the same level of protection from carpetbaggers as exists for building societies, and allowed future changes to company law to be applied to industrial and provident societies by means of a statutory instrument. My hon. Friend's Bill was much needed, but there remain a number of outstanding issues, which this Bill, in part, seeks to address.

Although they are covered by the same legislation, there are some major differences between co-operatives and community benefit societies. A co-operative conducts its business in the interests of its members, who gain from it on the basis of how much they use the service or its trade, rather than purely on the basis of their investment in it. If people want to register a new co-operative society, they have to satisfy the Financial Services Authority that the proposed organisation is a bona fide co-operative. Many retail and agricultural organisations and many social clubs are designed as co-operatives.

In my constituency there are successful retail outlets owned by two societies, Midlands co-operative society and Tamworth co-operative society. They offer a range of convenience, non-food and funeral businesses from Chellaston on the edge of Derby to Swadlincote in the south. My one regret is that the range has diminished over the years, as has been common in several parts of the country. The most recent example was the closure of the store serving the village of Hilton. The village in which I live, Willington, has an excellent Co-op convenience store, which my family uses regularly.

The retail co-operative movement makes up a significant part of the UK economy. Retail co-ops alone have an annual turnover of £9.7 billion and employ 115,000 staff. They operate for the benefit of their 9.7 million members throughout the UK.

Community benefit societies are the second category of industrial and provident society. They differ from co-operatives in that they trade for the benefit of a wider community, rather than just their own members. Their name is often abbreviated to bencoms, and I shall use that term. They include the many housing associations that exist, but I should explain that housing associations have greater protection than other community benefit societies because the Housing Corporation oversees their activities. Community benefit societies also include some social clubs—I remember some entertaining exchanges last year about some of the social clubs that had been established, including Conservative clubs in some parts of the country—and the new football supporters trusts.

31 Jan 2003 : Column 1117

Many South Derbyshire people support Derby County. There is a football trust for supporters of the club, set up as a community benefit society with the aim of strengthening links with the club and adding weight to the voice of supporters. In other parts of the country, such societies have been able to share in the ownership of clubs. If we reflect on the origins of the industrial and provident society movement—a desire on the part of ordinary people to have more control over their lives and to rely less on the decisions of a wealthy few—we can see its attractions in the football world.

---