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Under current law, the FSA has certain powers to investigate industrial and provident societies, but such powers are limited, particularly in respect of those societies that are not regulated by the FSA as providing
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financial or insurance services. In contrast with that, the Secretary of State for Business, Enterprise and Regulatory Reform has more extensive powers to investigate companies. Clause 4 will enable the Treasury to give the FSA powers of investigation in respect of industrial and provident societies equivalent to the powers that the Secretary of State has in respect of companies. That will increase the FSA’s ability to check the proper running of those societies and their corporate governance.

Clause 4 will also give the Treasury the power to apply to industrial and provident societies certain company law provisions concerning names. The FSA, as registrar of industrial and provident societies, already has certain powers in respect of names of societies. For example, it may refuse to register a society under a name that it considers undesirable. However, the Secretary of State has more extensive powers in respect of the names of companies than the FSA has for societies. For example, the Secretary of State has powers to direct a company to change its name if that name is similar to another name on the register or if a company provides misleading information in order to register by a particular name. By enabling the Treasury to give similar powers to the FSA, clause 4 will improve the FSA’s ability to regulate the names of industrial and provident societies. Great care has been taken to ensure that the proposed modifications are appropriate to industrial and provident societies, and that they do not create extra burdens.

Finally, clause 5 enables provisions corresponding to building society law to be made for credit unions. The power will allow any provisions of building societies legislation that is deemed appropriate to be mirrored for credit unions. There has been a significant expansion in credit union membership in recent years, and the best way of allowing credit union law to keep pace with credit unions’ expanding membership and operations is to be able to bring it into line with building society law, which is tailored to deal with issues specific to institutions that accept deposits. Clauses 6, 7 and 8 deal with technical issues such as the making of consequential amendments and regulations under the Bill, the short title, commencement and territorial extent.

Why is the Bill important? It not only offers an opportunity to make much needed reforms to the legislation on co-operatives and credit unions, but modernises the framework and enhances the corporate governance standards for such societies. Renaming and rebranding them will make the legislation easier to, relate to, and will provide greater appeal to a new, younger generation of members. The Bill comes at a time when the work of credit unions has never been more important, and when ever more consumers are attracted to the ethos and ethics of co-operation and the quality of the product and services offered by such societies.

10.6 am

Meg Munn (Sheffield, Heeley) (Lab/Co-op): I welcome the Bill introduced by my right hon. Friend the Member for Croydon, North (Malcolm Wicks). I, too, think that the ideas and practice of co-operation and mutuality have enjoyed a renaissance in recent years. As he has said, they have an even greater significance during this difficult economic period. I supported a number of the private Members’ Bills, to which he has referred, to modernise the law with regard to co-operatives and social enterprises, and I am pleased to do so again in
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this case. It is always good to meet fellow co-operators on a Friday morning to update and improve our legislation in this area.

In my contribution, which will be a little briefer than that of my right hon. Friend, I want to illustrate how the co-operative movement of today is important, as he did. It is important not just as an idea of history, including our personal history—how many of us remember our parents’ divi number?—but because the ideals of co-operation and mutuality are relevant today and for the future. The Bill will help greatly in that regard. Although it may appear quite technical, my right hon. Friend has explained extremely well how its provisions will make a real difference.

Co-operatives are based on the values of self-help, self-responsibility, democracy and equality. In the tradition of the movement’s founders, co-operative members believe in the ethical values of honesty, openness, and caring for others. Co-operatives invariably have strong and special relationships with the communities to which their members belong, and they strive to be socially responsible in their activities. Many co-operatives show this responsibility by making significant human and financial contributions to those communities, both at home and abroad. A good example is the Co-operative bank. In 1992 it became the first UK high street bank to launch a customer-led ethical policy—a policy that sets out where it will and will not invest members’ money. It has carved out a niche as the ethical banker.

Co-operatives, contrary to the image sometimes presented, can also be a moving force in innovation, as the Co-operative bank showed by being the first to offer telephone and internet banking. It is also at the forefront of tackling climate change—almost all the electricity used by the Co-operative bank is sourced from renewable wind and water. It is good to report that in recent times, there has been an increase in people wanting to move to the Co-operative bank because of its ethical nature.

David Lepper (Brighton, Pavilion) (Lab/Co-op): Does my hon. Friend agree that the co-operative movement generally, and the Co-operative bank in particular, was a decisive factor in the lobbying among the public that led to the Climate Change Act 2008?

Meg Munn: My hon. Friend makes an extremely important point. The reason why the co-operative movement and organisations such as the Co-operative bank are so strong in helping to achieve such outcomes is that they do not just talk about the issues, but put what they say into practice. So my hon. Friend is right to identify the importance of this aspect of the co-operative movement.

Another feature with which we are now all familiar, but which was not always the case, is that the co-operative movement is a leading champion of fair trade. It was the first major retailer to sell Fairtrade products in its stores back in 1994, and it was the first UK supermarket to launch its own brand of fair trade products in 2000. As a co-operator, I am pleased that the co-operative retail movement is still the leading British retailer for Fairtrade products.

I know how co-operatives go out of their way to promote equality. Succeeding within a co-operative business is a win-win situation—it is great for the individual, for the business and for society as a whole. There is no
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doubt in my mind about what co-operatives offer to communities. Having seen people in my constituency setting up their own social enterprises, it is clear to me that the co-operative model gives them more than they would get from just setting up a company.

There is no doubt in my mind that the co-operative business model offers a great deal to women. To exploit the potential of co-operative and mutual enterprises, women need access to information on the various business models available. Organisations such as Co-operatives UK have unique expertise in this field. As well as being part of the co-operative world and wanting to see it grow and succeed, they know the issues that have held women back from starting and growing businesses. During my time in what was then the Department of Trade and Industry, alongside my right hon. Friend the Member for Croydon, North, I recall that Co-operatives UK did a great deal of work promoting women in business, particularly through that model, and I was proud to have worked on that.

My right hon. Friend mentioned a large retail society, the Co-operative Group, but there are, of course, retail societies around the country that may be somewhat bigger than when they started out but that are regional in nature. I have great admiration for the Lincolnshire Co-operative Society, and I recall some years ago meeting a number of women employees from its range of businesses. The society was one of the top 50 places where women want to work in this country. At that meeting were women from pharmacy, accountancy and bakery, and a funeral service manager. They told me how working in a co-operative helped them with their work-life balance, and how they were encouraged to build on their work experiences for the mutual benefit of themselves and the co-operative.

Working for the benefit of those around you forms part of the ethos of that other co-operative institution about which my right hon. Friend spoke, the credit union. I am pleased to tell him that I, too, am a member of a credit union and have so far managed to stay on the saving side. Credit unions are not-for-profit organisations, set up for the benefit of their members. The regular process of saving every month or every week, as is the practice in some credit unions, means that members receive loans related to what they can afford, which promotes good practice.

My right hon. Friend rightly mentioned the low rates of interest, and the help and support that enables people who would otherwise struggle to get loans to manage their financial affairs sensibly. Credit unions are essential local institutions, and although they have not received as much attention as I would like on the financial pages, they are as relevant today as they have ever been.

We need our co-operative and mutual sectors to compete more effectively in the future than they have done up to now. They will be able to fulfil their valuable social role, protect their members’ asset and provide socially responsible growth. The principal purpose of the Bill helps them to do that by ending all artificial legislative obstacles, thereby levelling the playing field. It has tremendous significance for the mutual sector and the wider economy.

I pay tribute to my right hon. Friend for his work and to the co-operative movement, particularly the Co-operative party, for its help. Putting co-operatives on an equal
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footing with proprietary companies in a number of respects must be an essential step, moving us forward in the 21st century. I am pleased to support the Bill, and I thank my right hon. Friend the Member for Croydon, North for bringing it to the House.

10.14 am

Linda Gilroy (Plymouth, Sutton) (Lab/Co-op): I, too, congratulate my right hon. Friend the Member for Croydon, North (Malcolm Wicks) on bringing the Bill before the House. I look forward to supporting him as it goes forward, I hope, to its future stages. Like many hon. Members present, I have an association with previous legislation, and this is almost the last piece in the jigsaw. It is needed to ensure that co-operatives, community benefit societies and credit unions can go from strength to strength to play their role in our economy at a time when that is needed more than ever.

It is more than 20 years since someone asked me to join the Co-operative party. As I was working in the consumer movement at the time, I was particularly attracted by the way in which it put consumers and their interests first. Having joined the Co-op party, I learned so much more about the history, traditions, values and principles of the movement. Co-operatives are based on the values of self-help, responsibility, democracy, equality, equity and solidarity. As they are so much more than a set of values, history, traditions and principles, the role of co-ops and community benefit societies in the 21st century is set to become increasingly important.

In Plymouth we are blessed with many such organisations. For 149 years we have had the Plymouth Co-operative Society, as it was originally called, which is now the Plymouth & South West Co-operative Society. It is currently in discussions to become part of the Co-operative Group. The Wolseley Community Economic Development Trust is probably the largest of its type in the whole of western Europe. The Millfields Community Economic Development Trust is also a major player in our local economy. We are hoping that a successor body to our new deal organisation, the Devonport Regeneration Company, will be able to develop its own community land trust, which is similar to the type of organisations that we are discussing today.

I am pleased to see my right hon. Friend the Member for Cardiff, South and Penarth (Alun Michael) in his place. When he visited Plymouth back in 2007, he saw for himself that we have a critical mass of such organisations in our city.

Alun Michael: I am grateful to my hon. Friend for giving way and for referring to that visit, which was undertaken with officials from the Treasury, who were looking at the potential benefit of co-operative models and governance to the wider public service and the wider economy. She has rightly mentioned the critical mass. Does she hope that the Bill will help the building in other parts of the country of similar critical mass to that enjoyed in Plymouth, and would she encourage members of the Treasury team dealing with the Bill to look at the wider lessons that came out of that valuable visit?


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Linda Gilroy: I very much agree that that needs to be done, for reasons that I shall go on to describe more fully.

On that day we also visited Playtots, one of several nurseries in the city that run along co-operative lines, and the Hope Credit Union, of which I became member No. 100 a few years ago, and which has gained several hundred more members since then. We also visited the Tamar View community centre in the neighbouring constituency of my hon. Friend the Member for Plymouth, Devonport (Alison Seabeck).

My right hon. Friend the Member for Croydon, North discussed the renaissance in the ideals and values of co-operative organisations, and in an intervention my right hon. Friend the Member for Cardiff, South and Penarth remarked on how appropriate they are to the internet age. My right hon. Friend the Member for Croydon, North comprehensively set out how and why that is happening, and I would like to add a few further thoughts. Their ethos, principles and structure tend to circulate money, which, after all, is only the means of exchange within the local and regional community, which, in contrast to globalisation, promotes a virtuous circle of economic activity. We have seen many benefits from globalisation, but we have failed to reinvent some important checks and balances, and co-operative and mutual organisations will allow us to do that in future. Hence the great importance of this Bill.

The activity of plcs is so much more unpredictable and volatile than that of co-operatives. As I often say to my many friends who are concerned about the matter, plcs fund a large part of our insurance and pension industries, so in themselves they are a good thing, but they are less predictable and more volatile than co-operatives, whereas co-operatives allow us to anchor more activity in a local and regional community. Co-operatives work with the grain of what is good about markets. Markets often fail, and worker co-operatives are often used to conduct phoenix rescues of such businesses, which people in my community are particularly well known for implementing. Co-operatives also work to restrain some of the volatility in the open and free markets.

Co-ops, community benefit societies and credit unions can fail and falter themselves, and the Bill contains some important provisions on registration and disqualification of directors in the case of serious mismanagement, which it is important to have on the statute book. Co-operative and community benefit societies have a couple of other important roles that are beneficial to our macro-economy—they may become increasingly important—and to the hard-pressed circumstances that Government funding will find in the future decade and decades, including in our important local government and public services. I wish that I had a pound for every time that someone said to me during my working life, “Linda, I have been running this voluntary service and now the grant has gone. Please don’t let them take my grant away.” I also wish that I had a pound for every time that someone said to me, “Linda, I have such a good idea. If only somebody would give me some money for it, but I’m told that there is just not enough money to go round.” I also wish that I had a pound for every time since I started work 35 years ago with the voluntary organisation Age Concern Scotland that it said, “If only our core funding could be guaranteed.”


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Effectively, at the moment, there is a cap on social enterprise, but there are many examples of how co-ops and social enterprises have developed trading activities that can release them from that straitjacket. Elected Members here in Parliament and local government should become much more conscious of how we can empower voluntary and community organisations to develop the tools to earn their own core funding, and we should concentrate on providing those tools and making it conditional when a grant is awarded for three, five or even 10 years in some cases, that they should be able to earn by whatever means—it might not even be their core activity; it might be by some trading function—the money that will allow them to become independent and allow those who are elected to fund other organisations. I welcome the Bill and the work of my right hon. Friend the Member for Cardiff, South and Penarth, a copy of whose report I have here, which demonstrates how, in a thoughtful way, we could tackle the tax trap that puts that cap on social enterprise.

By sheer coincidence, late last night someone sent me a think piece on the role of universities in unlocking social enterprise and creating a sustainable and future-facing knowledge city. It is a perspective from Plymouth university, which I want to quote because it has opened my eyes to the extent to which that critical mass operates within my community and the potential that it has elsewhere:

not all of them, of course, are co-op and mutual or community benefit societies, but many of them are—

I hope that as my university goes forward as the enterprise university, it will have a strong social enterprise dimension, including community benefit and the co-operative organisations with which the Bill deals today.

I hope that the Bill will not only achieve that but give a new lease of life to some important traditional values at a time when people are looking for something on which to base their future—as my right hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) said when he was Deputy Prime Minister, traditional values in a modern setting.

10.29 am

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