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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 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,
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
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,
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
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,
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.
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
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.
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.
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
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
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.
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.
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 be unduly delayed by the present Government, who profess sympathy for and interest in the co-operative idea.
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
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 £11 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.
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 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
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.
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
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.
Baroness Dean of Thornton-le-Fylde: My Lords, I join with other noble Lords in thanking my noble friend Lord Carter for initiating this debate. Co-operatives are 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
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.
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
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 be 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.
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
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 be 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.
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.
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
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.
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.
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
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".
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.
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.
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