MPs demand tax reliefs and legislative changes to grow the co-operative economy

In a debate at Westminster Hall on 14 July, MPs highlighted ways in which the government could help to promote and grow the co-operative sector even more. Stephen...

In a debate at Westminster Hall on 14 July, MPs highlighted ways in which the government could help to promote and grow the co-operative sector even more.

Stephen Doughty, Labour and Co-operative MP for Cardiff and Penarth, who secured the debate, highlighted how the co-operative economy had grown in recent years, with membership increasing by 10% to 17.5 million.

Himself a member of the Cardiff and Vale Credit Union, Mr Doughty added that that fair lending and fair access to finance could help different sectors. He also referred to the issue of tax, pointing out that Britain’s top five co-ops paid more tax than Amazon, Facebook, Apple, eBay and Starbucks combined.

Joining the debate, Steve Baker, Conservative MP for Wycombe, argued that co-operatives could play a crucial role in reforming the institutions of the market economy so that it worked better for “ordinary, working people”.

Mr Baker thinks that the 2014 Co-operative and Community Benefit Societies Act was “a disappointment” because it was only a consolidation bill. The act passed through parliament but it was not possible to “consider, debate or amend it”, he explained.

Labour and Co-operative MP for Liverpool Wavertree, Luciana Berger, talked about the economic impact of the UK’s split from the EU. “To survive Brexit, we will need new trading arrangements, access to new markets, and new firms to fill the gaps. That is where the co-op and mutual sector, with its emphasis on fair trade and trade justice, can step in,” she said.

Read more: Brexit: How will the UK leaving the EU affect co-ops?

Ms Berger added that she welcomed the pledge from the new prime minister, Theresa May, to put employee representatives on company boards – a policy advocated by the Co-operative Party. She called for support for other initiatives championed by Labour and Co-operative MPs such as having a scheme whereby all businesses with more than 50 employees are obliged to set up a profit sharing scheme with their staff, with a minimum profit share pot set aside based on a calculation of annual profits.

“The Co-operative Party is calling for all publicly listed companies to have a duty to involve their employees. We want tax incentives for employee ownership. As it stands, the government spends £615m every year on tax incentives for employee ownership, but that is poorly targeted towards individual shareholdings and the remuneration of senior executives. That could be refashioned to ensure that all employees benefit.”

Ms Berger also asked for tax incentives for community energy and encouraged the government to revisit the decision to change the regulatory environment for community renewable energy schemes and withdrawing tax incentives that encouraged community investment in those schemes.

Reflecting on the Euro 2016 championships, she said that key players had come from co-operatively owned clubs such as FC Barcelona, Real Madrid and Bayern Munich. She believes tax incentives should be used to ensure that sports clubs that meet stringent criteria for fan involvement and engagement could secure special tax status.

Scottish National Party (SNP) MP for Glasgow South West, Chris Stephens is a member of Glasgow Credit Union, which he joined while working at Glasgow City Council. He argued that promoting credit unions could save public funds in the long term.

Labour and Co-operative MP Anna Turley suggested steps the government could take to enable co-operatives to thrive. These included credit unions for freelancers, provision of micro-insurance and related services such as debt collection, tax accounting and legal advice, the scope for platform co-operatives and sources of capital for co-operative business development.

Gareth Thomas MP, Co=operative Party chair
Gareth Thomas MP, Co=operative Party chair

Co-operative Party chair Gareth Thomas also spoke in the debate. He mentioned the proposal to turn the BBC and Channel 4 into mutuals to allow those who pay the license fee to become members and have a vote on who should seat on their boards.

“I also hope that, in time, we will see the new Mayor of London seek to do the same with Transport for London, giving commuters the chance to vote on who should sit on its board alongside the Mayor,” he said.

Mr Thomas, who has been Labour and Co-operative MP for Harrow West since 1997, also highlighted that many internet retailers do not have large property footprints in particular communities and therefore pay substantially less in property tax than those who are offering a direct service on high streets in communities up and down the land.

One of the MPs that had campaigned for the creation of the Armed Services Credit Union, Mr Thomas said he hoped the government would go further than just support the military credit union. He called for the right to save so that anybody who wanted money deducted at payroll and sent to their credit union were allowed to make that request and have that implemented without question. At the moment, it is at the discretion of the employer.

Read more: Credit unions link up to offer direct services to armed forces

Mr Thomas also put forward the idea to create a “British version of the Community Reinvestment Act”. This would be a requirement of major banks to account for the services that they provide to the communities from which they take deposits. “When those major banks leave those communities and shut branches, there should be an obligation on them to continue to work there, albeit perhaps through credit unions or other community banks operating there. That legislation works extremely well in the United States and is long overdue here in the UK,” he said.

Contributing to the debate, Hannah Bardell, SNP MP for Livingston expressed concerns about details in the 2016 Finance Bill, specifically the calculation of the apprenticeship levy.

“The present wording of the Finance Bill dictates that the apprenticeship levy does not include dividends to shareholders, but does include bonus payments to employee owners. That will ​affect about 70 employee-owned businesses across the UK, based on the criteria of companies with a payroll bill of £3m and over,” she said.

In his response to the questions raised by MPs, the Minister for Civil Society, Rob Wilson, said that the government had allocated £0.5 million from the Armed Forces Covenant (Libor) fund to establish payroll deductions to allow armed forces personnel to access credit union savings and loans.

Answering the question on legislation, he said that the 2014 Act had consolidated laws to make it easier for societies to understand and apply the legislative framework and rules governing them.

“We also simplified the electronic registration process to help new societies get going, and more importantly, made it easier and cheaper for them to raise capital by increasing from £20,000 to £100,000 the withdrawable share capital an individual member may invest.”

Facilitating co-operatives is about not just the legislative and regulatory environment but a cultural shift in the economy and society, and a recognition of the role that co-operatives play

He added that the new prime minister had set out her commitment to public service mutuals and co-operatives as a means of safeguarding public services.

On the BBC and Channel 4 mutualisation, Mr Wilson said that while some support existed among a number of MPs, the PM had yet to say what she thought of the proposal.

The minister has also touched upon the issue of community shares. “The government supports such share offers through the social investment tax relief, the second anniversary of which we recently celebrated. Several community share offers have benefited from that relief, which has allowed local people to buy shares in Clevedon Pier, Portpatrick Harbour and Burley Gate Community Shop and post office,” he said.

Speaking about the government’s policy of credit unions, he said that it was running a credit union expansion project, backed by an investment of almost £40m. That will help to create a tool to automate loan decisions and help credit unions to decide which loans to make and which to refuse, thereby speeding up that process, and a shared IT system and banking platform will be developed for credit unions to use.

Mr Doughty added: “Facilitating co-operatives is about not just the legislative and regulatory environment but a cultural shift in the economy and society, and a recognition of the role that co-operatives play.”

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