John McDonnell: Co-op principles can transform the country

Shadow chancellor John McDonnell made the case for the co-operative economy at the annual conference of the Co-operative Party in Cardiff. Addressing delegates, Mr McDonnell said that an...

Shadow chancellor John McDonnell made the case for the co-operative economy at the annual conference of the Co-operative Party in Cardiff.

Addressing delegates, Mr McDonnell said that an incoming Labour government led by Jeremy Corbyn would place co-operative principles at the heart of its policies to empower communities and tackle inequality.

John McDonnell was appointed shadow chancellor in September 2015 after having managed Jeremy Corbyn’s leadership campaign. He thinks the “Leave” vote in the EU Referendum is a proof that “the status quo is no longer an option”.

In his speech at the conference, Mr McDonnell argued that the “Taking back control” campaign has spoken directly to those who felt they had been ignored or marginalised and subject to forces beyond their control, such as international businesses, Brussels politicians or Westminster policy makers. People support taxing big multinationals and value the NHS but are sceptical about the ability of governments to act in their interest, he said.

The shadow chancellor proposed an alternative to Labour’s model of winning control of state and using it to redistribute income.

“The economists talk about ‘secular stagnation’, which is the idea that the developed economies are in for a period of extended low growth. The International Monetary Fund, in its latest forecasts, has downgraded its expectations for economic growth in the developed world.

“And we know from OECD figures, analysed by the TUC, that real hourly wages have fallen 10% in this country since the crash – a worse performance than any other OECD member, except for Greece.

“We have to search for a different approach and I think that the co-op approach has so much to offer,” he said.

According to Mr McDonnell, a Labour government under Jeremy Corbyn would launch a £500bn investment programme, backed up with a National Investment Bank and a network of regional development banks.

“The evidence that co-operative enterprises and worker-owned companies can produce far better results is compelling. Twice as many co-operatives survive the crucial first five years as other businesses. And worker-owned enterprises offer a clear productivity advantage.

“So that is why after this conference season is over, we will begin a major piece of work on developing the co-operative economy,” he said.

With two thirds of Britain’s family businesses at risk of closure, the shadow chancellor suggested promoting employee ownership to solve the succession crisis.

“It’s a disgrace that zero hour contracts have risen by 20% in the last year alone. But by giving people a stake in the companies they work for and spreading the ownership of those companies, we can start to transform corporate Britain.

“That’s why I’ve argued for a “Right to Own” for employees. If a company is facing a change of ownership or closure, they should have first refusal on forming an alternative employee-owned business plan.

“Backed up by financing from the new regional development banks, who will be tasked to deliver low-cost financing to co-ops, this can be one way to resolve some of the issues now bearing down on our local economies.

“With two-thirds of Britain’s family businesses at risk of closure when their owners retire, employee ownership can help solve our brewing succession crisis,” he said.

Mr McDonnell thinks the UK’s co-operative sector remains “too small” despite continuing to grow rapidly. The main barriers he sees are lack of finance and the failure of governments to invest.

“We won’t accept the old model of low investment, we’ll place co-ops at the heart of economic policy making, where they should be,” he told delegates. The Shadow Chancellor promised to double the size of the UK’s co-operative economy, which, he said, would give a £40bn boost to the country’s whole economy.

“We’d look to introduce legislation to assist the formation of mutual guarantee societies, mobilising funds for small businesses by enabling them to club together to raise credit.

“Over 8% of lending to SMEs across Europe is made through mutual guarantee societies. We can end the starvation of funding for our small businesses here,” added Mr McDonnell.

He also talked about Labour’s energy policy. Last week Jeremy Corbyn has launched an environmental manifesto, which pledges to transform Britain’s energy sector by creating over 1,000 renewable energy co-ops. The shadow chancellor said the UK could learn from countries like Germany and Denmark, which are actively promoting co-operative ownership in energy.

“We believe that with these principles we can transform our country so that nobody and no community is left behind again,” he concluded.

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