Co-ops in England face a “pretty challenging“ funding environment for local development after yesterday’s budget, says Co-operatives UK, although the situation is different for the devolved nations.
Chancellor Rishi Sunak’s budget included a Levelling Up Fund investing £1.7bn invested in local areas across the UK; a 50% business rates discount for the retail, hospitality, and leisure sectors in England in 2022-23, up to a maximum of £110,000; and a 6.6% increase in the minimum wage to £9.50 an hour.
But critics say his plans fall short of what is needed to rebuild the economy after the Covid-19 crisis and to tackle the climate crisis.
James Wright, policy officer at Co-operatives UK, wrote in a blog on the apex’s website, that the nearly £30bn allocated over four years to tackle the climate emergency is “arguably, rather modest”.
He added: “They expect private investment and consumer choice to do almost all the heavy lifting in implementing their new Net Zero Strategy. As we keep telling them, co-operatives are a proven vehicle for channeling private wealth into climate action and driving behavioural and societal change, especially at the community level.
“On the role of business in net zero, our research suggests that co-ops – and small businesses generally – could do more, faster, to cut their emissions if they had more help to do so. So the announcement of a new rates relief for businesses that make green investments in their premises (heat pumps or insulation for example) is very positive. We encourage rates-paying co-ops to take advantage of this.”
Mr Wright added that businesses will need more help, especially when it comes to accessing expert scientific advice. “Our hope is that the Shared Prosperity Fund, the long awaited replacement to EU development funds, will also include some support for businesses to decarbonise.”
There is some good news for co-op development under the devolved national administrations, which will see a 2.4% funding increase over the next few years. “There should be additional scope to fund policy ambitions to support co-ops,” said Mr Wright. “Following the SNP-Green agreement, Scottish government now has an explicit policy of increasing the representation of co-ops in the Scottish economy. This will require more funding to provide tailored support to existing co-ops and to co-operative entrepreneurs. The money should now be there to do this.”
But he said there is “scant new information” on the upcoming Shared Prosperity Fund, “which will be much smaller than the EU development funds it’s replacing in the first two years”.
This will grow to £1.5bn in 2024-25 – roughly the level of EU development funds per year in the last decade – but much of this has been earmarked for a new national numeracy programme.
“While this could be a great initiative, it means an already-shrunken Shared Prosperity Fund will have even less for local economic development, business support and net zero,” warned Mr Wright. “EU development funds have been important for supporting co-op development in some parts of the UK. A smaller Shared Prosperity Fund is probably bad news for combined authorities and local enterprise partnerships, whose funding and future role remains very unclear.
“We’re working with some combined authorities who’d love to have more resource to allocate to co-op development, so this is a worry.”
Mr Wright said he hoped the continued provision of ‘gainshare’ investment funding for combined authorities could provide resources for progressive initiatives, as demonstrated by South Yorkshire Combined Authority.
“The real term increases in local government funding in England could create scope for progressive councils to support co-ops, particularly in specific areas like social care,” he added.
Mr Wright said many Co-operatives UK members would find the review of business rates disappointing, with “no long-term measures to level the playing field between online and bricks and mortar retail”, although consultation on a possible online sales tax might offer hope for physical businesses suffering from the challenge of online rivals.
“There are no plans to improve a rates relief system that too often fails to value and support businesses with social purpose,” he added, although there will be measures to make the valuation process fairer.
“Things look better in the short-term, with a new temporary 50% business rates relief for retail, hospitality and leisure properties, up to a £110,000 per business cap,” he wrote. “We’ll make sure there are no devils in the detail for co-ops.”
Turning to the new Help to Grow Digital scheme, coming online in December Mr Wright said: “Frustratingly, government refuses to tell us whether co-operative and community benefit societies will be eligible, but still asks us to promote the scheme to our members anyway.”
He added that co-ops and mutuals aren’t catered for by the equity investment schemes that make up the £1.6bn for the British Business Bank’s regional fund for SMEs. “This needs to change and will be a lobbying priority for Co-operatives UK in our next three-year strategy,” he wrote.
The Co-op Party condemned the budget as a missed opportunity which failed to level the playing field between online retailers and the high street “by scrapping business rates for a fairer, more equal system of taxation”.
“Yet again,” it said, “the government has opted to tinker around the edges, ignoring pleas from the high street shops and businesses we all rely on and love and shying away from the bold decisions needed to genuinely level up our economy. Their half-hearted tweaks to business rates will fail to unlock our high streets – because it does not give them the financial backing they deserve to be able to compete with their multinational online competitors.
“We could have been celebrating an end to the unfair business rates system, and looking forward to something fairer which gives local businesses, rather than the online giants, the support they so desperately need to get back on their feet after one of the toughest 18 months in and out of lockdown.”
Community Energy England said: “The budget certainly doesn’t demonstrate world leadership on net zero ahead of COP26 and there was no real support for community energy or other community or social businesses. There is a huge unaddressed emissions gap from not involving people that demonstrates a severe lack of ambition and understanding about the challenges ahead.”
It added: “Climate change was not mentioned in the Chancellor’s speech which made much of fiscal responsibility. Many spending pledges (mostly to large-scale centralised projects) were made in the Net Zero Strategy … These have already been agreed with the Treasury, such as funding for new nuclear power, and are not re-stated in the budget. The government had promised to set out plans for community energy in the Net Zero Strategy but it contained neither a plan nor the practical support measures which the Environmental Audit Committee had recommended.”
CEE warned that increases to the Department for Business, Energy & Industrial Strategy budget will not be enough to achieve net zero, but added that it is working on CEE is working on an index of potential sources of funding for community energy projects to promote retrofitting and energy efficiency.
It noted tax reliefs on R&D work and extra funds for innovation and skills, but said small energy companies should have been given similar corporation tax measures to those granted to small challenger banks.
“There was no mention of insulating Britain,” it added. “The Climate Change Committee estimates that we need at least £10bn over this parliament. The £9.2bn pledged for building energy retrofit in the Conservative manifesto has still not been fully allocated. There was no move to reduce or remove VAT on Energy Saving Measures, including solar panels and batteries, despite widespread campaigning.”
CEE also criticised the announcement of a £21bn spend on roads, the lack of an increase in fuel tax, and the halving of air passenger duty “incentivising short haul flights over rail”.
“Overall there seems to be little for community energy or other community or social business in the budget,” it said. “We will have to hunt among the funds and initiatives above to see how the sector can extract benefit.
“Further detail of departmental budgets will follow over the next few months and so there is the possibility that support for community energy will be identified. The minimum we will be hoping for is an expanded Rural Community Energy Fund that includes urban, heat, retrofit and energy efficiency projects and supports capacity building within the sector.”
Peter Holbrook, CEO of Social Enterprise UK, said: “The chancellor has spent a lot of money today. Worryingly, we have not seen a credible plan to change the British economy so that we can deliver the transition to net zero and level up communities.
“We need to move on from business as usual to grow new forms of business that patiently invest in people, places and the planet. The power of better forms of business, such as social enterprise, hold the key to our future. Politicians need to rapidly educate themselves on the potential of social enterprise.”
He said Social Enterprise UK will keep continue to call for reform. “Today’s budget was a missed opportunity in the wake of Covid-19 to build back better. We cannot put off fixing our broken economic model any longer.”
Tony Armstrong, chief executive of Locality, welcomed announcements on universal credit, early years support, youth centres and local government funding as “a vital course correction after a decade of disinvestment” but warned that on economic development, Mr Sunak had “reinforced a business-as-usual approach”.
“Treasury control over the Levelling Up Fund may have enabled some good party political lines in the Commons, but it highlighted a centralising tendency that’s the wrong way to maximise local potential,’ he said. “What’s more, the focus in the main on big ticket infrastructure projects fails to give enough priority to investment in the underlying social infrastructure which is required to make investment stick for the long-term.”
He shared James Wright’s concern over lack of detail in the Shared Prosperity Fund, adding that “it is vital that it breaks free from Treasury orthodoxy to enable local communities to invest in their own priorities for the local economy”.
Mr Armstrong welcomed the first 21 projects announced under the Community Ownership Fund – “a brilliant opportunity to save local spaces and empower local communities” – but said tight eligibility criteria had excluded many community organisations. “It’s vital that future rounds are more flexible and more developmental in order to support more of the transformative community ownership projects we know are out there, ready to go across the country.”
Community empowerment will also be crucial to the levelling up agenda, added Mr Armstrong. “Community power can be the thread that knits the levelling up agenda together and connects it to people’s lives. Shifts in the patterns of economic development spending need to be accompanied by lasting shifts in power.
“With talk of new and improved devolution deals, these need to involve ‘onward devolution’, creating powerful new institutions at the neighbourhood level. Local people know best where the opportunities to drive forward their neighbourhoods are – we need to put them in charge”.