MPs debating the role of the UK co-op and mutual sector included a discussion of last week’s rejection by LV= members of a plan to sell and demutualise the business.
Politicians from all sides had been critical of the handling of the deal, which would have sold the insurance mutual to US private equity firm Bain Capital.
During Tuesday’s Westminster Hall debate on co-ops, called by Conservative MP Steve Baker (Wycombe) at the request of sector apex Co-operatives UK, the threat to the sector of demutualisations was among the concerns raised.
Gregory Campbell (DUP, East Londonderry) said: “It has been remarkable and refreshing to see the members of the mutual society LV= use their power in the past few weeks … They wanted power to go to the membership, as opposed to going to shareholders for a fast buck.”
Mr Baker – a member of the All Party Parliamentary Group on Mutuals, which conducted an investigation into the LV= affair – said the mutual’s management had made “quite a compelling case” for the deal but added: “The point is that … it is up to the members what they do.
“In a free society, we make progress through trial and error. It might well be that that members have made a mistake in rejecting the bid, but it is their right to do so; it is their right to choose.”
Referring to the wave of building society demutualisations of the 1980s and 90s, Mr Baker said he was “a huge fan of mutuals, because I can see that they are bound to create a set of incentives that support the people whom the business serves.
“I remember in my youth being very disappointed that so much carpetbagging was going on, with people taking £500 in exchange for demutualising. I was very disappointed at the time, and even as a teenager I could see that it was not a good idea.”
But he warned: “In the case of LV=, I fear that things are not going where they should,” adding that he wanted to see ministers hold “a good quality inquiry into what is going on, and into how regulation can better support people’s desire to support the mutual spirit in the future.
“We cannot afford to be romantic and exempt co-operatives and mutuals from the realities of commercial life, or the exigencies of things such as competition law.”
Sir Mark Hendrick (Labour / Co-op, Preston), said “only time will tell” if LV= members had made the right decision, but noted that “many of the building societies that demutualised and turned into banks were extremely vulnerable in the financial crisis some 15 or 20 years ago”.
Treasury minister John Glen, responding to the debate for the government, said he had received details of reforms to the sector, proposed by Labour/Co-op MP Gareth Thomas, chair of the APPG on Mutuals. These would toughen up the rules on demutualisation and offer mutuals a more level playing field in capital markets.
Mr Glen told MPs: “We will be reflecting on that very carefully. I have received correspondence from LV= subsequent to the vote, and I will continue to update the House on that.“