The case for consolidating co-operative legislation

Following the announcement of a Co-operatives Bill by Prime Minister David Cameron, the case for consolidating co-operative legislation is examined by Helen Barber, Head of Legal Services at Co-operatives UK . . .

About co-operatives

• Co-operative enterprises are member owned businesses.
• There are 5,450 co-operative enterprises in the UK. The turnover of the co-operative sector now stands at £33 billion pa. 
• These enterprises are owned by 12.8 million members. There are therefore more member owners of co-operatives than individual shareholders investing in the stock market. 
• The United Nations has declared 2012 as the International Year of Co-operatives, “highlighting the contribution of co-operatives to socio-economic development”. 

Co-operatives and economic growth

• The sector has grown by 21% over the last three years. Co-operatives operate in all parts of the economy including retail, banking, food and farming, design and renewable energy.
• Co-operatives are emerging in new sectors, such as the creative industries, allowing freelancers and creative professionals to come together into collaborative enterprises where it helps to work together.
• The co-operative business model has a strong presence across a range of international markets. In a few countries, co-operatives may have a dominant role in the economy. In Finland, the co-operative sector is said to account for 21% of GDP, in Switzerland 16% and in Sweden 13%. In New Zealand the largest business, Fonterra, is a co-operative.

The business costs of complex and outdated legislation

• The legislation governing co-operatives and community benefit societies has not been reformed since the Industrial and Provident Societies Act (IPSA) 1965.
• Since 1965 legislation has been updated mainly using Private Members Bills and secondary legislation. There are now seventeen separate pieces of legislation governing societies which were drafted between 1965 and 2011.
• The existence of a large amount of legislation creates a number of costs and barriers for the sector including: use of obsolete and obscure language which makes promotion difficult; added complexity when setting up a society because of the need to consult many pieces of legislation; increased costs when legal or accountancy advice is needed; a lack of clear legal guidelines compared with companies and charities.
• This also discourages the setting up of societies and acts as a barrier to those wishing to develop co-operatives and community benefit societies in response to government policy, such as the Localism Act 2011.
• The legislation governing other business forms, companies and charities, has been consolidated and reformed on a number of occasions, most recently in the Companies Act 2006 and the Charities Act 2006.
• There is a strong case for a narrow consolidation with the aim of simplifying and bringing together current legislation.

The case for a consolidated act

• A narrow Co-operative and Society Consolidation Act would bring together all the legislation under one statute without reform.
• While there could be a wider consolidation with consideration of more extensive reform, this introduces complexity and appears less attractive in terms of the simple goals of reducing regulatory and legislative burdens, in line with Government policy.
• Narrow consolidation could be achieved by referral to the Law Commission and then implemented using a special parliamentary procedure, the Consolidation of Enactments (Procedure) Act 1949.

Benefits from a consolidated act

The benefits for the co-operative and society sector from consolidating legislation include:

• helping to create more societies through simplifying the set up process;
• reducing the cost and complexity for new and existing co operatives and community benefit societies;
• creating a level playing field with companies and charities;
• providing an opportunity for the sector to develop further as a key player in the economy and society.

The benefits for the government from consolidating legislation include:

• creating jobs in the private sector and delivering on its “red tape challenge” to cut down the costs and burdens on business; 
• meeting the commitment to promote mutuals in the Coalition agreement; providing an emblematic boost to the “Big Society”;
• supporting work underway through the Cabinet Office Mutuals programme; making, through a commitment to explore this a significant UK contribution to 2012 UN International Year of Co operatives.