Budget sets consultation to make it easier for members to invest in co-operatives

In today's Budget, the Government has announced plans to make it easier for members to invest in the co-operative sector and will be providing £50 million towards employee-ownership...

In today's Budget, the Government has announced plans to make it easier for members to invest in the co-operative sector and will be providing £50 million towards employee-ownership initiatives.

As part of the legislation surrounding co-operatives, a consultation in the summer will look at options to raise the limits of withdrawable share capital in industrial and provident societies (IPS). Through the same consultation process, views will also be invited on the introduction of insolvency procedures for IPSs and credit unions.

Since 1994, the amount of money any one person or organisation can invest in a co-operative as withdrawable share capital, has been limited to £20,000. The Treasury consultation will take views to see what this level can be increased to. Co-operatives UK said the current limit "can result in co-operatives being undercapitalised, over exposed to debt finance and limited in their ability to finance new investment".

Ed Mayo, Secretary General of Co-operatives UK, which has been campaigning on this reform, said: "Raising the cap on investment in co-operatives is something we have long campaigned for and we are delighted that the Chancellor has recognised the case for backing co-operative enterprises with this vital change.

"The announcement will make it easier for members of co-operatives to invest at higher levels and will support the growth and development of co-operative businesses."

Agricultural co-operatives are likely to benefit from raising the cap of share capital to allow individual farmers to make greater investments. James Graham, Chief Executive of the Scottish Agricultural Organisation Society, commented: “This change will be warmly welcomed by agricultural co-operatives, and will help them to secure more capital for investment in growth. Agricultural co-operatives deliver substantial commercial benefits to their farmer members by enabling them to access scale advantages in both farm supplies and produce marketing, and by providing a counter-balance to the power of the multinationals.”

The Government has also pledged to invest £50m each year in delivering the recommendations of the Nuttall Review, which sets out a strategy to create and sustain employee-owned businesses, including co-operatives.

Delivery of the recommendations will be carried out by the Implementation Group on Employee Ownership, which is well-populated by the Co-operative Movement with representation from Co-operatives UK, Co-operative Development Scotland and the Wales Co-operative Centre

Part of the funds will also be used to introduction a capital gains tax relief on the sale of a controlling interest in a business into an employee ownership structure. Consultation on this measure will take into account the progress of work by the Department for Business, Innovation and Skills (BIS) and the Implementation Group to develop an ‘off the shelf’ employee owned company model, with the intention that the new capital gains tax relief will be introduced in Finance Bill 2014.

• To read the full Budget document, visit the Treasury website.

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