How Sir Mark Hendrick’s bill will help unleash co-operatives

Rachel Reeves give a speech at the Co-op Party conference in Leeds last weekend. The Shadow Chancellor spoke highly of the positive impact that co-operatives have on communities and economies throughout the UK and pledged the next Labour government to doubling the size of the co-operative sector. This is a highly welcome commitment and paves the way for a new generation of co-operatives and mutuals. The first step in achieving this would be successfully passing Sir Mark Hendrick’s new co-operatives, mutuals and friendly societies bill into law.

The bill aims to strengthen and protect the co-operative and mutual sector – laying the ground work for doubling the size of the sector. The co-operative sector encompasses a wide range of organisations, from major retailers such as the Co-op Group to building societies like Nationwide. In 2021, there were over 7,200 co-operatives in the UK, employing a quarter of a million people and generating a turnover of £39.7bn.

Co-operatives and mutuals are businesses owned by their members, which can include consumers, workers and more. Mutuals are primarily found in the financial sector, such as credit unions, building societies and co-operative banks, which provide accessible services to people who are often shut out by financial institutions.

Democracy is at the heart of co-operative businesses, and they have been shown to be more productive and long-lasting than other business ownership models. Increasing the number of co-operatives and mutuals will be at the heart of developing a more equal economy and will be central to achieving meaningful levelling up across the UK. While the co-operative sector is growing across the economy, more can be done to boost growth, and this is where Mark’s bill will be essential to further development.

The co-operatives, mutuals and friendly societies bill aims to achieve four key legislation changes:

1. The first is the ability to issue a new perpetual share that is transferable but not withdrawable – to help co-operatives raise greater funding to help growth, investment and innovation in the co-operative’s business without compromising the co-operative’s democratic structure;
2. The second is a tax change to reduce the taxation burden on mutuals when issuing mutual deferred shares that enable further investment and growth in the organisation;
3. The third will be safeguarding mutuals for the future by creating a new protection against takeovers in the form of a lock on the distribution on legacy assets, which are built up over generations by members of the mutual; and
4. The final legislative change will be an update to friendly societies law – which would remove the restrictions on friendly societies put in place by the Friendly Societies Act 1992. This outdated law puts friendly societies at a disadvantage versus competitors from other business models – which led to the attempted demutualisation of Liverpool Victoria (LV=) by venture capitalists in 2021.

Collectively, this package of reforms would provide the co-operative and mutual sector with new tools for growth – making them more competitive, modernised and able to grow, whilst maintaining their core democratic structure.

By supporting this bill, we can strengthen and promote the co-operative movement for a new generation. Unlocking the benefits of mutuals and friendly societies will help deliver financial services that are inclusive and accessible at a time of a cost-of-living crisis that is pushing people to the brink financially. Facilitating a new generation of co-operatives through this important legislation will help us establish the building blocks for a fairer, more prosperous economy.