Financial Mutuals Arrangements Bill

The hon. Gentleman makes his point eloquently and passionately, and I absolutely agree with him. My own children will have fewer choices in the marketplace, thanks to that sad and unfortunate period in the history of mutuals, but I hope that the Bill will help to strengthen the role of members, and I congratulate the hon. Gentleman again on that. By the end of the 19th century there were about 30,000 registered friendly societies with around 4.5 million members. Building societies emerged from the friendly society movement, and the first was established in the late 1700s. There had previously been temporary societies, which were wound up as soon as they had provided housing for their members. The garden suburbs in London were formed through mutual housing set-ups, which people paid into and borrowed from while their houses were built, and which ceased to exist in that format thereafter. So the long history of mutuals has even had an impact on our city of London. The first building societies in a form that we recognise can be dated to 1845. Funds for building houses were supplemented by funds from people wanting to save, but not necessarily wanting a house, thereby addressing some of the problems with the earlier form of building society. This left them able to borrow money from investors to build houses more quickly, and able to create reserve funds across generations of members. We cannot mention building societies without mentioning the co-operative movement and its birth in Rochdale in December 1844, with the establishment of the Rochdale Equitable Pioneers Society, a consumer co-operative, founded by just 28 members. That is just one fewer than the number of Co-operative Members of Parliament—perhaps there is a lesson for us there. They registered their society with the registrar of friendly societies on 24 October 1844 and opened their first store just before Christmas, on 21 December, on Toad lane in Rochdale, with the objective of"““selling pure food at fair prices and with honest weights and measures””." That commitment to consumers was crucial to its success, although I gather it had some early problems that it overcame. It went on to be very successful at a time when many private shop owners were suspected of cheating their customers by adding impurities to sugar and flour and tampering with weights and consumers could not be sure that they were getting what they should. Those people in Rochdale were pioneers, because over 150 years later we are still talking about the origin of food and wanting to know what is on our plate. In a way, we have come full circle, of which the co-operative moment should be proud. From that moment, the co-operative movement took off. It was strengthened in 1863 by the establishment of the Co-operative Wholesale Society, which rapidly expanded into other activities such as banking and insurance, and diversified beyond food into other areas of retailing. Those organisations grew out of the needs of working-class families in conditions imposed by the industrial revolution, including the uneven distribution of economic resources, the exploitation of labour, the difficult living conditions in overcrowded urban areas, and the particular vulnerability of families to the loss of a single wage earner. At that time, the dependency ratio—the number of people depending on that wage earner—rose in most parts of England. It is possible to identify the origins and development of each type of enterprise in the mutual sector as responses to different types of hardship imposed in that era, but I will not go into all that history now. The key features common to each form of self-help are a harnessing of the economic resources of those in work and an adherence to a set of governance values founded on important social ideals. Again, it is membership that is key to the co-operative movement. I must commend the hon. Member for Bournemouth, West again for his proposal to give members parity with other investors. The strength of mutuals and the movement came from their functional purpose. They were a way for working-class people to gain some power over their living conditions and productive output. We see that today in local farming co-operatives in developing countries, where people want control over their lives. Exclusion and marginalisation from the political process—adult suffrage was not universal in the early stages of the co-operative movement—left people with no alternative but to work their way out of poverty through other means. The core values of that era remain. While the organisations, along with the country, have moved on a great deal from their roots in the past two centuries, they remain the same in one crucial respect: they exist to provide mutual self-help for their members, rather than to generate profit for investors. Those core values drive high standards of ethical behaviour throughout the sector. The absence of external shareholders means that there are no conflicts of interest between the claims of consumers and owners, leaving mutuals no incentive to exploit their customers for short-term gain. As others have said, that has led to greater trust among consumers for the products offered by the mutual sector. Crucially, the ethical emphasis in the co-operative moment has led to a greater emphasis on ethical practice by non-mutuals, and I pay tribute to the work of several colleagues, including the work of my hon. Friend the Member for Portsmouth, North (Sarah McCarthy-Fry), on corporate social responsibility. That desire for businesses to have wider social responsibility stems from the important values laid out by the co-operative movement. In a wider sense, the membership base also enables co-operatives and mutuals to take a broader view of the interests that they aim to serve, to pursue values that are not purely financial, and to take a long-term view of their members’ interests. It also gives them space to pursue social and ethical goals and support members’ communities. Perhaps the best, iconic example is that of the Co-operative bank in the 1990s, which, under its chief executive Terry Thomas, now Lord Thomas, pioneered ethical banking before it was flavour of the month. That approach to investment is now being taken up across the banking sector, and consumers are getting savvier about what they should be asking for. In the same way, the Co-operative bank pioneered the recognition of the importance to business of environmental concerns. It sponsors and supported the first environmental business centre, which opened in Manchester in the mid-1990s, showing that business, too, had a responsibility to the environment, and that responsibility could be met in giving economic benefits to banking, business and the community. Retail co-operatives were the first major retailers of fair trade products, which we now see on supermarket and shop shelves up and down the country. The success of the Co-op in selling fair trade products no doubt encouraged other businesses to sell them too. Fair trade product sales have risen from £32 million in 2000 to over £290 million last year. My borough of Hackney is attempting to become a fair trade borough. By doing so, it will also support co-operatives in the developing world, which is entirely appropriate given the make-up of Hackney’s population: about 13 per cent. of my constituents come from parts of Africa. Mutuality has not only fostered organisations with a strong moral purpose and ethical function but has driven other organisations to follow suit. The initiatives first taken by mutual organisations have subsequently been taken up by multiple plcs. That would not have happened in the absence of the mutual sector. Today is a small but significant moment in the history of the mutual sector. Through the Bill, we hope to put power and rights back into the hands of members, and to give mutuals a level playing field alongside other key financial institutions. I hope that the Bill gets a fair wind in Committee, and I look forward to seeing it return for its Third Reading.