Because responsiblity for co-operatives is scattered across government departments, our members are not on a level playing field with other businesses. We think the single most effective way to address this is to transfer responsiblity to the department for business. It's an ambitous but important move. As a co-operative and member of Co-operatives UK, do you agree? Tell us here.
What is at stake?
There’s long been a Whitehall department dedicated to maintaining the UK’s business environment. Since 2010 we have seen a significant focus on updating company law, cutting red tape, promoting entrepreneurship and helping businesses grow, and this Conservative government has made big manifesto commitments to back business. Co-operatives are businesses. Distinctive yes, but with as much right to decent service from government as any other. So, on recent experience, are you being served?
Despite important action in recent years, with the Coalition delivering key co-op law reforms, we believe that on balance the answer is ‘no’. Right now when it comes to national policy for business, co-ops aren’t competing on a level playing field:
- Most co-operatives face increasingly burdensome account reporting and audit requirements, especially when compared with other businesses
- Government’s impressive deregulation agenda stops short of providing for most co-operatives
- New Business Impact Targets are designed for conventional companies and community and voluntary organisations, but take no account of mutuals
- Co-operatives are marginalised in employee ownership policy
- Some government schemes to support business exclude co-operatives altogether
- Official data on co-operatives is harder and more expensive to access for industry and the public
- Members risking their capital directly in a co-op stand to receive five times less support from HMRC than they would if investing in a PLC
What is the cause?
A number of factors combine here. Co-ops and mutuals present additional challenges for government as their unique features do not always fit neatly into standard policy frameworks and are often poorly understood or worse ignored by policymakers and officials. To make things worse, responsibility for their legislative and regulatory frameworks is fragmented across Whitehall.
In theory the new Department for Business Energy and Industrial Strategy (BEIS) is responsible for creating an appropriate environment for all businesses, but in practice it has no part in legislating or policymaking for most co-ops. This role belongs to HM Treasury, and while its officals are a great help when they can be, the department is often too busy with financial services and fiscal policy to pay much attention to co-ops. The knock-on of this odd arrangement is that the UK financial regulator acts a registrar for most co-ops. And while the mutuals team in the Financial Conduct Authority (FCA) performs its role diligently an organisational focus on entrepreneurship, cutting red tape, and sector growth is all but impossible.
This fragmentation of responsibility hampers government’s ability to provide a level playingfield for co-ops. This state of affairs has grown out of historical happenstance, not logical design.
What is the solution?
One department in government should be given adequate responsibility and resource to champion the cause of all business forms.
If responsibility were to move to BEIS, societies will be served by officials with a specific business development remit, rather than by officials in HMT responsible for financial services. We believe that once BEIS has practical responsibility for the society legal form it will be easier for this to be maintained alongside the company legal form as matter or course. It will also become less likely for societies to be unwittingly or unnecessarily excluded from deregulation agendas and schemes to support business.
Moving the registrar function to a better-resourced Social Economy Registrar with a specific and clear remit to help people set up and run co-ops and social enterprise, while also guarding against misuse, would have significant positive impacts for the usability of the society legal forms.
“Moving responsibility for co-ops from HM treasury to BEIS, to my mind, makes perfect sense. The treasury remit is so wide that co-operative policy is unlikely to ever be a high priority. This BEIS department have the specific responsibility to create an environment that is suitable for all businesses, which I believe would best ensure that co-ops are able to benefit from all schemes that benefit business, and are designed to help them grow... There is a very strong case to move the policy function of co-operatives from HM treasury to BEIS.” Adrian Bailey MP, Chair of BIS Select Committee, 2010 to 2015
HM Treasury officials agree - at least in theory. Yet we have been told that moving the legislative function to give co-ops a better service is not a priority, and won’t happen without ministerial support. We cannot even dream of getting that without a demonstration from our members that they are unhappy with this fragmented service and back measures aimed at putting it right.
So the first step in building a political case for moving the resposibility to BEIS is to put the question to you, our members. Are you being served by government? Would a single department repsonsible for co-operatives help create a more level palying field for your busiiness, and thousands of others like yours? We think so.
If your co-op agrees that government should move responsibility for co-operatives from HM Treasury to BEIS and give it adequate resource, then take action by registering you support here.