Building the Co-operative Economy

In government, Labour would double the size of Britain's co-operative sector - a bold ambition that would change how the economy works, and who receives its rewards.

It seems obvious, if we were to design an economy from scratch, that everyone would get their fair share. A system driven by private profit, where decisions are made in the short-term financial interests of the few, makes no sense to anyone other than the small number of shareholders at the top. 

We know that economies characterised by a larger co-operative sector are fairer and more equitable. With wider ownership comes a narrower gap between rich and poor. We know too that an economy where people have a stake and a say is a more productive one. Growing the co-operative sector levels up, not down. 

Unlike a private business, co-operatives are owned by the workers, consumers or communities that rely on them. They’re democratic and accountable – decisions are voted on instead of being negotiated in distant boardrooms. And when they make profits, they’re reinvested or shared fairly. Workers, consumers and communities benefit instead of shareholders and fund managers. 

But despite a more co-operative economy being common sense, co-operatives too often face an uphill effort to succeed. A system dominated by private corporate interests over the centuries has ensured that a fairer way to do business is also often the hardest way to do business. Legislation means you can set up a private company in a heartbeat, without checks and balances, while starting a co-operative can involve a more complicated process. Banks are geared up to lend to those private businesses, while co-operatives often struggle to find the financial instruments they need to grow. 

This inhospitable environment for co-operation isn’t by accident – it is by design. Private shareholders and banks are threatened by co-operation. From day one, co-operatives have faced unfair treatment. The first co-operative shops often found themselves undercut by private retailers, who would also induce wholesalers not to supply them.  

So it is testament to the tenacity of co-operatives, and co-operators, that the sector is worth some £37.7 billion in the UK. But compared to our neighbours in Europe, we still lag behind. In parts of Italy, for example, co-operative enterprises generate 40% of GDP. 

This election presents an opportunity to radically change this, to shape a different kind of economy. Labour’s pledge to work with the co-operative movement to double the size of the co-operative sector will mean a democratisation of many workplaces, a step change in collective ownership and co-operative start-ups, accelerated growth of existing co-operatives, and a new settlement where everyone has a say and a stake. 

To achieve this transformation, it will be necessary to provide tailored support, improve access to finance and rewrite the laws and regulations that are holding the sector back. Labour’s manifesto promises this: a clear ambition to double the co-operative sector, with a new Co-operative Development Agency tasked with delivering this. 

We’ve been working with the wider co-operative movement to develop the action plan to double the sector, to ensure a new Labour & Co-operative Government can hit the ground running. Up and down the country, we gathered representatives from co-operatives, credit unions, building societies and local communities to listen to the changes that would make the biggest difference to their businesses, and the support that they need to grow. 

From this, we’re able to flesh out what a Co-operative Development Agency could look like in practice. We are clear it needs to provide the sector with a national voice, that can champion the needs of co-operatives in the corridors of Whitehall. A strong Co-operative Development Agency can ensure that future legislation does not inadvertently hold the sector back, as well as playing a role in developing proposals for new financial instruments and laws that could give employees a right to own their business when it’s being sold off. 

We believe too that a new Agency should be tasked with education – a key co-operative principle – ensuring the curriculum in schools inspires and educates a new generation of co-operators. This shouldn’t stop at the school gates, and the new Co-operative Development Agency should be ensuring every workplace offers co-operative education, whether it is to help employees buy their own business when it is being sold, or giving them the tools to start their own. 

But it is not enough to have one central office. Co-operativism is by definition bottom-up and the plan for co-operative development must reflect that. Meaningful change needs local resources and expertise, driven by the needs of co-operatives and communities. Support for co-operative development needs to be present in every region, and the Co-operative Development Agency must have a footprint that reflects this, drawing on the expertise and best practice of co-operators on the ground. And co-operative development does not stop at the English border. Scotland and Wales benefit from some existing co-operative development support from the Wales Co-operative Centre and Co-operative Development Scotland. These institutions need to be strengthened, with the resources they need to transform the Welsh and Scottish economies too. 

Co-operative development in each region would include encouragement for local authorities to play their part too – which must include giving councils greater powers to promote local co-operatives and to guarantee ‘community benefit’ in their contracting. And it would include educating and partnership with the professional services firms which support and advise businesses, to ensure they are equipped to help co-operatives too. 

In addition to co-operative development support, the sector needs access to the finance it needs to grow. There’s a need for new financial instruments to be created so that co-operatives can raise capital without compromising their co-operative principles. Labour’s plans for a National Investment Bank, and a network of regional banks and post banks, will also be key to boosting the sector. Responsible lending by these new institutions to co-operatives will provide another of the financial tools the sector needs to grow.

The sum of this new support and these new agencies will be greater than its parts. This is not about creating yet another government agency: it’s about building a new kind of economy. It will be a boost to those existing co-operatives, enabling them to expand, create new jobs and engage more communities, as well as a clarion call to a new generation of co-operators to play their part in building a fairer future. 

Labour’s plans for the co-operative sector do not limit themselves to tinkering around the edges of an economy that doesn’t work, tweaking a failed model for marginal gain. Plans to double the size of the co-operative sector are a deep, structural change in the way our economy functions, and how it shares its rewards.