Wednesday, 2 April 2014

Phone Co-op is Ringing the Changes

The annual Co-operatives West Midlands networking lunch saw co-operators from across the region come. There was much to talk about and we needed some good news.

Fortunately we got it from the key note speaker Vivian Woodell the chief executive of the Phone Co-op. What a great story as in 2013 they had declared record profits of £555,000.

"It has been a challenging year for both the co-operative movement and the telecommunications industry,” he said.  So they where delighted with their results, profits up, membership up, members investment in the business up to over £4m, and they had built reserves, to over £1 million.”
He added, “We see that consumer co-operatives, with their strong member-backing, can grow organically in a highly competitive marketplace. We are unique in our industry and this contributed to the improvement in our performance at a time when volumes and prices are falling."
Vivian himself is quite a deep thinker on the co-operative business model who as well as running an enterprising telecoms business also serves on the Boards of Midcounties Co-op and Co-operatives UK. A gifted social entrepreneur he came up with the idea of a phone co-op when he spent years working abroad being ripped off when he came to phone home.
Beginning the business in his back bedroom of his home it now has a turnover of over £10.5 million. This is amazing when you think how tough this industry is to break into. Much of the investment has come from its 10,000 members with the average having over £400 of shares.
They set aside a proportion of their surplus to invest in other co-op enterprises from their Co-operative and Social Economy Development Fund. Last year the Fund contributed £55,000 to businesses including: Drumlin Wind Energy Co-operative, Spirit of Lanarkshire Wind Energy Co-operative, Wedmore Community Power, Osney Lock Hydro Limited and the Bevendean Community Pub. 
As well 90% of business miles being made by public transport (not bad if you are based in Chipping Norton) they used energy from renewable sources, recycled 100% of its waste and offset all the carbon dioxide emissions that its activity generated, including that of its suppliers. As well as having installed 230 kilowatts at peak output of solar photovoltaic capacity since 2011.
It’s a wonder doing all this they have they have time to sell phone and broadband services but this year they have been particularly busy working with the Co-op Group to introduce the first Co-op Pay-As-You-Go SIM with very competitive rates.
It’s very easy to switch and you can keep your number and last year you got 2.5% dividend on all your telephone and broadband purchases from the co-op.  Considering their performance I do get annoyed when I see committed lefties using some very dodgy email and phone providers.
They do not like to pay to advertise in publications that they do approve so they have an affinity scheme where they offer a partnership with organisations which market or endorse their services to their supporters, members or clients. In return they pay a percentage of the call and internet spend of referred customers. There is a wide range of partners from CND to WWF.
Vivian first got involved with the movement through his local co-op shop in the early 80s in Oxford. “I was fascinated by the fact that there was this large operation that was different from other organisations. It was owned by ordinary people and was supposed to be run in their interest, but it actually seemed to be run by a small, fairly visionless clique.”
“They hadn’t done anything about member recruitment in years. There were few tangible member benefits and little desire to talk about what makes co-ops different. I felt that this was a business that had lost its way. When you went back to the root of it, these were such powerful ideas, but they hadn’t been updated. A few of us formed a group to push a different view, and we got elected.”
Working with new management, they started experimenting with ways of presenting the co-operative message in a modern way. I always felt that when you walked into a co-op it should feel different. We created a concept store promoting things like Fairtrade, supporting local producers, and the fact that it’s owned by the customers. Today that co-operative is the Midcounties Co-op the first £1billion pound regional co-operative.
At a time when the whole co-op idea has come under threat it is great to see the continued growth of a co-op like this in a new sector. The Phone Co-op shows with the right leadership and real member engagement co-operatives can not only be commercially successful but ethical and socially responsible to!

Sunday, 30 March 2014

Memorial to Tony Benn

I have been thinking of how to best memorialise Tony Benn.  When it came to the promotion of worker co-ops and his support for the Institute of Workers Control he was ahead of his time. Today every politician in Britain seems to be in favour of the John Lewis Model whilst doing precious little to genuinely promote worker ownership. One of the pamphlets Tony Benn contributed to for the Institute of Workers Control contained a speech of his on the Levellers in the English Revolution.

So my suggestion is we have a memorial plaque on Burford Church. This would not be the first time his name was engraved on the church. Tony first came to Levellers Day in 1976.

His diaries record, “At 9.45 we arrived at Burford Church where the Revd Gilbert Parsons was waiting, and as we approached we saw two elderly church wardens with paraffin and wire brushes wiping off a slogan on the wall, ‘Bollocks to Benn’, - a piece of graffiti that embarrassed the vicar but not me.”

Over the years he visited Burford many times.  In 1979 he unveiled a plaque to the three soldiers, Cornet Thomson, Corporal Perkins and Private Church, on the church wall to commemorate their execution and burial in the churchyard in 1649. Tony himself said, “Apart from their radicalism, which was unacceptable to Cromwell, they refused to fight in Ireland where Cromwell, effectively head of state following the execution of Charles I earlier that year, was engaged in a campaign that has scarred Anglo-Irish relations ever since.”

I propose a simple plaque to add a fresh Leveller to that wall.
“Tony Benn, 1925-2014. True Leveller”.

Plain and simple in true non-conformist style.  It could be unveiled by the man who sang on that day in 1976 and who joined him in a wonderful duo to tour the country doing ‘Writings on the Wall’, Roy Bailey.

Tony says in his dairy, “I came away understanding England much more, understanding the radicalism of the Peasant’s Revolt and the Levellers, and the very early birth of English radicalism, why our history isn’t taught, and how rich we were in our own tradition. It is our own home grown socialism.”

Building Co-operation

Building Co-operation, published last year to mark 150 years of the Co-operative Wholesale Society, was the first business history of the Co-operative Group, written by John Wilson, Tony Webster and Rachel Vorberg-Rugh. It very nearly turned into its obituary. When it was published the Co-operative Group was on an up, confident enough to be building a superb new state of the art headquarters at Angel Square in
That seems like a lifetime ago. We are facing the biggest crisis in the movement since 1997 when the Lancia Trust attempted to take-over and demutualise the CWS backed by such City luminaries as Hambros, Schroders and Nomura.

We fought back learning lessons that sparked a revival based on two things a common brand and a degree of consolidation. The branding was effective, meaning that travel,
pharmacy, funeralcare, food, insurance and banking where all clearly part of the same business. The idea was to encourage cross selling and reduce marketing costs.

Consolidation has however been less successful. If any one individual is associated with this drive it was the former CEO Peter Marks who even argued for a single national co-operative society. His climb to the top was thanks to a series of society mergers rising from CEO of Yorkshire Society via a merger with United North West, to CEO of the Group when United in turn merged with CWS.

Despite some people having misgivings in the way elected members had been persuaded to support these mergers with large pay-offs grudgingly most commentators felt that the Co-op was at least back on the map.

Mergers had bought some efficiency savings, in food and to some extent in banking, the feeling was the Group was still too small to compete effectively with its rivals.

The book has a section on Marks and the ‘Renaissance’ in retrospect the word is quite rightly hedged. Len Wardle became chair in 2007 and Marks CEO in 2008. The authors argue that Wardle offered Marks ‘constructive criticism’.  It is hard now to see anything constructive about this partnership. Having gathered as many of the existing retail societies into their net as possible the next step, given that organic
growth was too slow, meant that acquisitions where on the agenda.

His predecessor Martin Beaumont had looked at the acquisition of the Somerfield Group (also an aggregation of other businesses including Kwik Save) and ruled it out as too difficult to absorb. Marks and Wardle had no such fears and in March 2009 paid £1.57 billion to make the purchase.

Euan Sutherland informed us recently that the Group are to announce losses of over £2billion. As well as the costs of saving the Co-operative Bank, following its merger with Britannia, part of the losses will be a reduction in the value of the stores and the good-will obtained from the Somerfield deal.

The step too far that finally bought the Group to its knees was the attempted acquisition of branches from Lloyds.

These deals have left the Group carrying far too much debt. There was a danger the Group would no longer be owned by its members but by the banks. Clearly reducing the debt is a key challenge.

Academic’s point out that co-op failures can be attributed to three key factors, “badly thought out business strategies, paying too much for acquisitions, and boards being out of their depth.”

They don’t point to over weaning CEO’. But they are a challenge in any business and Marks did not care much for the Board or the members.

Indeed Sir Graham Melmoth an earlier CEO of CWS has publicly stated had, “Peter Marks would not know a co-operative principle if it crept up and hit him in the face.”
The biggest issue however the Group today is the relationship with its members. A revitalisation of the membership offer is vital. If membership is just a loyalty scheme for many the loss of the dividend has stretched that loyalty to breaking point.

Clearly cultural difference has emerged between Euan Sutherland and the Board. And not wanting to repeat past mistakes he has gone.  He had begun a renewal programme to turn the business around and according to the co-operative principal of self-reliance, we will, successfully continue to navigate the clear commercial plans it has in place.

The Co-operative Group does have to be as good as any other commercial business in its operations, Euan is right on that point.

It is not true however that Co-operatives are ungovernable. What they are is democratically accountable. And I can name a few other businesses that would benefit from that sort of control.

Across the worldwide there are 1,465 co-operative businesses with a turnover of more than $100 million a year. Large, complex businesses, their accountability to their members is a strength, not a weakness,they are living proof that large-scale co-operatives can work.

The road ahead is tough but the Co-operative Group can, and will, turn its fortunes around.

What the other 6,000 co-operative businesses in Britain must think of these goings on one can only guess at.

Saturday, 15 February 2014

Green Deal Disaster Sinks Energy Saving Co-op

When in 2010 Chris Huhne then Minister for Energy and Climate Change, launched the Green Deal he said, As well as being good for the environment;
“The Green Deal also represents a significant opportunity for businesses. Retailers, tradespeople, energy companies and investors will have access to a huge and growing market, with implications for jobs and skills across the supply chain – and across the country, with no regional bias.
We predict that the supply chain could support 100,000 jobs within five years, spread across the United Kingdom. By making our homes and businesses more energy efficient, we can cut our carbon emissions and make real progress toward our 2050 emissions reduction target.”
Now hindsight is 20/20 so the ambition to take just a small part of a promised £10 billion market enough to support a dozen people in a specialist co-operative business did not seem an excessive aim. I even bought some shares in it so I can understand why people invested. But no one realised just how big a disaster the Green Deal would turn out to be.
From the beginning of the coalition it was a key policy. They said the Green Deal is the Government’s “flagship piece of legislation, which will deliver energy efficiency to homes and buildings across the land”.  It is expected to result in net business costs of an estimated £1.3 billion a year (ultimately reclaimed through everyone’s energy bills) and around £14 billion of private sector investment over the next decade.
This fanfare drew many firms to seek out the necessary accreditation to be Green Deal assessors. By the end of November last year there were 314 firms engaging 2,855 individual assessors. So a small industry was being created to deliver this green deal. The problem however is not the green part it is the deal part. Frankly it is not a very good deal.
The whole process is incredibly convoluted which puts your energy bills up for a saving that is too little over too long a period.
Whilst by the end of November 101,851 green deal assessments had been lodged and there were 1,478 green deal plans in progress but only 458 had been completed.  Not exactly a revolution. Hundreds of firms and thousands of advisers had been sent on a wild goose chase. At the end of last November there were six times as many green deal assessors as there were satisfied customers.
This brings me back to the Energy Saving Co-operative. I am sure this was the right idea. There is a low level of trust in this area which thanks to this botched green deal is now even lower. I am sure householders would have had more confidence in a co-operative business than a purely profit seeking enterprise. But there is simply not enough business and the Co-op is being voluntarily would up.
No business can survive without customers. Even if they had bagged all the 458 who completed the Green Deal it would not have had enough to sustain them let alone 300 businesses. Now there are double grazing providers, loft and cavity wall insulators, new boiler fitters and numerous other trades people wondering where their next job is going to come from. Rather than creating thousands of jobs this disastrous debt laden policy is destroying jobs.
Chris Huhne launched the policy at the Liberal Democrats Spring Conference in 2010, "The Green Deal will be a revolution. The first scheme of its kind in the developed world. The most ambitious energy-saving plan ever put forward. A once-and-for-all refit that will make every home in Britain ready for a low-carbon future."
This will now just be added to that long list of Liberal Democrat broken promises. Huhne was later to be led off in disgrace and imprisoned for lying about speeding it is a pity that charge could not be extended for lying about other things.
My suspicion is that this scheme was sunk by the Treasury who have no interest in helping people to spend less money. It is no secret that George Osborne has been manoeuvring to undermine the Government’s green agenda as weak as it is.
The real tragedy then is not for the staff and directors of the energy saving co-op, one of whom Chris Herries will now lose her place on the Board of Co-ops UK, sad as that is or that investors who will lose their money. All business investment is risk capital. The real tragedy is that the country really does needs an effective Green Deal. We really do need to reduce energy costs, keep people warm and to refocus our energy industry towards conservation and renewable generation. That is where the future jobs will be and that possible future is what the government have turned their backs on.

We are all Rogues and Vagabonds

The Tories and their Liberal Democrat allies have been accused of wanting to turn life in Britain back to Victorian times. They seem to want to get us to know our place, to respect those with wealth and to be upstanding for the Queen and the Union Jack.

Victorian life is well known to us mainly through the novels of Charles Dickens. In 1824 Dickens was working for six shillings a week in Warrens Blacking factory labelling pots of bootblack and the whole of that six shillings went to cover his board and lodging. His father had been arrested for a debt of £40 and was sentenced to serve in Marshalsea Prison. On weekends Charles would visit the family in prison.

In 1824 too London was besieged by soldiers returning from the Napoleonic Wars to no homes and no jobs (it was ever thus). The government responded with the Vagrancy Act which in effect made it an offence to sleep on the streets or to beg.

This week three young men, Paul May, Jason Chan and William James, all residents of a squat in north London, where charged under the 1824 Vagrancy Act. Their crime was of a profoundly Dickensian nature, we all know how obsessed many of Dickens’s characters where with food, how Pip stole food for Maqwitch or how Oliver Twist wanted more.

Their crime is they stole food from a skip at the rear of an Iceland store. According to reports they stole mushrooms, tomatoes, cheese and Mr Kipling cakes.

Under the Act Persons committing certain offences where to be deemed as rogues and vagabonds some parts of the original act have been subsumed in newer legislation but some of it remains on the statute book.

They are charged under this part of the Act “every person being found in or upon any dwelling house, warehouse, coach-house, stable, or outhouse, or in any inclosed yard, garden, or area, for any unlawful purpose.”

They face three months in prison. Where presumably they will at least be fed.

I understand that the police have returned the mushrooms, tomatoes, cheese and Mr Kipling Cakes now very well past their sell by dates to Iceland. Presumably they will put them back into the skip. They can then be collected with 890,000 tonnes of food waste collected by the London boroughs each year and added to the 1.6 million tonnes of food waste thrown out by stores across the UK.

What sort of world have we created where everyday trucks make rounds of the streets of London and take their cargo either to be incinerated or shipped up the Thames on barges to have it dumped in the sea or into landfill. In North London just 23 % is recycled. Landfill sites already cover 109 square miles of our country and an extra 16 million tonnes of rubbish is being added each year.

And we prosecute three lads for nicking some out of date mushrooms!

Of course the apologists for capitalism tell us it may not be that fair but it is efficient. The free flow of market forces ensures nay it guarantees the most efficient allocation of the factors of production. Well this demonstrates that it is neither fair nor efficient.

What is fair about the need for foodbanks? And what kind of efficiency has farmers across the globe overworking their land depleting the soil and over using chemical inputs to produce food we then put into landfill whilst people go hungry?

Sometimes it is good to be reminded of why you are a socialist and of why the trade union struggle for a fair deal at work, the co-operators struggle for pure food at fair prices and the political struggle for working class representation are all part of the same fight.

It reminds me of the words of that great Wobblie Fred Thompson. In his memoir Fellow Worker he explains why he is both engaged in his union and in the Socialist Party. He says, “perhaps my attitude towards the IWW and the Socialist Party would be clearer if I added that if there were a food co-op store nearby, I would feel I should buy there; if there were a daily labor paper here, that I should subscribe to it even if I quarrelled with the editor; if there were labor cultural institutions in which I could participate and I had the time I would do that too.”   

The editor and I may quarrel from time to time but that does not distract us from the bigger fight to maintain that daily voice for a better world.

Remember the Vagrancy Act in 1824 did not work it paved the way for the Poor Law Amendment Act of 1834 which led to huge expansion of the workhouse system. It meant that instead of outdoor relief, on the basis it was unsustainable (have we not heard that one before too), the destitute had to enter the workhouse.

The National Trust has a workhouse at Southwell in Nottinghamshire, coincidentally built in 1824. Visitors think they are looking into the past but if we do not get this dreadful government off our country’s back it just might be their vision of the future.

The Co-op Bank Disaster who is to Blame?

The Co-op Bank Disaster who is to Blame!

Clearly something has gone seriously wrong at the Co-operative Bank but the latest twist in this saga has created far more heat than light. The public pillorying of Paul Flowers, for the Tabloids love it is the perfect story, a Vicar, sex, class A-drugs and rent boys. And that is before the banking connection. Clearly the Tories have enjoyed this big time. The Co-op movement’s historic connection to the Labour Party has made this a great opportunity to attack both the democratic nature of the Co-op and its role as the banker to Labour.

Firstly the Co-op Bank has never been a co-operative. It began life as the Loan and Deposit Department of the Co-operative Wholesale Society back in 1872 and ninety-nine years later it became a plc and a wholly owned subsidiary of the Co-operative Group.

Furthermore the Directors of the Bank have never been elected. They have always been appointed by the main board of the Co-op Group and to overcome any skills gaps they have included a significant number of  what are independent non-executive directors drawn from the financial services and banking industry.

In short Paul Flowers may have been chair of the Bank Board but he was not running the show. Indeed the board had a minority of elected members. To quote the annual report for 2012, “Of the 11 Non-Executive Directors four are elected members of the Co-operative Group Board, two are Co-operative Group Executives and five are independent and recruited for their specific financial services experience and expertise.”

All the key roles on the operational sub-committees of the board where taken by banking professionals of some standing. 

In the 2012 annual report you will see that the Chair of the Risk Committee which had responsibility for “the management and control of all significant risks, including technical, operational, business model and external risks”, was Merlyn Lowther.  Her name maybe familiar indeed you may have her signature in your wallet. As chief cashier of the Bank of England her signature was on our bank notes for four years. She joined the Bank of England Economics Division in 1975 and had worked her way up to chief cashier by 1993.

Then there is the Exposures Committee, responsible for sanctioning “large counter party transactions, manage large exposure positions and consider risk management of exposures”. This was chaired by Peter Harvey who had been the chief executive of UK Business Banking at Barclays PLC as part of long career at Barclays.

There is also William Hewitt former Group Finance Director of the RAC who was chair of the Audit Committee.  Then there are the external auditors KPMG. The Bank was given a clean audit including a review of their corporate governance statements by Andrew Walker an Audit and Transactions Services partner in KPMG’s Financial Services practice.  He specialises in the retail financial services sector, in particular building societies, credit cards and consumer finance.

Andrew has worked extensively on IFRS (For those who don’t know these are International Financial Reporting Standards) for most of his audit clients and has detailed experience and insight of application of standards in complex, subjective areas such as impairment, fair value and hedging.  He has acted as the expert on a major claim in connection with credit card and internet systems.  He has also led reviews in connection with OFT investigations in the banking and consumer finance sectors.

Oh and don’t forget the advisers who facilitated the merger with Britannia said to be Tim Webb of J.P. Morgan Cazenove. According to their website Tim is an exceptional banker. He represents “the stability of our management team and the depth of talent that allows us to maintain consistent service to clients year after year”.

It must be clear to everyone now that that deal was the mutual equivalent of Lloyds and HBOS.  The Co-op Bank was a prudently run fairly boring bank indeed there had been a time when the board consisted was solely of elected members who were completely risk averse.

Britannia it now appears believed there would never be a recession and the housing market and the commercial property market would ever stall and was loaded with all sorts of toxic debts. Now we all know the consequences of that lethal cocktail.

The other board members included Neville Richardson the former CEO of that Building Society. Then there was Peter Marks the Co-op Group CEO determined to grow the business by acquisition at apparently any price the stage is set for a total disaster.

Far be it from me to try and defend Paul Flowers. His performance at the select committee was not brilliant but he was not the worst performer by any measure. However hs apparently dissolute private life style has provided the tabloids with a great story and Cameron and Osborne a stick to beat the Labour Party with. But the collapse of the Co-op Bank is not the fault of the elected members of the Group Board or of the four elected members on the Bank Board.

It was the professional bankers and financial advisers that that cooked up the deals that bought the bank low. The Co-op Bank is in the brown sticky stuff because it was a Bank not because it was a Co-operative.


Friday, 17 January 2014

2013 Not a Bad Year for the Co-op Movement

At the tail end on 2013 the Co-op Movement had some very good news and no it was not about yet another inquiry into the Co-op bank. Or perhaps that should be the Bank formerly known as the Co-operative as last week it finally passed all of the regulatory and business hurdles required to complete its demutualisation.

The process has been agreed by all necessary classes of creditor and shareholder and approved by the Courts. So effective majority control of the Bank has now passed to investors with the issuing of the new ordinary shares and the termination of the Co-operative Groups existing shares.

Personally I am not rushing to leave the bank I suppose in my heart I hope to win it back for co-operation but in my head I am fully aware of what happened to all the other Building Societies that became small banks on demutualization and what subsequently happened to them. So the omens are not good.

No the good news was astonishingly in the Houses of Parliament. The first reading of the Co-operative and Community Benefit Societies Act due to become law on 1st August. It took a while of patient and careful lobbying of government and civil service but this is the most tangible benefit from the UN International Year of Co-operatives in 2012. One of the objectives of the Year was to get governments around the world to update their legislation when it comes to Co-ops. And on a wave of Big Society rhetoric David Cameron found it hard to resist.

This new Act is however a consolidation act and can therefore only ‘consolidate’ existing legislation and that means that, the 1965, 1967, 1975, 1978 and 2002 Industrial and Provident Societies Acts; the Friendly and Industrial and Provident Societies Act 1968; the Co-operatives and Community Benefit Societies Act 2003; and the Co‑operative and Community Benefit Societies and Credit Unions Act 2010, will be repealed and replaced with the new Act.

Having all this Co-op law in one place will be a great boon when it comes to starting and running co-operative enterprises making life simpler for everyone who works for and with co-ops.

Co-ops UK has however got a long list of new things it would like to include as new Co-op law and has been encouraging the Law Commission to take some of these ideas into account in the process of consolidation. There has been some success including increasing the limits on withdrawable share capital from £20,000 to £100,000, modernising the processes on insolvency – something that will particularly help with fan owned football clubs, improving the investigatory powers of the regulators, and allowing the electronic submission of registration documents.

Co-ops UK will be pushing for more amendments as the legislation progresses but despite all the movements set backs this is the most significant change in the legal basis of co-operation for a generation. 
If you read the mainstream press you would think the whole co-op movement had gone bust but for all the troubles that have hit the Co-operative Bank after all it is not as if all the other Bank’s have be free of trouble. This new law is good news for the over six thousand co-operative businesses across the UK, and in turn for their 15.4 million owners.
Despite what you may have read elsewhere 2013 was a good year for Co-ops with a new one starting everyday! What is more their survival rate is far higher than for business at large. One in three conventional businesses goes out of business within three years of starting. For co-ops, that is only one in twenty.
For five successive years the co-operative sector has outperformed the UK economy, growing by 20% since 2008. Across the nations of the UK, turnover is now £36.7 billion. Worldwide, the co-operative sector has a turnover 54 times the global turnover of Coca-Cola.
Meanwhile in the UK the sector is strong and growing Examples of this commercial success story are:
  • In farming, 65% of all farmers in Scotland, an expanding sector, are now members of an agricultural co-operative.
  • Co-operative schools have doubled their number every sixteen months, with now over 500 co-operative schools in England.
  • There are now one million members of credit unions in Britain. These are financial co-operatives, lauded most recently by the Archbishop of Canterbury, who asks all churches to work with their local credit union.
  • Co-operative Energy is challenging the big six retail energy giants. The percentage of UK consumers who would recommend their energy supplier is 30% overall but an amazing 97% for Co-operative Energy.
So in a nutshell the problems with the Co-op Bank are just that a problem with the bank all that is wrong with the rest of the sector is that it is still too small. There is also a very important thing you learn when things go wrong - the corporate media are no friends of co-ops. But why should they be, the sector maybe small but the co-op model is a clear threat!