Substantially expanding co-ops would provide an alternative to both market structures and rationalisation, writes Malcolm Wicks MP

After a long period of slumber and decline, co-operatives and mutuals are experiencing a renaissance. It could hardly be more timely. With the mainstream banking sector in disrepute, customers seek a reliable and honest home for their money. And with many people looking for ethical alternatives, goods that are fairly traded and produced sustainably make co-ops, both large and small, attractive.

Already co-ops, mutuals and credit unions are significant players: total assets in excess of £400bn and a combined membership of over 30 million. But now is the opportunity for a substantial expansion and, in the finance sector, an alternative to both market structures and to nationalisation.

Renewal is evidenced by three recent significant developments. The co-op retail sector has now combined, bringing together many separate retail societies and around 2,200 stores, into one entity. Second, the new unified Co-op is taking over more than 800 Somerfield retail stores, which will mean a combined market share of 8%. Third, the Co-op Bank and the Britannia Building Society have announced plans for a merger – a new £70bn ‘supermutual’ bank.

This represents a significant turnaround. For, despite a glorious social history (Robert Owen, New Lanark and the Rochdale Pioneers), for several decades the sector was in retreat. The rise of Sainsbury and Tesco exposed the Co-op store as lacklustre and wrong-footed when it came to both innovation and enterprise.

Later, in the 1980s and 1990s, the building societies, established largely in the 19th century to enable ordinary citizens to access decent housing, became victims of privatisation mania, the lure of quick profit over principle. Society members who were offered a few hundred pounds to vote to turn their mutual into a bank did so overwhelmingly. For a period, the new banks pursued profitability, and lavish bonuses ensued.

We now know all too well the end of that particular story. Abbey, the first building society to demutualise, with an ambition to become a great British bank, is now owned by the Spanish company Santander, who also own Alliance & Leicester and Bradford & Bingley. Others were swallowed up by larger British banks, now in serious trouble. Northern Rock, once a proud north-east England mutual, is now nationalised.

The fortunes of these former building societies were intimately linked to the more general bankers’ folly which the public is now, all too expensively, having to sort out. In recent years, government has acted to rationalise and modernise laws for bodies which are still legally termed ‘industrial and provident societies’. My private member’s bill, with cross-party support, represents a further step in that direction.

So the scene is set for the future. Many successful enterprises already exist, including Nationwide, John Lewis Partnership, the Wine Society and the Co-operative Group with interests in retail, pharmacy, insurance, funerals and travel. They now have much scope to build and develop, but the most urgent challenge concerns banking. In a few years’ time the government will be presented with another big banking question, as Britain recovers from recession and the banks, largely in public ownership, recover solvency and profitability.

What should be their future? Powerful interests and voices will argue they should simply be returned to the pre-crunch ownership structures, no doubt to build again businesses built on greed, short-term dealing and bonus bonanzas. The softening up has already started. We are told that ‘banks are best run by companies and not governments’. This itself is based on a questionable hypothesis. If government relies purely on advice from financial experts drawn from a small but powerful City pond, that is what we will get.

But one of the new dividing lines in British politics should be between that argument and something altogether different. One powerful signal would be the remutualisation of Northern Rock – a good signal to the north-east of England, a clear message that lessons have been learned and that Labour fully backs the new renaissance of co-operation and mutuality.

This article first appeared on Progress Online