We must keep the co-operative spirit alive

In the wake of building society demutualisations and the bid for the Co-op Wholesale Society, mutuals need fresh legal protection.

The Co-operative Commission has published a report which provides a modernising route-map for the co-operative movement and the mutual and social enterprise sectors - the social economy. It argues that the movement must take prime responsibility for driving forward modern-day business practice for performance, management development, change management and membership involvement. So is there a role for government action?

The Co-operative Commission has published a report which provides a modernising route-map for the co-operative movement and the mutual and social enterprise sectors - the social economy. It argues that the movement must take prime responsibility for driving forward modern-day business practice for performance, management development, change management and membership involvement. So is there a role for government action?

Those who oppose government action argue that government "favours" will do the co-operative movement no favours. I disagree. There are sound reasons why government should act.

Firstly, co-operative values are Labour values. They are as relevant as ever and in tune with the 21st century. These values of openness, honesty and social and community responsibility are integral to the emphasis placed on sustainable development, replacing the laissez-faire of the 1990s.

Secondly, successful implementation of co-operative values can create competitive advantage. World-class companies are using the values of co-operativism to strengthen their corporate brand, helping them to market their products and build success. The Co-operative Bank has integrated its ethical values into its corporate business, which gives it a competitive edge over its competitors.

Thirdly, Labour believes that a successful economy and strong society go hand-in-hand. The co-operative movement is a vibrant example of this. Worldwide, co-operatives are thriving. According to United Nations' figures, around three billion people are made secure by co-operative enterprise, 800 million individuals are co-operative members and the sector supports an estimated 100 million jobs.

Fourthly, the Labour government is striving towards a new age of active citizenship and an enabling state where the relationship between the state and local communities is transformed. The co-operative movement has a central part to play in promoting active citizenship and assisting, as a successful business and employer, the development of our local, regional and national economy.

These are sound reasons for Labour to act. It is naïve to leave the success or failure of the movement to members alone. Co-operatives and parts of the social economy are subject to laws which emanate largely from the 19th century. These laws are cumbersome, out-of-date and costly to administer. The costs of registering a co-operative in the UK under the Industrial and Provident Societies Act 1965 out- strip the costs of registering a company. Unlike other countries, there is no formal recognition of the common form of ownership of a co-operative.

Members are not free to choose how to dispose of future assets and secure success for co-operativism. This penalises successful co-operatives rather than failing ones, leaving them vulnerable to carpet-baggers. One solution may be for the UK to recognise the form of co-operative common ownership as a distinct form of ownership, just as companies and partnerships are recognised in law.

The social enterprise and mutual sectors are an integral part of British business activity. Co-operatives and mutuals existed well before joint stock companies. They are deeply rooted in our history and are an integral part of the current economy. Just like companies, they require laws which enhance rather than impede their own competitiveness.

Government is overseeing a comprehensive review of company law which aims to replace the 19th-century hotch-potch of legislation with an efficient and cost-effective legal framework for companies carrying out business activity in Britain. Government has acted to eliminate regulation that restricts competition and to create an effective framework for promoting competition through the Competition Act. There is a strong case for a parallel review of the current framework of laws governing the mutual and enterprise sector. The 19th-century remnants of law and the 20th-century sticking- plaster should be replaced by durable 21st-century legislation. Government can play an active role by creating a legal framework which empowers and enables diverse forms of social enterprise to flourish.

The dominance of the company should meet the chall- enge of diverse forms of economic and social enterprise. There should be no government "protection for the social economy to disguise failure or postpone decline". "Favours" should not be used to prop up ineffective organisations. But no government red-tape or regulation should hold back the entrepreneurial spirit of the social economy. A second-term Labour government should act to provide equal opportunities for such diversity in the interests of us all.

Ian McCartney is Minister of State in the Cabinet Office.