What if... Co-operatives UK had £70 million a year?
This article was originally written for Issue 14 of STIR, the magazine for the new economy and was also published online at Co-operatives UK What if…? blog that fed into the UK National Co-operative Development Strategy. I recently noticed that blog has since gone offline and so have re-posted the article here so I’m able to share it with people.
The first in a four-part series looking at 1) the scale and success of co-ops funding co-ops internationally, 2) existing examples and recent developments in the UK, 3) how platform co-ops empowered by open source tools could rapidly scale these models, and 4) how to spend £70 million a year.
Co-ops in the UK turnover £35 billion a year (edit: that was the 2017 figure, in 2023 it was £87.9 billion) but rely on £333k a year from the Co-operative Bank (edit: that's how much the Co-op Bank was contributing towards Business Support for Co-ops back in 2017) to fund co-op development. This needs change if we’re to navigate the perfect storm of climate, energy and economic uncertainty and accelerate the transition to a fair economy that thrives within planetary boundaries. Justice demands it. Our shared future depends on it. How might we do it?
This year (2016) The Co-operative Group are “Back to Being Co-op” and UK Co-op Congress 2016 explored three themes:
- Embracing co-operative excellence
- Practicing co-operation among co-operatives
- Being open to innovation
To me, “Back to Being Co-op” starts with rediscovering the practical solidarity and bold ambitions of the Rochdale Pioneers. These 28 weavers, cloggers, shoemakers, joiners and cabinet makers each pooled 2 pence a week (about 50p a week today) and built up enough capital to open a shop. But it was way more than just a shop. Their 1844 rule book states:
“That as soon as practicable the Society shall proceed to arrange the powers of production, distribution, education and government” — Rochdale Piooners Rule Book, 1844
They also encoded cooperative best practice into a set of principles that evolved to become the internationally recognised guidelines by which co-operatives put their values into practice.
The 5th principle is: Education, Training and Information:
“Co-operatives provide education and training for their members, elected representatives, managers, and employees so they can contribute effectively to the development of their co-operatives. They inform the general public – particularly young people and opinion leaders – about the nature and benefits of co-operation.”
This is surely where “embracing co-operative excellence” must begin. But how to finance it? Enter principle 6: “co-operation among co-operatives”. This has been a co-op principle since at least 1966, but large networks of co-ops systematically pooling resources are virtually non-existent in the UK. As a result the UK’s 7000 co-ops and 17.5 million members are punching massively below their weight.
What could be achieved in the UK if this changed?
In 1991 Italy passed Law 381/91 which created two types of multi-stakeholder “social co-operative”: 1) social, health and educational co-ops, and 2) co-ops who employ disadvantaged people. Today 14,000 social co-ops serve over 5m people, employ more than 400k and turnover €9 billion a year. Social co-ops invest 3% of their annual income in the “Marconi Fund” to finance new co-ops. I’ve not yet found any detailed info about the size and operation of the Marconi Fund, but 3% of €9 billion is €270,000,000.
(Edit: I got the info about the 'Marconi Fund' from this (.pdf) by Paul Gosling at Social Enterprise London - as referenced by this (.pdf) by Pat Conaty, but I don't think it's actually correct as I'm unable to find any other sources about it. It seems likely Paul just misnamed the various "Fondi Mutualistici" which all Italian Co-ops - not just Social Co-ops - have to pay 3% of their profits (not revenue) into. There is lots more information about these Solidarity Funds in this (.pdf) 2022 paper, e.g. "The capitalisation of the solidarity funds is supported by multiple sources. The largest one is the mandatory transfer of 3% of annual profits from member co-operatives and consortia. This is prescribed by article 11, paragraph 4, of Law 59/1992. In 2018, the three solidarity funds associated with the Alleanza delle Cooperative Italiane (ACI) received EUR 40 million thanks to this provision." Note: ACI is just one of the big co-op networks in Italy.)
Spain’s Mondragón Corporación Cooperativa (MCC) is probably the best known cooperative network in the world. Starting life as a small vocational school in 1943 the first Mondragon Co-op made up of five of its students was founded in 1956. It is now complex network of 289 business (of which 110 are co-ops), has a turnover of over €14 billion and provides a livelihood for over 80,000 people (at present just under one third of these are owner-members but this is due to rise to over 75% in the next 3 years). They have their own bank, 15 technology centres and a university. Wages ratios between the highest and lowest paid members are democratically agreed upon and average 5:1 with low paid workers earning on average 13% more than they would elsewhere. Individual co-ops are federated into four sector-wide co-ops: Industry, Knowledge, Finance and Retail. Member co-ops contribute between 15-40% of their profits to these sector co-ops in order to fund joint marketing, branding, and research projects etc. These contributions also help smooth out and share the losses and gains made by individual co-ops – losses made by one co-op can be partially offset (up to 40%) against profits from another. 10% of sector profits are paid to MCC Investments to fund co-operative development. In addition to this, individual co-ops contribute 10% of their profits to the MCC Foundation, 2% into an education fund and 2% into a solidarity fund. About £20 million a year is invested in educational and social projects alone.
Japan’s Seikatsu Club Consumers’ Co-operative Union began in 1965 when a group of housewives organised a collective buying club to purchase quality milk at affordable prices, one of the earliest examples of Community Supported Agriculture. Seikatsu is now an association of 30 consumer co-ops, employs about 1300 people and has over 300,000 members organised into 200 independently managed branches across Japan. Members contribute 1000 yen (about £7.50) a month, and also invest substantial sums in the association. In 2010 the accumulated contributions of the members was roughly £220 million, an average investment of about £750 per member.
The Arizmendi Association of Cooperatives is a Californian cooperative network made up of seven member businesses: six cooperative bakeries and a co-op development and support collective. The first business The Cheese Board opened as a small cheese store in 1967. In 1971, the two original owners sold their business to their employees and created a 100% worker owned business of which they remained a part. In 1995 the Cheese Board funded the Association’s part-time staff who then helped to create 5 more bakeries all named “Arizmendi” after Arizmendiarrieta (the founder of Mondragon). Together they have about 100 worker owners. The co-ops share a common mission, share ongoing accounting, legal, educational and other support services, and support the development of new member cooperatives by the Association by pooling the lower of 4% revenue or 25% of profit. Older more established co-ops pay the equivalent of 1 full time wage per 20 full time equivalent members.
Founded in 2005, The Valley Alliance of Worker Co-operatives (VAWC) is dedicated to building a sustainable local economy by facilitating the growth and development of worker cooperatives in the Connecticut River Valley of Western Massachusetts and Southern Vermont. Their 9 member co-ops include 6 businesses who converted into co-ops, have a combined annual revenue of $7.2 million. Members pay dues of 1/8 of 1% (i.e. 0.00125%) of their revenue to cover the association’s operating expenses and pool 5% of their profits into a co-operative development fund. If the UK’s 7000 co-ops pooled the same amount of revenue and profit as VAWC members it’d generate about £70 million a year.