Archive for October, 2014

Activist 54: TUC Demo 2014 Special

October 17, 2014 1 comment

Includes articles on ‘We Need a Payrise Now – We Can’t Wait Until 2020’ and Usdaw EC & Presidential elections

Crisis in the Co-op

October 16, 2014 1 comment

Over the last 18 months the Co-operative group has been hit by a series of scandals, first a black hole in its finances and then the sex and drug scandal around the former Co-op Bank Chairman Paul Flewers. The repercussions have been widespread with huge upheavals within the group.

Given the origins of Usdaw’s predecessor union, AUCE in the Co-op, then the possibility of its demise will have shaken many, particularly coming at a time when the supermarket retail sector as a whole seems to be unstable.

Indeed, only 50 years ago, the Co-op had been the UK’s biggest grocer with a market share of 30%, a figure similar to the share that Tesco, the current largest retailer holds today. But since 1964, with the abolition of resale price maintainence – which had guaranteed that products had to be sold at or above a minimum price, then larger retailers who could benefit from economies of scale have become dominant, able to sell the same goods cheaper.

As a result, the market share of Co-op’s food retail business declined (although at around 6% market-share, it is still the 5th largest today), as the dividend consumers received of their share of the profits didn’t suffice to make up for the higher prices charged than the major supermarket chains. As time went on, the group’s profits were boosted by its booming finance and other services, by 2011 the Co-op Bank accounted for £200m out of the group’s £585m profit.

To keep up this trajectory, the Co-op group developed an aggressive expansion programme in the wake of the 2007-08 financial crisis. In 2009 it took over the Britannia Building Society and had a further plan to buy 600 Lloyds Bank branches and part of its mortgage business.

In the wake of the revelations of £1.5bn black hole in its finances, the Lloyds deal collapsed. The black hole largely came from bad corporate loans inherited from Britannia, but the Co-op Bank itself was guilty of mis-selling Payment Protection Insurance (PPI), with fines of £269m as a consequence. Moody’s credit ratings agency dropped its rating to junk status and £1.6bn of corporate deposits were withdrawn.

The bailout plan to recover the Co-op Group from this catastrophe has been severe. Hedge funds were brought in to inject more capital into the bank, reducing the Group’s ownership of shares now to a mere 20%. A new structure to the group has been adopted, whereby the board now has a majority of unelected appointees on it.

Additionally, the Conservative government has sought to exploit the Group’s misfortunes to politically damage the Labour Party. The Co-op established its own party around 100 years ago, which affiliated to the Labour party and has a number of joint sponsored MPs with Labour. More recently, it was the Co-op which has bailed out the Labour Party financially as its membership has declined, with a series of ‘soft loans’ to the tune of £34m since 1993.

One of the key things which has differentiated co-operative’s approach has been its attempt to have an ethical trading practice. Historically, AUCE found organising workers easier in Co-ops because of the desire of many Co-op members to treat the Co-operative’s own workers fairly. However, under the pressure of capitalist competition then even the best intentions are pushed out of the window.

Now we see the adoption within the Co-op of S3, a move to increase workforce ‘flexibility’ where workers may work a set minimum number of contracted hours but are flexible between 7am and 11pm, five days out of seven. This is very similar to the recent Ideal Scheduling brought in recently by Tesco.

The co-op crisis shows how, despite working class people having a degree of control over the business, under a capitalist system co-operatives are still subject to the pressures of that system. The struggle must go on to defend the Co-op’s remaining democratic structures and reverse those that concentrate its decisions in the hands of unaccountable speculators – but also to defend Co-op workers jobs, pay and working conditions from being made to pay for this crisis.

In the long run, only by facing up to that system and tackling it head on – by bringing into public ownership under workers democratic control and management the key sectors of the economy, such as major production, distribution and transport but also the financial sector and the major supermarket chains – can working class people fundamentally begin to control the economic forces that dominate our lives.