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Jesse Norman is the Member of Parliament for Hereford and South Herefordshire. His  new biography of Edmund Burke has just been published. Follow Jesse on Twitter.

Screen shot 2013-06-10 at 06.55.39As ConservativeHome readers will be aware, I am a huge believer in the virtues of co-ops, mutuals and employee ownership.

In the early 1990s the late, great Robert Oakeshott asked me to serve on the board of his pioneering advisory organisation, Job Ownership Limited (now the Employee Ownership Association).  I edited a pamphlet on how to set up a co-op a few years ago; have pushed for better recognition of mutuals in parliament and in the press; and have even helped to set up an Industrial and Provident Society, the grandiosely named Conservative Co-operative Movement, to explain and advocate the importance of co-ops to fellow Tories.

In my view, co-ops are splendidly conservative institutions.  They generally spring from local soil, fired up by local energy, and positively teeming with small-c conservative values of thrift, entrepreneurship, and community self-help.  Their founding Rochdale Principles give them a broad ethical basis far removed from modern state-first socialism.  They belong to no political party or creed.

But to me, indeed to all co-op-ites, there is but one Everest, one institution which dominates the UK landscape.  That is The Co-operative itself, the Co-op:  the retail behemoth whose businesses stretch from banking to funeral services, from food retailing to pharmacies.

The Co-op has 340 bank branches, 2,800 stores and 7.2 million—yes, 7.2 million—member-owners; last year it had sales of £13.5 billion, and just under 100,000 employees.  By its own estimation it accounts for around 80% of total co-operative activity in the UK.

The Co-op has struggled in recent weeks from a bad loan portfolio following its acquisition of the Britannia Building Society.  But over the years it has been a pioneer in many areas of its business:  the first UK retailer to forbid testing of own-brand products or ingredients on animals; the first UK bank to introduce a customer-led Ethical Policy as to which companies or countries it deals with; the UK’s first full internet bank.  It takes the responsibility of funding and leading the co-operative sector in the UK very seriously, and rightly so.

But there’s one other fact about the Co-op which is less often mentioned—one “say it ain’t so” fact which undermines this whole great picture, and indeed raises issues of serious public concern.

For the Co-op is not just a retailer; it is a major political player in its own right.  Over the past ten years it has given £6,187,788 to a British political party, the Co-operative Party, and a further £355,857 to the Labour Party.  There are currently 32 Co-operative Party MPs in the House of Commons, 17 Co-operative Party Members of the House of Lords.  It has five MSPs, nine AMs, and hundreds of councillors around the country.

This would matter less if the Co-operative Party were an independent party in its own right, which contested elections alongside the other parties.  But it is not; on the contrary, it is umbilically linked to Labour, and every single one of these politicians is a Labour party member.

Seventeen members of the shadow front bench are members of the Co-operative Party, including Ed Balls, the Shadow Chancellor (who in 2012 received £50,000 in financial support from the Co-op).  You cannot join the Co-operative party if you are a member of any political party other than Labour.

These political contributions raise profound questions not merely about the Co-operative Party, but about the Co-op itself.

The first question relates to how they are financed.  As the Co-op’s 2012 Annual Report makes clear, these contributions are charged as operating expenses, which eat into profits and so reduce the dividend to members.  But, one might ask, how many of the Co-op’s 7.2 million members are aware that they are paying for very large contributions to the Co-operative and Labour parties?

The second question is about transparency.  The Co-op prides itself on its ethical values, and in particular on the Rochdale values of openness and honesty.  In its words, “Ultimately, our aim is to be the most socially responsible business in the UK, offering our members and customers not only value, but values… We are taking ethics to the next level.”

That being so, you would expect it to be upfront and open about spending over £6 million that would otherwise go (net of tax) towards members’ dividends on contributions to political parties over the past decade.
 
Unfortunately, the opposite is true.  The first mention of the Co-operative Party in the Co-op’s 2012 Annual Report comes on page 31, in the small print; the phrase occurs again later in the small print on page 51, alongside the Labour Party; and that is it.  If you apply to join the Co-op, you will search its membership forms and papers high and low for a mention of its political contributions, its huge direct and indirect commitment to the Labour Party, and for details of how these contributions are paid for.

Indeed, the only reason why the Co-op can make political contributions at all is because it is not in fact obeying the original Rochdale Principles, which insisted on political and religious neutrality (they were changed in 1966).  And when you think about it, political neutrality is an obvious prerequisite in any organisation that claims to embody community values.

The third question is where the money goes.  How much of the Co-op’s £6,187,788 actually goes to subsidise the Labour party?  The answer seems to be all of it, since the Co-operative party does not operate in any genuine way independently of Labour.  And the Co-op seems to get a poor deal for its money; it may have given Ed Balls £50,000 last year, but I struggle to recall Mr Balls welcoming any of the measures the government has taken to assist co-ops and mutuals over the past three years—or indeed doing anything else much to help co-ops.  Perhaps as Shadow Chancellor he will now make the case for the ailing Co-op Bank to be exempted from capital adequacy requirements?
 
A Co-op Area Committee member, Dave Boyle, attempted to raise some of these issues recently in the Guardian saying "The overwhelming majority of [Co-op] members are blissfully unaware that the Co-operative Party even exists, or that it – and thus the Labour Party – are funded via profits from their purchases in the shops.  It's an arrangement that has much in common with the way trade unions funded the Labour Party, until legislation required them to secure the direct consent of their members." Unfortunately, Mr Boyle’s call for a degree of independence for his party from Labour was dismissed by the (Labour) Chair of the Co-operative Party, Gareth Thomas MP.

But he puts his finger on the problem.  How many Co-op members know of these payments?  A tiny minority.  Why don’t they know?  Because the Co-op, despite its huge public commitment to ethical business, has decided to ignore the Rochdale principles of honesty and openness, and keep them in the dark.

How many Co-op members would approve of these political contributions if they were asked?  No-one can say; it may be a large majority.  But the parallel Mr Boyle draws with the trade unions is an accurate one.  What is needed now is for the Co-op to level with its own membership, and call a ballot on the issue.