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Labour to keep getting Co-op funds

Published 16/05/2015

Problems at the Co-Operative Bank caused major problems for the wider Co-op Group
Problems at the Co-Operative Bank caused major problems for the wider Co-op Group

Labour will continue to get funding of up to £1 million a year after a vote by members of the Co-op Group at their annual general meeting in Manchester.

Co-op, the UK's biggest mutual organisation, passed a motion by 48,579 for to 39,479 against, to approve "political expenditures" of up to £1 million that support the movement's objectives.

It means the group which is owned by its members will continue to financially support the Co-op Party, the "sister party" to Labour.

Many Labour MPs stand in elections as representatives of both Labour and the Co-op Party and the two political movements have strong historical ties.

The Co-operative Group, based in Manchester, has been balloting almost three million members to ask whether they should continue funding the Co-operative Party, the political arm of the organisation set up to support the group's ideals.

In all 93,283 members took part in the vote, with around 1,000 attending the AGM in Manchester.

They voiced both support and opposition to carrying on political funding.

One member told the meeting that every business in the country lobbied Parliament to get legislation to suit their interests and funding Labour ensured the co-operative movement would have a voice in the corridors of power.

Another member said "other political parties represent the PLC sector" and if the Co-op ditched its links with the Labour movement it would simply be another company "like all the rest".

The motion to approve political funding "not to exceed £1 million per annum" was carried by 55.17% to 44.83%.

Much of the day's AGM was spent discussing the pay and perks of board members, with top bosses being given a rough ride by ordinary members.

Karin Christiansen, general secretary of the Co-operative Party, said: "The Co-operative Party has been the political voice of the co-operative movement for 98 years and we look forward to continuing our successful relationship with the Co-operative Group in light of today's clear and decisive result.

"Co-operative Group members voted to support this partnership, which has done so much to advance the Co-operative cause and to extend and widen people's ownership, decision-making and a share in the profits of businesses serving their communities."

"The Co-operative Party looks forward to working with the Co-operative Group's board and new national members' council to plan our future work together."

Last year Co-op Group gave £625,000 to the Co-op Party.

The vote is advisory rather than binding, and a final decision will be made by the group's board.

But after the AGM, Allan Leighton, chairman of the Co-op Group, said: "There's a clear remit from the members to continue to support the Labour Party.

"I think there's a mandate from the room.

"It allows us to now have a conversation with the Co-op Labour Party about what we do next. We have clearly got a mandate to do that."

It is three years on since the firm's banking arm threatened the future of the entire £9 billion business, which has 2,800 shops and commercial interests in everything from food and insurance to funerals.

The AGM heard three board members alone were paid £12 million over a 12-month period.

The first question from the floor from a member was: "How do you justify all these pay rises for the executives?"

Members were told the current management were turning the business around and Frank Nelson, chair of the remuneration committee said: "The team of Red Adair doesn't come cheap, but we need them to do the job."

Despite discontent in the AGM the motions on remuneration for senior executives was carried by a large margin, including the £2.5 million pay package for group chief executive Richard Pennycook.

Founded in 1872, the Co-op movement grew out of the Rochdale Society of Equitable Pioneers, who came together on a basis of political and religious neutrality with the aim of building a better society.

But the firm which prided itself on its ethical stance has faced a series of crises since the financial crash of 2008.

The bank was on the verge of collapse in 2013 and dragged the wider Co-operative group to a £2.5 billion annual loss that year, after a £1.5 billion hole was discovered in the lender's balance sheet.

It had to be rescued by US hedge funds, in a deal which saw the group's stake in the bank to shrink to 20%.

The group has since sold large parts of the firm, including farms and pharmacies, to clear some of its debts.

There was further damage to the bank's reputation after a drugs scandal involving former bank chairman Paul Flowers, and sharp criticism about how the Methodist minister was appointed to the role despite a lack of experience.

A damning report by former City minister Lord Myners said the group's board was "manifestly dysfunctional" and its governance structure "labyrinthine".

Bosses of the firm say they are turning the organisation around with a three-year rescue plan.

The firm made a "technical profit" of £216 million last year off the back of selling assets.

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