Co-op could phase out Labour support

 
Co-op bank branch Co-op Group profits have been wiped-out by its bank's losses

When Co-op Bank collapsed into losses, and was instructed by the regulator to raise £1.5bn of new capital as a protection against future shocks, most attention was inevitably focused on the pain being experienced by the bank's big creditors.

But the damage from the banking debacle extends further than losses for those who own £1.3bn of the bank's bonds and preference shares.

There is actual and potential hurt for the bank's owner, the Co-operative Group, its seven million members and the institutions that depend on the support of the Co-op, including the Labour Party.

First, and perhaps obviously, Co-op cannot pay a dividend to members this year, because the dividend is a share of profits, and Co-op Bank's losses have tipped the entire group into losses: no profits means no dividend.

Just in the first half of the year, Co-op Group incurred a loss of £559m, and it will also be seriously in the red for the year as a whole.

That will deprive Co-op members of the £50m to £70m they've received in recent years.

Fairly generous

Co-op Group will offer them money-off vouchers in the run up to Christmas. These sound fairly generous, a rolling programme of 10 per cent off bills between mid-November and Christmas.

But such loyalty discounts are bound to be offered by all the big supermarket groups. There is nothing terribly Co-op-ish about in-store money off deals.

Also, if there's no dividend, that puts at risk the millions Co-op members pay to local charities by opting to transfer their dividend entitlement to Co-op Group's Community Fund: last year good causes received £3.2m in this way.

Well, Co-op Group has decided that the incompetence of its bank should not impose hardship on these charities, so it will continue to pay the £3.2m or so out of group resources.

Then there is the wholly separate political donations that Co-op Group makes, which were £1.2m last year and which supports the Co-operative Party - which in turn is affiliated to the Labour Party.

This £1.2m can be seen as largely, but not wholly, supporting Labour - especially 30-ish MPs who call themselves Labour Co-operative MPs. They include the shadow chancellor, Ed Balls.

For this year, the political contribution has been reduced to £1m.

Members surveyed

And I am told it could disappear altogether - in time.

The reason is that Co-op Group is embarking on a detailed survey of its 7m members to find out what they expect of the Co-op, and how it should change to meet their needs.

Euan Sutherland, the group's chief executive, tells me that they will be asked whether it is appropriate that their money should continue to be used to support Labour.

He concedes it is by no means certain they will say yes.

Labour's leader, Ed Miliband, cannot really complain that Co-op Group is asking the question, since he has already announced plans for union members to opt in to providing funds to his party, rather than having to opt out, as at present.

But if that million quid a year were to become de minimis, that would intensify a funding squeeze for Labour - which is already squeezing the pips till they squeak, as a former Labour chancellor might put it.

 
Robert Peston, economics editor Article written by Robert Peston Robert Peston Economics editor

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  • rate this
    +1

    Comment number 83.

    81.jgm2

    "Tories and Labour are equally useless and incompetent"

    Precisely!

    Though that begs the question of course - do any of them deserve another turn?

  • rate this
    -1

    Comment number 82.

    This thread is going to last longer than the Co-op Bank will ....

  • rate this
    +1

    Comment number 81.

    78 ComradeOgilvy

    'Which party is paying mothers to breast feed?'

    And how will it be monitored?

    It's as ridiculous as paying children to go to school and they got rid of that stupid idea.

    Tories and Labour are equally useless and incompetent but that doesn't mean we should reward Labour with another turn any time soon.

  • rate this
    +1

    Comment number 80.

    @72. toast
    "What I would like to see is companies who make donations, requiring shareholder permission, of say 50%+ made into law."

    Shareholder permission (by member resolution) has been required since 2001, although a strict majority is not required, just a larger share of the vote in favour than against.

  • rate this
    +1

    Comment number 79.

    A couple of thoughts. Firstly, I have never understood all the fuss about TCB providing banking services to Labour. After all, all political parties have banking facilities, so why should Labour be any different? Secondly, if Co-op shops are too expensive, shop somewhere else...it's as simple as that...!

  • rate this
    0

    Comment number 78.

    77.CC

    Which party is paying mothers to breast feed?

  • rate this
    +1

    Comment number 77.

    When is the BBC going to phase out its support of the Labour party? I joke of course, that will never happen. Still, anything that damages the party of tax, waste, vote bribes and freebies for the undeserving is a good thing.

  • rate this
    0

    Comment number 76.

    @75 splendidhashbrowns

    The £1.5bn shortfall "emerged" this year following some good sense from the FPC (taking over supervision from the FSA). The FPC directed the PRA to ensure more prudent valuation of bank assets and a more rapid adoption of the BASEL III leverage ratios, making full allowance for likely compensation and penalties (on FCA assumptions).

  • rate this
    0

    Comment number 75.

    54.
    treacle_01
    FSA has gone in name but not function "a pig in lipstick and all that".
    I notice you do not take issue with the FACT that auditors receive Directors OPINIONS as to loss provisions and are unable to argue or make comments in the accounts.
    Did any audit of the CooP ever warn about the business not being a going concern? This hasn't just happened in the last few months.

  • rate this
    0

    Comment number 74.

    @70
    "... (including in-kind contributions, 2011: £28,500) were made to The Party to support a range of activities including party conferences. Furthermore, £50,000 was also donated to the Labour Party to support the Shadow Chancellor’s office and a number of donations with a total value of no more than £11,550 were made to support various national and local Labour Party events."

  • rate this
    0

    Comment number 73.

    @70
    "In 2012, an overall financial contribution of £805,000 (2011: £767,000) was made to The [Co-Operative] Party in respect of the annual subscription and support for Party Councils. An additional donation of £10,000 was made to The Party to support activities in advance of Greater London Authority and London Mayoral elections. In addition, a number of donations totalling £28,500..."

  • rate this
    0

    Comment number 72.

    "71.Rich
    Personally I have more time for the Co-op than Wonga but I guess it takes all sorts to make a world"

    You are spot on Rich.

    What I would like to see is companies who make donations, requiring shareholder permission, of say 50%+ made into law.

    This certainlty won't happen whilst the Tories are in government.

  • rate this
    0

    Comment number 71.

    69.toast Don't forget the large contribution to the Conservative Party from the Venture Capitalist with a major investment in Wonga. Personally I have more time for the Co-op than Wonga but I guess it takes all sorts to make a world.

  • rate this
    0

    Comment number 70.

    45.Recall Tian Square
    #42----did you really say "call me thick" ?

    I've just had a bit of a trawl on the co-op website and failed to see any reference to political donations. I don't doubt for a second that they do make these donations (and someone will give provide the link I'm sure), but I certainly don't believe they make a big song and dance about it.

  • rate this
    0

    Comment number 69.

    "prudeboy
    It happens when you dance with the devil.

    How did you think it would end?

    You're going to reap just what you sow"

    You're right, see below...
    The Conservative Party has become reliant on bankers, hedge fund managers and private equity moguls for more than half its annual income since 2010.
    Tells you all you need to know!

  • rate this
    0

    Comment number 68.

    @67
    Precautionary: "the company has not made political donations requiring shareholder authority in the past, and has no intention either now or in the future of making any such political donation or incurring any such political expenditure in respect of any political party, political organisation or independent election candidate" [text relating to Resolution 20].

  • rate this
    0

    Comment number 67.

    @59
    How many people are aware that the parent company of G4s voted to allow political party donations at their AGM in June this year.
    And RP's next article covers Gov contracts.
    http://www.bbc.co.uk/news/business-24909883

  • rate this
    +2

    Comment number 66.

    61.Jonathan

    "My local Co-operative store charges about double what my local Waitrose charges"

    ==

    Really? You must have a very unusual shopping list or Co-op.

    On everyday items I find the Co-op a bit cheaper, but Waitrose offers high end products too, which are VERY expensive (e.g.100g of prunes for £3)

  • rate this
    0

    Comment number 65.

    64.t_01

    "Given that the Co-op Bank's selling point is "ethical", that is the last thing that they will abandon."

    Not their only selling point though. They might for instance start to focus more on "local" and "community", then before you know it...

    In the marketplace, all businesses adapt or die (the qualifier is non-trivial of course).

  • rate this
    0

    Comment number 64.

    @62.Just_the_Fax

    Hedgies want to make money. Given that the Co-op Bank's selling point is "ethical", that is the last thing that they will abandon.

    Not sure about what will happen when they cash out, though.

 

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