Friday, 30 January 2015

Do the FCA's new guidelines threaten community co-ops?

Guardian columnist George Monbiot has kicked off a small storm with claims that the new FCA guidelines for mutual societies, following on from the recent Co-op and Community Benefit Societies Act, has sabotaged the growth of the community energy sector. Is it true?
Mostly no, with a bit of yes. It is not the case that community energy societies have lost the ability to attract investors with decent returns on investment. Social Investment Tax Relief, which is taking the place of Enterprise Investment Scheme Tax Relief for community energy, is just as good. It can only be claimed by Bencoms, but that is not a disaster: as the approval of our model rules shows, they can be just as co-operative as co-op societies; they have an asset lock to frustrate carpetbaggers; and given that all electricity is pooled in the national grid, 'community benefit' does better describe their purpose.
But it is true that the FCA is sending mixed messages about limits on interest payments. A restatement of the law ('no more than is necessary to attract and retain investment') is apparently contradicted by repeated references to savings accounts rates. It is also the case that community co-ops are treated very poorly: as Bencoms, they can't use the word 'co-operative' in their name; and as co-op societies, they can't have non-material transactions alone with their members.
Our submission to the FCA (which incorporates much of the excellent Co-ops UK response) is intended to clear these points up. In the meantime, it's business as usual.