Government turns to co-ops to deliver

Posted on October 2, 2011 · Posted in Re:act (Co-operative Group)

The UK’s Coalition Government came in with a ‘big idea’ of the ‘Big Society’ – and also a massive problem of a massive financial deficit. The idea and the problem since the election coalesced into a important initiative – to turn public services into co-operatives.

Yet there is widespread confusion about the so-called ‘Right to Provide’ (also called the ‘Right to Run’), under which public sector staff can bid to convert their services into co-operatives, or another type of mutual. Nor is there universal support for the idea – even from within the co-operative movement.

Much of the difficulty comes from history. There is a Co-operative Party, which grew from the consumer co-operative movement. This is allied to the Labour Party and was traditionally seen as one of three strands of working class struggle – alongside trade unionism and Parliamentary / political representation. Many members of the Co-operative Party are therefore instinctively hostile and distrustful of an initiative coming from the Conservative and Liberal Democrat coalition government.

The Liberal Democrats have a long-standing commitment to the co-operative cause, which they see as a ‘middle way’ between free market capitalism and militant trade unionism – in which the two forces can be brought together into a management of compromise.

For the Conservatives, interest in co-operatives is recent, but genuine. A new breed of Conservative politician has not rejected the legacy of Margaret Thatcher in terms of economic policy, yet takes a more socially inclusive approach to politics. They have disowned a notorious claim by Thatcher that “there is no such thing as society!” and are instead looking to the community sector – including co-ops – as a means of strengthening society.

The leading exponent of the new Conservative approach is MP Jesse Norman. In a recent interview with trade magazine Co-operative News, Norman explained his support for co-ops. “They are entrepreneurial and not part of the state alternative,” he said. “If you look at other countries like the US, the idea that co-ops are intrinsically left-wing is just not the case. I don’t think the fact that co-ops don’t have shareholder capital and distribute their surplus makes any difference at all.”

A similar view has been put forward by the Government minister in charge of ‘Right to Provide’, Francis Maude. For him, the transfer of services to their own employees is part of a drive to cut costs by getting the private sector to deliver public services on contract. However, to avoid connotations of past political conflicts, the word ‘privatisation’ is seldom used by ministers.

Yet the debate is not fully formed. The terms ‘co-operative’ and ‘mutual’ are thrown around, without the public – and possibly even some of the politicians – understanding what these mean. There is, for example, a world of difference between a workers’ co-operative and a consumer co-operative. It is difficult to see how a workers’ co-operative would overcome the public sector problem of ‘producer capture’ – the interests of managers and staff being prioritized over those of service users.

And probably very few people understand what a ‘multi-stakeholder co-operative is (it brings together representatives of workers, consumers and the community to manage the business in partnership – it is sometimes used in Britain and Scandinavia to operate children’s nurseries and schools). The word ‘mutual’ confuses people even more, especially for those used to reading about ‘mutual funds’, where it has a very different meaning. (A ‘mutual’ is an organization owned by its workers, customers, or in some shared arrangement.)

To muddy the situation further, some transfers may be made to ‘social enterprises’ – businesses that have a social purpose, rather than an over-riding profit motivation. But the details of definition are often hotly contested.

In order to make progress with the ‘Right to Provide’ programme, the Government has now created a working group to look at the practical challenges and to provide expert support. One of the group members is Ed Mayo, secretary general of Co-operatives UK. He shares the concerns about the lack of understanding within government of co-operative principles and the differences between different mutual structures.

“It’s quite a fundamental issue,” he says. “Where it matters particularly is where you have a privatisation of a public service. The coalition government does not see that sharp a difference between mutuals and wider forms of private business.”

Yet there are key differences – one of which is that a co-operative or other mutual is likely to have much greater difficulty in obtaining sufficient start-up and working capital. Another is that an existing large-scale private contractor could walk in and manage a public service – existing workers providing that service are unlikely to possess the range of suitable expertise without substantial support and advice from outside. It may take a long time to build workers’ capacity to fulfil the ‘Right to Provide’ and initial proposals under the initiative have tended not to be fully formed.

Mayo is worried that without access to development and financial support, emerging public service co-ops run the risk of failing; of being taken over quickly by a commercial competitor; or of requiring permanent public financial subsidy. Both government and the co-operative sector itself need to understand that converting public services into co-operatives is a time-consuming and challenging operation, he says. Mayo explains: “The pioneers have had to walk through treacle, because there are fundamental barriers to overcome.”