Public sector cuts – a co-operative solution: Accounting & Business

“This is the biggest shift of power from government to people since the right to buy your council house in the 1980s,” said shadow chancellor George Osborne.  The grand claim was a reference to a radical proposal to transform public services by giving workers a right to convert state services into workers’ co-operatives.


As the Financial Times said, the Conservative’s proposal “wrong footed” the Labour Party.  Co-operatives are not merely a central part of Labour Party philosophy, co-operative leaders helped create the Labour Party and the Co-operative Party is still affiliated to it.  Criticising the proposals outright was therefore not an option for senior Labour figures.


Education secretary Ed Balls, himself a Labour and Co-op MP, recognised the political difficulties of the Conservative’s proposals.  The idea, he said, “is a really good one” – and, he claimed, copied from the Government.  He pointed to the success under the Labour government of co-operatives providing out-of-hours cover to GPs. 


There are other examples of both the Labour government and Labour councils using co-operatives and social enterprises (businesses motivated by social objectives) to run public services.  The most high profile example is foundation hospitals, which are modelled on co-operative principles and intended to involve substantial engagement from patients.


Around the country, about a third of councils have outsourced leisure services to social enterprises run by staff.  They have attracted greater engagement and initiative from staff and as charities they do not have to pay rates or charge VAT (so can keep more of their income for re-investment).


There are other examples of the current government using such approaches to reform public services.  A Social Enterprise Unit was established in the Department of Health to support workers taking over parts of the NHS to run as free standing social enterprises, contracting services to NHS trusts. 


Despite this, there was strong criticism of the Conservative proposals by many within the Labour and Co-operative parties.  Concerns were expressed, in particular, that the model of co-operatives promoted by Conservative politicians was for the services to be run by workers, while some Labour Party proposed reforms used a model in which service users have the majority voice. 


Academics often refer to the problem of ‘producer capture’ – that the people who run public services may prioritise their own concerns and convenience over the rights of service users.  While those concerns are clearly reasonable, the leisure services experience shows this can be overcome with effective management and tight contracting.


And the Conservatives’ ideas for public service reform are not restricted to the use of workers’ co-operatives.  They also want to promote the creation of ‘co-operative schools’ – where parents would have the dominant say.  They are also calling for the formation of what they term ‘the Big Society’ – in which much more support for vulnerable people is undertaken by the voluntary sector, rather than the state.  In this way, state services might also be transferred to the third sector.


Within the context of the overpowering fiscal crisis, it looks likely that whichever party forms the next government that there will be massive spending cuts, further public service reform and the transference of many services out of the hands of the state. 


While there may be differences in detail between how a Conservative or Labour government might achieve this, it would probably be wrong to characterise those differences as matters of philosophy or ideology.  In truth, it is a direction of travel for both the main parties.





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