The big society and the small state: Co-operative News

There is an old saying, ‘be careful what you wish for – it might come true’.  The co-operative and mutual movement and social enterprise sector may well mull over those thoughts in the months and years to come. 

We are seeing the beginnings of a public sector revolution in which much of the traditional central state will be replaced by a devolved and diverse service provision in which co-operatives, other mutuals and social enterprises play a key role.  We will have to wait and see whether we will be happy with the results.

Much of this transformation comes under the rather shapeless umbrella of David Cameron ‘Big Society’.   But there are widespread anxieties that the social economy sector is being used as cover for massive funding cuts. 

To quote from former Conservative Party leadership contender David Davis, overheard by Financial Times journalists in private conversation: “The corollary of the big society is the smaller state.  If you talk about the small state, people think you’re Attila the Hun. If you talk about the big society, people think you’re Mother Teresa.”  Davis apparently referred to the Big Society as being the “Blairite dressing” to a cuts agenda.

The nature of the Government’s reforming agenda – or more specifically the Conservative Party agenda, developed prior to the election and now being implemented with support from the Liberal Democrats – was made plain by Cabinet Office minister Francis Maude.  “He said he wanted to unleash a new wave of public sector entrepreneurs willing to take over public services as co-ops or mutuals,” reported the Guardian, after interview him. 

Maude explained: “If you look at the last transitions of governments and the way they came in, I would say one of the things that Thatcher regretted was not pushing ahead vigorously enough, and quickly enough, in terms of reform……  Similarly, the Blair government did not just waste its first 100 days – it wasted its first five years.  By contrast we have prepared very carefully. So we are well equipped to hit the ground running”

The signs, and planning, are particularly obvious in the reforms planned for the NHS.  All existing foundation trusts will become commercially-orientated as social enterprises, operating independently from government control.  The Government’s white paper explains: “We aim to create the largest social enterprise sector in the world by increasing the freedoms of foundation trusts and giving NHS staff the opportunity to have a greater say in the future of their organisations, including as employee-led social enterprises.”

The white paper adds: “As all NHS trusts become foundation trusts, staff will have an opportunity to transform their organisations into employee-led social enterprises that they themselves control, freeing them to use their front-line experience to structure services around what works best for patients.”

This policy direction will be supported by an important initiative – the ‘Big Society Bank’.  This will see funds in long dormant bank accounts used to finance social enterprises and other third sector organisations.  Schemes that may be funded through the bank include a community-led renewable energy project, a community centre and co-operatives to run a pub and a business providing digital content.  But while the bank is to be welcomed, it should be noted that this is merely the implementation (under a new name) of a decision taken by the last Labour government.

More impressive is the proposal coming from two ministers in the last Government – David Milliband and  Tessa Jowell – to turn the BBC into a co-operative.  Similarly, other arm’s length public agencies might be evaluated for the potential to turn them into mutuals.  Sadly, though, I see that Liberal Democrat business secretary Vince Cable has rejected the option of remutualising the currently government-owned bank Northern Rock.  A government paper has, more promisingly, referred to the possibility of other areas where mutualisation might be advanced in the financial sector.

In fact, much of the move towards a ‘Big Society’ and mutualisation of public services is to be welcomed.  I support the general policy trend towards breaking up the central state through the use of mutual organisations.  It is positive if the users of public services feel more engaged in deciding how those service are to be run; if staff feel more committed to the services they provide; and if the public ends up feeling more in control, and less alienated from society.  And socialists and co-operators surely cannot complain if all people are expected to pull their weight in society for the common good.

But there are equally clearly many risks for the co-operative and mutual movement and perhaps even more for the social enterprise sector.  Two risks predominate for trade unions.  One is that social enterprises become stepping stones towards full privatisation of public services.  This is potentially damaging for the services and for the social enterprise and mutual movement.  The second is that under-funded social enterprises or mutuals are likely to be forced to implement cuts in staff numbers and pay rates that the state itself might have wanted to impose, but found impossible to achieve.  As these likely trends play out, we may see the Labour Party put itself at a greater distance from the Co-operative Party and from the ideas of mutuality.

Another danger is most obvious with foundation trusts as they evolve into social enterprises – but are equally likely to apply to social services providers.  Some foundation trusts have quickly indicated their willingness to move towards greater income generation as a means of subsidising public services and raising finance for investment.  But at some point we may see these social enterprises providing two-tiered services – one for those who can pay and the other for those who cannot.  The model of ‘co-payment’ (raising more in contributions from service users, while maintaining an essentially publically funded service) has been raised repeatedly in recent years by public service think-tanks.  But the model would be far easier to implement by an arms length body operating on contract to the Government, rather than by a public agency itself.  The social enterprise, in other words, could be the ‘fall guy’ for adopting unpopular policies.

There are further risks to public services from the fact that a greater expectation is being placed on social enterprises and the voluntary sector at exactly the time when their funding – particularly from local government – is being slashed.  Councils, social housing and regeneration projects face the most swingeing of the public funding cuts – all with major negative impacts on the voluntary sector and social enterprises. 

Everything may, of course, all end for the best for public services, for mutuals and for social enterprises.  I hope it does.  I am, though, a long way from confident.  I try to avoid being tribal and I am happy to remind readers that in the distant past I was a Labour and Co-operative councillor.  But I fear that David Davis has it about right.