Big society versus new mutualism

27 February 2013 | Advocacy, News

Peter Hunt’s article for Australian Policy online

‘Big Society’ has been a flagship policy of the UK Coalition Government, centred around ideas of localism, volunteerism and devolving government service delivery to public sector mutuals. In low revenue environments, public sector mutuals offer a potential panacea to the rising costs of essential services in areas such as disabilities, health and education, whilst delivering the much touted benefits of community management structures.

Mutuals are organisations that are owned by their customers, their employees or a mixture of the two. They exist to serve them instead of shareholders. Co-operatives are one form of a mutual organisation. A landmark research project by The Australia Institute in 2012 (“Who knew Australians were so co-operative? The size and scope of mutually owned co-ops in Australia”) found that while 80% of Australians are members of co-operatives or mutuals, only 20% were aware of their connections.

In the UK, there are now 66 public sector mutuals providing about £1billion of public services. Peter Hunt, CEO of Mutuo, a peak body advocating for mutual approaches to business and public policy in the UK, reflects on the outcomes of the Big Society agenda in light of the trend to empower state employees rather than service end-users.

The fanfare around the (UK) Prime Minister’s ‘Big Society’ initiative in the UK has obscured some confused thinking. On the face of it, the idea of people doing more for themselves and indeed for their communities has a certain universal appeal. We like the idea of volunteering even if we ourselves don’t participate – so the notion that we could reduce the cost and increase the quality of delivering public services by engaging in more voluntary, co-operative activity is attractive. And it is a fact that overall, volunteering is on the increase in the UK with participation levels up and positive memories of London Olympic Games-Makers still strong.

We might have expected a slew of Government initiatives aimed at encouraging more of us to participate – incentivised policy that helps to build the reality of a virtuous circle between public service users, providers and funders. Local co-operatives and mutuals that engage service users would be the ideal vehicles for this type of delivery.

But though this message of public spiritedness has been a strong part of Government communications around the ‘Big Society,’ there is a real disconnect with actual policy initiatives. In fact, most measures under the guise of public service reform have been about empowering state employees rather than service users.

Let’s take a look at how the Government has interpreted its own Big Society policy in terms of its actions.

The Cabinet Office is supposed to be the unifying ideas engine of Government and it is responsible for delivering on the Big Society. On the face of it, it understands that for the Big Society to succeed, it needs new and different providers of public services. It argues that there should be more mutuals and co-operatives at the sharp end of provision and established a Mutuals Task Force and Mutuals Information Service, with grants to start ups available to facilitate the conversion from state or municipal authority into a ‘mutual.’ It is a good story, but on closer examination we start to see the strategy fall apart.

The problem is that the Cabinet Office has unilaterally re-defined ‘mutual.’ Much taken by the success of the middle England, middle class department store and food retailer John Lewis, it has decided that mutuals are synonymous with employee owned businesses. True, these firms are a part of a rich tapestry of mutual business in the UK, but this is more than a simplistic error. Employee owned mutuals, on even the most generous estimate, make up less than a quarter of the total mutual business sector.

The mutual sector is in fact dominated by customer owned mutuals such as co-operatives, building societies and friendly societies, for example. And the clue is in the name – customers i.e. the end users and those who pay for the service are the focus of these bodies, not their employees. Mutuals based on these principles are the very embodiment of the Big Society in action, yet they have so far been ignored by Government.

A new mutual that has been established – the radical tenant/employee community partnership at Rochdale Boroughwide Housing was refused support from the Cabinet Office when it sought pilot status. It just did not fit their criteria of a mutual. It was delivered instead by the sheer will of the organisation and with support from the mutual sector, leading to 13,000 homes being transferred to the new mutual following a 75% positive vote by current tenants.

Further, the Coalition has adopted a year zero approach to pre-existing public service mutuals. The previous 10 years had seen a huge growth in new mutuals providing public services – in health, education and local government services – almost entirely based on a customer focused model that built employees into the mutual structure, but did not permit them to dominate it. These mutuals exist for their customers, they involve them in their governance and they operate with their active consent.

Between 2004 and 2010 many such mutuals were established; over 130 NHS Foundation Hospitals, more than 400 Co-operative Trust Schools, many new mutuals in local government services and social housing, community mutuals such as football supporter trusts combining a total public membership of over two million citizens.

Being critical of the Cabinet Office is one thing, but what of other Government departments? Each has read the memo about promoting voluntary activity, but few know what this means for them. This is mainly because they have received a previous order – they have to cut their spending. So they have a dilemma. How do they simultaneously cut costs and promote more co-operative action?

Take local government funding. It has been deeply cut (%) with more to come. Councils have to cut out non-essential services (they are left without direction on how to achieve this) in order to protect their local priorities. For some, just letting someone else do the service is enough – spin it out, cut the budget, make central administrative savings and then let the new service organisation compete in the big wide world, with the market ensuring that value for money is achieved. A small number of employee owned mutuals in local government have been supported by the Cabinet Office, but they have as yet made little impact. They are just too small scale.

The Department of Work and Pensions is also keen for non-governmental bodies to provide public services, funding private operators to administer job seekers. A similar approach is being taken in the Ministry of Justice for probation services. Both bear more resemblance to traditional out-sourcing to private firms, involve big ticket public service contracts and do not pursue the potential for Big Society solutions.

Away from the Big Society initiative the Education Department’s free schools policy, which promotes genuine bottom-up programmes, has led to the establishment of 79 new community owned free schools, but even this has been pursued whilst ignoring the existing co-operative schools movement.

So let’s come back to the beginning and ask how this public service reform activity fits with the Government’s vision for a Big Society? Surely the Government should be supporting models that empower co-operative endeavour and mutual objectives? It seems that the Government’s real objective of promoting mutuals has been to try to make entrepreneurs of public servants, make them more business-like and efficient. Any spun out services are then encouraged to compete with other providers in the increasingly competitive market for public service contracts.

It is ideologically driven and at odds with the vision of the Big Society, and has more to do with the mantra that privately owned business is the most efficient.

In simple terms, ownership matters to how a service is provided. It is a fact that the ownership structure of a business will decide its primary purpose. If shareholders take the risk and invest in a firm, then it will primarily exist to serve their interests. It will seek to make profits that pay them back in dividends and higher share value. On the other hand, if a firm is owned by its customers, whose interest is in the quality and availability of what it can provide, then it will naturally concentrate on trying to satisfy them. In practical terms, it will seek to maximise their satisfaction by charging the lowest prices for the desired quality.

This is the basic difference between investor owned and co-operative types of business. One is not better than the other, they are just useful for different things, the trick is matching the business form to the outcome that is being sought. It should not be a revelation that alternative business forms exist; they have for centuries. What is surprising is that so few politicians really get it.

So for the Big Society, we may have conclude that the popular story it set out has not been connected with thought through policy. It certainly has lacked a coherent understanding of how to engage users in public service delivery. It is a disappointment that Government has not done better with this worthy idea, but new and existing mutuals will continue to grow and prosper with or without Government help – it is just that progress will be slower.

Peter Hunt will be discussing the role for mutuals in Australia’s new economy at a business breakfast on Wednesday 6 March.

The original article can be found at Australian Policy Online.