When Mutuo was established in 2001, the UK had just been through a major wave of de-mutualisation. This had a big effect on the mutual sector, with many building societies and friendly societies converted to publicly listed companies. As a consequence, the number of mutuals and their market share, particularly in financial services, fell dramatically.
The state of the sector in 2001
Many politicians and policy makers thought that the co-operative and mutual sector was insignificant and would soon be gone. They thought that it was an interesting 19th century idea that was now out of date. Consequently, policy makers and regulators had disregarded co-operatives and mutuals; the legislation was out of date and regulation was designed around joint stock companies. It appeared that the prevailing view in the United Kingdom was that listed firms were the ‘right’ way to do business.
Mutuals felt demoralised and lacked confidence.
The establishment of Mutuo
It was against this backdrop that Mutuo was established. Leaders of progressive mutuals came together to establish Mutuo as a counterbalance to these negative trends – to educate and persuade politicians and decision makers about the vital role that mutuals were playing in the UK economy.
Very quickly, a simple strategy was adopted to highlight the positive impact of mutual businesses through Mutuo’s advocacy and research work. Crucially, it would take the step of fostering a new and positive experience of mutuals by creating new mutuals in interesting and important policy areas. Mutuo sought to present mutuals in the best way possible by using mutual business ideas to help solve politicians’ problems for them.
Towards new mutuals
Building on the successful project to create football supporter trusts – mutuals that were enabling football fans to take an ownership stake in many professional clubs. Mutuo sought out new areas in which to develop new mutuals.
The reform of public services provided an immediate opportunity to establish new co-operatives and mutuals. The state had grown significantly after the Second World War, with new national services provided by the Government – health, education, social services, not to mention significant utilities such as gas provision, electricity generation and supply, telecommunications and transport. All were provided by state businesses.
This position was maintained until the late 1970s, when a fierce debate ensued about the efficiency of providing public services. It became a binary discussion about public sector versus private business provision. Under Mrs Thatcher, the privatisation argument succeeded, and many Government businesses were sold off into the private sector, the majority of them converted into joint stock companies. This model became ‘The’ business model of choice and the process greatly assisted the argument for those wishing to demutualise co-operatives and mutuals.
Under Tony Blair, the need to make those services which remained publicly owned more efficient was still accepted, so different reforms continued. New arms-length bodies were established in health, housing and education, in an attempt to copy the management rigours of the private sector without leading to the sell-off of public assets.
It was clear that the political impetus for the reform of public services meant that co-operatives and mutuals had a new opportunity to be seen as modern and effective business models. Government wanted to create public service providers that were business-like and efficient but retained their accountability to service users and other stakeholders. Mutual structures offered a key to this.
Mutuo worked with experts from the co-operative sector and from within the relevant public services. It developed new mutuals to provide public services in housing, health, education and a range of local government services.
In addition to this, one in three citizens was still a member of at least one mutual. Mutuals remained significant players in the mortgage and savings markets, businesses were performing well – the co-operative sector was undergoing a renaissance and many people remained committed to firms that operated in the interests of their customers.
Mutuals since 2010
This rebirth of the mutual sector has led to a dramatic turnaround in the attitude of politicians. In the 2010 general election, all parties pledged to support the mutual sector and to adopt policies that would promote co-operatives and mutuals.
Since then, the Coalition Government has written its commitment to promote mutuals and ensure a diverse financial services sector into its plan for Government. It is only the start, but provides a solid platform from which to build.
The mutual sector today
The financial crisis that began in 2008 caused a major shock to the economic system and also challenged many people’s views of the ownership of business. The failure of the joint stock model in financial services and the attendant risk to the economy led policymakers to view mutuals and co-operatives more positively. They had not contributed to the economic crisis and had fared better throughout it. The tight fiscal squeeze has focused minds on the need for more efficient and accountable services. The strong positive business performance of co-ops and mutuals has helped to bridge the understanding of the value of our business models.
By 2012 more than 130 NHS Foundation Trusts had been created, 10 community housing mutuals, over 400 co-operative trust schools, youth service, leisure service and child care co-operatives.
In all, more than two million people have joined these new organisations, which have added over £30 billion to the annual turnover of the sector. This process is continuing; currently Mutuo is involved with the largest public sector mutualisation of all: the conversion of Post Office Limited.
New mutuals have become popular and have started change how the long established sector was understood and the world in which these firms operate has also changed.
Today, in stark contrast to 10 years ago, there is a new political opportunity for mutuals. Public services continue to be transferred from the state to these new bodies and now the political parties wish to be seen to be supportive of the sector and helping to promote a plural business economy, with many types of firm.
We can say that this approach has had a strong beneficial effect for the UK mutual sector. From a low position, there is now a political consensus for co-operatives and mutuals. Hundreds of new mutual businesses have been established in areas where services had previously been provided by state or municipal authorities. These mutuals are popular, with a new level of engagement between management, customers and staff.
Over ten years this approach has worked well for the UK mutual sector and has transformed the political backdrop to the work of mutual businesses. The political parties are more aware and supportive of the sector and this has led to a new positive relationship between the long-standing co-operative and mutual businesses and Government. There is much to do, but mutuals are now in a position to grow in size and influence.