History Repeats Itself

During the 1970s to 1990s, as social enterprises, most cooperatives and mutuals were registered under Industrial and Provident Society and Industrial Common Ownership rules. Yet between 1998 and 2002, the wider cooperative and mutual movement almost allowed these structures to be swept aside.

As shown below, with Public Service Mutuals, this is now happening all over again – and Paul Myners is definitely not to blame.

Rory Ridley Duff and Cliff Southcombe show in The Social Enterprise Mark: A Critical Review of its Conceptual Dimensions Appendix A (November 2011), (1) that almost all the Founders and Initial Directors of Social Enterprise London on Monday 26 January 1998 had a cooperative background. As they write:

“In this statement of objects, the influence of the co-operative movement and New Labour are evident. Terminology remains characteristic of socialisation (e.g. participatory democracy, co-operatives, co-operative solutions) and this reflects the orientation of the co-operative development agencies and worker co-operatives that collaborated in its creation”

Three years later, cooperatives and mutuals were still in the headlines. In January 2001, in “The Cooperative Advantage: The Report of the Cooperative Commission(2) with an introduction by Tony Blair and chaired by John Monks, TUC General Secretary said:

“The Commission is recommending that a ‘Social Enterprise Summit’ should be held in 2001, hosted by The Co-operative Bank with the support of the Co-operative Union and the UKCC. The Summit should bring together social enterprise partners and representatives from the retail sector from around the UK, the Labour Party and the Trade Union Movement to discuss in depth how to pursue further co-operation between all sections of the Co-operative Movement in the UK”.

Despite this national significance and prominence of those with cooperative and mutual backgrounds, Jim Brown, in a presentation ‘Defining Social Enterprise’ to a Small Business and Entrepreneur Development Conference at the University of Surrey in 2003, (3) explained how by the time the Department of Trade and Industry set up a Social Enterprise Unit in October 2001, its initial definition of social enterprise “challenged the cooperative movement’s right to be included under the social enterprise umbrella”:

“We should not rule out a business because it has part share holders [sic], providing its primary purpose is not simply to deliver share holder value, nor include a business just because it is run as a co-operative”

For coops and mutuals, there was worse to come. When in July 2002 the Department of Trade and Industry issued “Social Enterprise: A Strategy for Success” (4), its first ‘official’ definition said:

“A social enterprise is a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners.

“There is no single legal model for social enterprise. They include companies limited by guarantee, industrial and provident societies, and companies limited by shares. Some organisations are unincorporated and others are registered charities.”

‘Social Enterprise’ loses its Meaning

In other words, the insertion of “principally” was the best that the lobbying efforts of the wider coop movement could achieve. From then on, as shown below, ‘social enterprise’ as a definition gradually lost its meaning for coops and mutuals and deteriorated in public recognition.

Fast forward to 2008 and Emma Carmel and Jenny Harlock in “Instituting the Third Sector as Governable Terrain” (5) were writing:

“…For the central state, procurement means that the same process is adopted for contracting-out service provision for all providers, irrespective of whether they are private sector (known as ‘mainstream’) or Third Sector providers. ….. Not only does the definition of the Third Sector specifically extend to include Social Enterprises, but Social Enterprise has explicitly been adopted as a generic name for Third Sector organisations working in partnerships”.

By May 2013, in a BMG Research Report for the Cabinet Office “Social Enterprise Market Trends” (6), produced for the Lough Earne June 2013 G8 Summit focus on Social Investment, the Cabinet Office had become even more ingenious:

“For this reason, this report will focus on both those enterprises who consider themselves a very good fit to the social enterprise classification, and also those enterprises who consider themselves a ‘good fit’ to the social enterprise classification (which includes both those enterprises who think that are a ‘very good fit’ and ‘quite a good fit’, to the social enterprise definition)”.

In other words, call yourself a “Social Enterprise” if you feel like it. According to the Cabinet Office Report, this produced no less than 688,200 “good fit” SME Social Enterprises, including 508,700 with no employees.

No wonder that in the British Council’s “What will Social Enterprise look like in Europe by 2020(7), published in December 2013 on page 7:

“There may well not be a recognisable ‘social enterprise sector’ by 2020. Certainly any attempts to confine social enterprise to specific legal structures or models of governance will have ceased”.

There’s no need to wait till 2020. Already, except in Scotland – where a different and definite Social Enterprise Code continues – most people no longer know what a social enterprise really is. As the section below shows, with pressure for Public Service Mutuals, coops and mutuals are going the same way.

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Public Service Mutuals

Driven by Coalition Government policy of outsourcing services to secure cheaper delivery, the concept of Public Service Mutuals is already undermining the meaning and public acceptability of cooperatives and mutuals. Many now openly deride them as “pretend mutuals”. The following represents an abbreviated list of organisations and initiatives, funded by the Cabinet Office, with its Mutuals Information Service and Mutuals Taskforce, whose members include Social Enterprise UK and Coops UK, including a £10mn Mutuals Support Programme, with contracts awarded till March 2014

Though Coops UK has jointly with the TUC belatedly published guidance on “Public Services, Cooperatives and Mutuals”, its Chief Executive Ed Mayo, with Ruth Lea from the far right Institute of Directors in 2002 wrote “The Mutual Health Service: How to Decentralise the NHS” (8) which proposed a significant expansion of the principles underlying Foundation Trusts:

“The autonomy of financial management, within a regulatory framework, is a basic guarantee of the ability of NHS mutuals to achieve their results in the way they feel is best. (p24)”

“There should be a Health Regulator supervising the NHS. One of us (Ruth Lea) has already proposed that the role of the NHS as such should be to become the regulator and funder”. (p25)

Parts of this could have been written by Andrew Lansley as a forward to his Health and Social Care Act 2012, which under Jeremy Hunt is now dismantling the NHS.

With friends like these, no wonder that Cabinet Office Minister Francis Maude in his Robert Oakeshott Memorial Lecture on Tuesday 25 March 2014 (9) was able to boast:

“4 years after the last general election, the number of mutuals has increased tenfold to nearly 100. Between them they employ over 35,000 people, delivering around £1.5 billion worth of services. They’re in sectors ranging from libraries and elderly social care to mental health services and school support. They range in size from a handful of staff to upwards of 2000 staff”.

Royal Bank of Scotland SE100 Quarterly Data Report March 2014 (10) reported that Health and Social Care spinouts are growing rapidly:

“The health and social care sector is big and it’s growing fast: 15.8% of SE100 members state that this is their primary business market, making it the single largest business market on the Index according to the number of organisations; the sector’s mean growth is 121%, compared with 42% for the whole Index.

“…What’s particularly interesting about this sector is that it’s not at all reliant on grants or fundraising – 97% of the income for organisations in this sector comes from local authority or health service contracts, compared with 36% for the Index as a whole.

“One of the most significant types of organisation in this sector is the public sector spin-out – created by entrepreneurially-minded local authority or health service employees leaving to set up their own independent social enterprises which then deliver the same public services under contract with the local authority or health service commissioner”.

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Reports on Public Service Mutuals

The UK Government has secured amendments to the new EU Procurement Directive, which came into force on Thursday 14 April 2014 and which initially allows the reserving of contracts for Public Service Mutuals – though these will later be retendered in open competition.

Huckfield supports trade unions in their resistance to this whole process, which is widely seen as a Government and local council response to austerity through outsourcing, cutting jobs and deteriorating pay and conditions.

Reports which follow include some from those closely involved in implementing the policy of Public Service Mutuals.

University of Northampton and London South Bank University

One of the most significant pieces of research on spinouts is Public Service Spinouts 2014: Needs and Wants (11) published by the Transition Institute, University of Northampton and Collaborate (London South Bank University). This detailed Report, based on 66 organisations from 201 (a 33% response rate) shows that under Right to Provide, Right to Request and the Mutuals Support Programme, considerable funding has been made available to form what are now generically known as Public Service Mutuals:

“Nonetheless, the aforementioned marketisation of the public sector means that spin-outs must compete with private and third sector organisations for contracts to deliver services”.(p12)

The Report defines a Public Service Mutual:

“An organisation that has transitioned out of a public sector body to become an independent public service provider. Spin-outs tend to prioritise the maximisation of social value within their services and usually take the structure of a co-operative, mutual or social enterprise”.(p18)

47% were in the Health and Care sector and 32% were in Leisure (p19)

“The results …identify that the main triggers for spinning-out were budget cuts, a decision made by the parent authority and/or a service management decision. The need to restructure a service, the existence of policy frameworks and local political support also all scored highly”.(p21)

“During the decision to spin-out the parent authority and the service management were the most involved stakeholder groups.”(p22)

“Though 38.5% were Companies Limited by Guarantee, 50.8% were either Community Interest Companies or Companies Limited by Shares (p24)

“Beneficiaries and to a lesser extent service staff are less involved (or excluded) in the decision to spin-out, but once this decision is made they are increasingly involved in strategic decision-making. This offers support to prior research that identified the importance of engaging service staff but suggests that this need (and de facto engagement) may be in flux” (p35)

Page 41 of this detailed Report concludes:

“Indeed, the participants in this research identified a number of serious concerns relating to the future sustainability of the sector and felt that action was needed to remedy them.”

The same page identifies:

“A lack of perceived political support for spin-outs”

Lack of consultation and the emerging structures in this detailed Report on Public Service Mutuals do not represent a resounding tribute to the principles of cooperation and mutuality!

Pioneers Post

Pioneers Post is normally an avid supporter of all these developments but on Wednesday 07 May 2014 Simon Denny from the University of Northampton painted “a picture of sustainable growth with serious challenges”:

“This is not the march of the mutuals
“I believe that this report brings into focus a key issue at the heart of spin-outs: what are they supposed to do? If the UK wants successful new businesses driven by the desire to serve the public, spin-outs seem to be capable of fitting the bill. However, if we we’re expecting these organisations to be mutuals, or new worker-managed organisations with extensive and formalised community engagement, then we may not get them”

National Audit Office and Articles in peer-reviewed Academic Journals

National Audit Office Report on Establishing Social Enterprises under the Right to Request Programme June 2011: (12)

(p18) “While the options set out by the Department were not intended to be exhaustive or prescriptive the guidance did, in effect, steer some PCTs towards using a Social enterprise model. The Department told us Right to Request proposals took precedence over other models to provide protection for staff groups that may otherwise have been ignored.”

In “Jumped or Pushed: What Motivates NHS Staff to set up a Social Enterprise”, Kelly Hall and colleagues describe New Labour’s “Transforming Communities” and the “Right to Request”: (Hall et al., 2012) (13)

(p56) “This is evidence of a top-down led venture, with a limited amount of choice being exercised by these respondents as changes within health policy “pushed” some them into forming social enterprises. As one respondent expressed it, … there wasn’t anywhere else to go”.

In a further review – “New Development: Spin-outs and Social Enterprise: the ‘Right to Request’ Programme for Health and Social Care Services” – Robin Millar and colleagues concluded: (Miller et al., 2012): (14)

(p 236) “However, as a minimum, the Right to Request scheme provides an example of a process through which Governments can spin out public sector services in the face of po-tential large-scale opposition from unions and existing healthcare institutions and professionals”.

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Conclusion

Like Paul Myners, Huckfield was brought up in a household dependent on the Coop.

Genuine coops, mutuals and social enterprises – democratically set up and controlled by their members rather than prompted by Cabinet Office funding and local council responses to austerity – deserve support.

But Public Service Mutuals, like Social Enterprise, are becoming a term of public derision, killing off what’s left of the cooperative and mutual idea.

REFERENCES

(1) Ridley-Duff,Rory; Southcombe,Cliff: “The Social Enterprise Mark:A critical review of its conceptual dimensions” Institute for Small Business and Entrepreneurship Conference, Sheffield November 2011

(2)“The Cooperative Advantage:the Report of the Cooperative Commission”. Chaired by John Monks, TUC General Secretary. January 2001

(3) Brown,Jim “Defining Social Enterprise”, Small Business and Entrepreneur Development Conference, University of Surrey 2003

(4)“Social Enterprise: A Strategy for Success” July 2002. Department of Trade and Industry

(5)“Instituting the ‘Third Sector’ as a Governable Terrain: Partnership, Procurement and Performance in the UK”: Carmel, Emma; Harlock, Jenny. Policy & Politics, Volume 36, Number 2, April 2008, pp. 155-171(17)

(6)BMG Research: “Social Enterprise:Market Trends” 2013, Cabinet Office, May 2013

(7)Ingram-Hill,Simon; Woodman,Paula; Benians,Stephen: “What will Social Enterprise look like in Europe by 2020?” 2013, British Council, Manchester

(8)“The Mutual Health Service: How to Decentralise the NHS” 2002 Ruth Lea and Ed Mayo. Institute of Directors and New Economics Foundation.

(9)Maude,Francis: 2014 Robert Oakeshott Memorial Lecture on Employee Ownership and the Future of Public Services Tuesday 25 March 2014.

(10)Royal Bank of Scotland “SE100 Quarterly Data Report March 2014”, Royal Bank of Scotland, London

(11)“Public Service Spin Outs 2014: Needs and Wants” May 2014 Richard Hazenberg for the Transition Institute, University of Northampton and Collaborate (South Bank University)

(12)National Audit Office 2011. Department of Health: Establishing Social Enterprises under the Right to Request Programme In: Comptroller and Auditor General (ed.) National Audit Office June 24 2011 ed. London National Audit Office

(13)Kelly Hall, Robin Miller, Ross Millar, (2012) “Jumped or pushed: what motivates NHS staff to set up a social enterprise?”, Social Enterprise Journal, Vol. 8 Iss: 1, pp.49 – 62

(14)“New Development: Spin-outs and Social Enterprise: the ‘Right to Request’ Programme for Health and Social Care Services. 2012. Robin Miller, Ross Miller and Kelly Hall. Public Money and Management, Volume 32 (3) pp 233-236

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