Harnessing Mutuals in the Public Sector

Harnessing Mutuals in the Public Sector

13.05.2013 Blog

In March 2013 ResPublica published a new essay collection entitled ‘Making it Mutual: The ownership revolution that Britain needs.’ Within its pages, policy-makers and practitioners call for a radical shift toward an economic model which extends ownership to all, a model embodied by co-operatives and mutuals. The collection contains essays that cover all areas of public policy, and that propose entrepreneurial and innovative proposals for reform within this context.

For the uninitiated, mutuals are organisations that are owned by, and run for the benefit of, current and future members. This can include both employees and service users. Co-operatives are similar, however these organisations usually commit to co-operative principles of self-help, self responsibility, democracy, equality, equity and solidarity. The International Co-operative Alliance defines a co-operative as being ‘an autonomous association of persons, united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise.’  Essayist Jonathan Bland defines such business models as social enterprises as they are socially owned, and benefit members rather than shareholders.

Since 2010, the number of public service mutuals in England alone has increased from 9 to at least 66, delivering around £1 billion worth of public services in a development which has attracted broad support from all parts of the political spectrum. Largely positive media coverage has stressed the value of mutuals in harnessing staff innovation, explaining that co-operative models allow staff to make decisions quicker and then have the flexibility to put these ideas to the test. In particular, mutuals are thought to have value in cutting through a large amount of bureaucracy and empowering staff to experiment.

The recent implementation of the Public Services (Social Value) Act in the UK requires public bodies to consider social value in the pre-procurement stage of commissioning of services. It is argued that these provisions offer a real prospect for mutuals and co-operatives to win a greatly increased number of public sector contracts. The government has created a Mutuals Information Service and a Mutuals Support Programme to provide advice and assistance, along with a Mutuals Task Force to ‘engage with, challenge and promote the work of Government to support the creation and development of public service mutuals’. Advocates suggest that the resulting difference in organisational cultures, increased levels of staff commitment and involvement of users in creating service delivery will result in improved services, productivity gains and savings that can be reinvested in creating social value.

In the collection, contributors  look in detail at the potential for co-operatives and mutuals to prove transformative in specific areas of public policy. So far, they have been adopted most enthusiastically within the National Health Service. Andrew Burnell looks at the example of City Health Care Partnership Community Interest Company (CHCP CIC) in Hull, which was formed in early 2006. It now trades as an independent for-profit company, where profit is reinvested into staff, services and the community. Each member of staff is also given the opportunity to buy a share in the business for £1, on a one share-one vote basis. As a result of these changes, Burnell describes how staff sickness and turnover has reduced, while efficiency targets have been met. The company has also had their ‘social value’ as a business externally measured, which suggested that that for every £1 that was invested into local communities, there was a £28 return generated. In addition, while central targets have pushed for larger procurements to save money, CHCP CIC has instead channeled 80% of purchases into the locality. These kinds of external benefits generated by mutuals will become even more politically salient given that the Social Value act explicitly calls upon government to consider how commissioned services might impact upon the economic, social and environmental well-being of the area.

One area in which it is suggested that these business models might prove particularly innovative is that of criminal justice. Currently, a very high proportion of those sent to prison go on to re-offend upon their release, and ministers are increasingly keen that there should be a ‘rehabilitation revolution’ within the justice system, which would have the parallel financial benefit of exerting downward pressure upon prison numbers. Research indicates that while enhancing offenders’ skills and capacities is an important part of this process, an equally important factor is enhancing offenders’ social capital, that is, their relationships and networks. Furthermore, it is important that prisoners learn to act responsibly by being given some responsibility, and that they feel some co-ownership toward the rehabilitative process. A benefit of mutual models is that they give prisoners opportunities to develop positive relationships with fellow prisoners and prison staff while also giving them an opportunity to shoulder some real responsibility. For these reasons there is significant interest in mutual within criminological circles as tools which might promote rehabilitation.

An example of these models being put into practice is seen in Italy, where a prison mutual runs a micro-brewery in Saluzzo prison, and a coffee and cocoa business in Turin prison. Prisoners join the mutual by paying a small fee. Membership then guarantees paid employment during imprisonment and after release, together with resettlement support. These kinds of prisoner managed mutuals are increasingly found throughout the EU and elsewhere. Most include Criminal Justice and Social Work staff in their membership to provide additional rehabilitation and resettlement support services, and provide all members with equal voting rights. Attention is increasingly being turned to the question of whether such a multi-stakeholder, mutual model could actually be used to run a prison in its entirety. This would be entirely consistent with public service reform in a number of other areas, all of which is characterised by a desire to move away from a paternalistic model where the service user is a passive recipient of services given by the provider, and to empower the user to help themselves. While imprisonment involves a necessary deprivation of freedom as punishment, in order to successfully achieve its rehabilitative aims it is arguable that collaboration between user and provider represents the most likely method of successfully encouraging a turn away from criminality.

A more commonly recognized example of co-operatives in action can be found in the housing sector. What is striking however is that despite their relatively high profile, and the positive feedback reported by housing co-operative members, these communities remain relatively rare, representing only 0.6% of the UK’s current housing stock. In 2009 the Commission for Co-operative and Mutual Housing published a report that considered what role these types of housing might be able to play in the UK national housing strategy, in which they noted the above average levels of satisfaction and wide community benefits inherent in the sector. They suggested that developing the co-operative and mutual housing sector would be dependent on three necessary components: grassroots community development, appropriate support and infrastructure and sympathetic national and local governments. The biggest challenge of all remains access to start-up loans at rates that would make such housing schemes viable, yet the report called upon government to adopt an ambitious aim that ‘by 2030 every town, village and community should be able to offer co-operative and mutual housing options to potential residents’. 

Not only are mutuals being considered as potential solutions in sectors as diverse as housing and criminal justice but the machinery of government itself also has the potential to benefit from the growing popularity of mutualism. On 1st of May 2013 the Cabinet Office announced that its successful ‘nudge unit’ was being part mutualised and ‘spun out’ of Whitehall. In local government too, Oldham council has adopted a ‘Co-operative Charter’  in a bid to become the first co-operative borough. They began this with a borough wide ‘co-operative conversation’ to determine the values and approach which would be used to shape the entire agenda. They are striving to be more responsive to residents’ needs and to put responsibility in their own hands, with the motto ‘everybody does their bit and everybody benefits’. An example of this is that rather than sending jobseekers on courses which many of them consider to be pointless, the council is instead asking what is specifically needed by that person to get into work and providing funding for this if the cost is not more than would have been spent on the course.

As is clear, mutual and co-operative models provide an exciting and so far under-utilised alternative to the existing ways of running public services.  They provide the tantalizing prospect of delivering significant efficiency savings without making staff redundant or cutting budgets, and also contain the promise of improving the experience of both users and staff members while bringing these two groups closer together. Importantly too, they promise to empower members to innovate, and give staff the flexibility and responsibility to make the changes that seem important to them. It is not surprising that the government has been so keen to embrace mutual models, however we are only at the very beginning of their use within the public sector. The coming months and years will be telling as to whether they fulfill their promise and deliver all that is expected of them.


Photo credit: Amy Stanley