3 The evidence for co-operative and
mutual approaches |
The benefits of mutuals and co-operatives
31. The Mutuals Taskforce pointed to a number of
benefits from mutuals:
- greater customer satisfaction;
- greater ability to innovate;
- lower production costs and generally higher productivity;
- increase resilience; and
- job creation.
The Taskforce described these as "intrinsic
benefits" to the employees and "instrumental benefits"
to the delivery of services and that most importantly the "higher
morale and greater commitment of employees leads to improvements
in the quality of service and the efficiency with which it is
The Minster, Francis Maude, took the same view: "by going
down the mutual path you get a better outcome".
We undertook an assessment of the evidence for these and similar
claims, especially from local authorities.
EVIDENCE OF BENEFITS
32. The submission from Winckworth Sherwood, an organisation
that provides legal services to not for profit organisations,
identified similar benefits that can be achieved from "non-profit
distributing organisations" (NPDOs), which includes mutuals
and co-operatives, delivering local services as follows.
- Single focused body able to
concentrate upon delivery of its core business. Such focus and
freedom provides an exciting opportunity for the management team
to use their innovative skills.
- The NPDO could, without changing its community
and social obligations, become a business-led organisation able
to make quick decisions freed from the sometimes lengthy local
government decision-making mechanics.
- Opportunity on transfer for one-off cultural
change with clear goals to develop the NPDO and its services.
- Increased probity and better governance.
- Community involvement and service user engagement
in the management of the NPDO through membership as well as creating
user groups for individual services or facilities.
- Staff involvement in the direction and administration
of a focused NPDO.
- An NPDO running the existing facilities could
contribute towards the local authority's social and economic agenda
and, most significantly, contribute towards the economic regeneration
of the local area.
- An NPDO could access private finance for improving
and enhancing any of the facilities or services, such finance
not generally being available to a local authority.
- The local authority could still maintain involvement
with the NPDO through grant funding and, possibly, membership
of the NPDO's board.
- If the NPDO was charitable, a status not available
to co-operatives generally, it would be able to obtain mandatory
relief for national non-domestic rates at 80% and apply for discretionary
relief for the remaining 20%. In addition, charitable NPDOs have
other fiscal advantages, including exemption from corporation
tax and gift aid on donations.
- Opportunities to maximise efficiencies and cost
savings with adoption of better business practices.
To supports these claims they cited research undertaken
by the Employee Ownership Association which showed that companies
owned by their employees were more resilient than conventionally
structured companies, outperforming the market during the downturn
and demonstrating a lower risk of business failure. Winckworth
Sherwood also referred to research from the Innovation Unit (a
not-for-profit social enterprise that aims to support innovation
in public services), which showed how employees taking ownership
of public services would yield exactly the same benefits as those
seen in business, by creating the "engagement ethic"
which was currently missing from local authority run public services.
33. We asked Simon Randall, a consultant at Winckworth
Sherwood and Chair of the Conservative Co-operative Movement,
about the relevance of applying evidence of the benefits of mutuals
operating in the private sector to the public sector. While the
evidence was mostly based on employee-owned organisationsthat
is those not involved in delivering public serviceshe said
that he had surveyed a number of charitable leisure trusts with
substantial staff involvement in the service and noted there was
some evidence that employee-owned bodies were more resilient and
created more jobs.
Ed Mayo, Secretary General, Co-operatives UK, added that:
the majority of evidence came from the private sector.
[...] The spin-outs that we have seen that are high performers,
as may have been mentioned before, are those that have emerged
and survived. They have a good story to tell, but they are relatively
small in number and therefore the evidence may be relatively anecdotal.
34. In contrast, Mark Bramah from the APSE, which
had recently undertaken a review of the role of co-operatives
and mutuals in local public service provision, recognised that,
although there are theoretical benefits of adopting mutual approaches,
they had found "very little evidence in practice of successful
public sector mutuals".
35. We received submissions from a number of local
authorities on the benefits of their mutual or co-operative approaches.
Councillor Butler from Shropshire Council, told us that the Council's
People 2 People project had resulted in "greater community
and customer satisfaction" and that there was a real prospect
of reducing demand on the public sector because of greater involvement
from the voluntary and community sector.
Donna Fallows, the practice leader at Evolve YP, told us
that the University of Central Lancashire had been monitoring
the performance of the practice and that it was performing better
than local authority services. She pointed out that within the
practice staff were happier:
the morale of the team has been absolutely massive.
It was ownership; it was ours. Because it is ours, we work that
little bit harder. There is the dedication of the staff, and morale
is absolutely fantastic. We have lost no staff since we have been
operational. We have been more creative and accountable and, I
suppose, more conscious of spending. When have you ever known
a local authority be out of the red? We are operating in the black
because we have been more creative. It has really worked for us.
36. We heard of similar qualitative improvements
in other local authorities. Lambeth set out what it saw as the
benefits of its 'co-operative council' model. It expected that,
over the medium-term this would include improved service design,
enhanced commissioning practice, better collaboration with partners,
and a "clearer focus on citizen priorities".
When asked for evidence of these benefits Councillor Reed, the
Leader of Lambeth Council, was unable to provide any quantitative
evidence but explained that this approach was responsible for
improvements on the Blenheim Gardens Estate, which was now being
run by a 'co-operative' residents' management association. He
said that on the estate:
Mall that was a drug-dealing corridor has now been turned into
a pleasant green space that the entire community uses, including
young people. They have community growing schemes on there. The
level of rent collection has gone from below the average in Lambeth
to close to 100% per annum. The quality of the repairs service
is so high that I no longer get any complaints about it. I have
not had a complaint for years in my casework bag, and I get many
from estates that are still directly run by the council.
37. The Ministers, Francis Maude and Don Foster,
accepted that it was early days and that there was little evidence
for successful co-operatives and mutuals delivering local authority
services. However, Francis Maude drew parallels with benefits
in health services.
The Mutuals Taskforce's final report detailed some:
- Central Essex Community Services
has significantly reduced staff sickness rates. The number of
days lost due to sickness absence per Full Time Equivalent (FTE)
employee has decreased by approximately two days per employee
since they spun-out in April 2011.
- Also in Central Essex Community Services, a staff
survey conducted in October/November 2011 showed that 90% of staff
looked forward to going to work, compared with 86% in 2010.
- NAViGO, a community interest company running
mental health and associated services in North East Lincolnshire,
has experienced reduced absenteeism and saved £80,000 as
- Central Surrey Health provides therapy and community
nursing services to central Surrey's population. Staff motivation
and satisfaction improved with 98% of co-owners say they are willing
to go beyond what is normally required. The industry norm is 84%.
evidence for the benefits of mutuals and co-operatives operating
in a local government is limited. However, the benefits that have
been observed from mutuals operating in the public sector and
the health sector suggest that these approaches have the potential
to offer improvements in delivering local authority services.
In particular, the motivational benefits provided by employee
ownership, the response to users' needs provided by enhanced user
engagement and the success of established organisations such as
Greenwich Leisure persuade us that more local authorities should
be considering these options.
47 Ev 103 Back
Mutuals Taskforce, Our Mutual Friends, December 2011 Back
Q 316 Back
Ev 125, para 3.2 Back
Ev 127, paras 5.5-5.6 Back
Q 222 Back
Q 222 Back
Q 104 Back
Q 254 Back
Q 280 Back
Ev 79, para 2.2 Back
Q 14 Back
Qq 314-16 Back
Mutuals Taskforce, Public Service Mutuals: The Next Steps,
June 2012, p 14 Back