Communities and Local Government Committee - Mutual and cooperative approaches to delivering local servicesWritten evidence from Co-operatives UK

1. Co-operatives UK greatly welcomes the select committee’s decision to hold an enquiry on “the co-operative council”. 2012 has been declared by the United Nations as International Year of Co-operatives, during which the world’s 1.4 million co-operatives will be celebrating the movement’s enduring success and its resilience in the face of economic crises and fierce competitive pressures. In the UK, the International Year will culminate with Co-operatives United.

Co-operatives United 29 October–2 November 2012

An inspiring global festival of events and exhibitions set in Manchester to mark the close of the United Nations International Year of Co-operatives. With one world premier, three exhibitions, 10 conferences, 45 countries, 150 workshops, 200 exhibitors and 10,000 people, Co-operatives United will inform and inspire everyone building an ethical economy and a better world.

2. Co-operatives UK is the national trade body that campaigns for co-operation and works to promote, develop and unite co-operative enterprises. We have a unique role as a trade association for co-operatives. We work to promote the co-operative alternative across many sectors of the economy from high street consumer-owned co-operatives to pubs and renewable energy, healthcare to agriculture, credit unions to community owned shops.

3. The Co-operative movement worldwide is based on a set of values and principles, last reviewed and agreed by the International Co-operative Alliance in Manchester in 1995. The “statement on the co-operative identity” is appended to this submission.

4. We have welcomed and supported an increasing level of interest over the last few years in co-operative enterprise and co-operative ways of working from Government at various levels (national and devolved as well as local). Although it is not entirely new (eg many local authorities sponsored local co-operative development agencies in the 1980s) the recent wave of interest seems to us to be much deeper and far reaching. Such engagement with co-operative values and principles by local Government is, in our experience, unprecedented.

5. As an autonomous, non-party political body, Co-operatives UK is keen to work with all elected politicians and their officers, including, of course, members of the Co-operative Councils Network, who show a genuine affinity with co-operative values and principles to determine the best ways in which the variety of co-operative models can be deployed to help deliver high quality public services.

6. There are distinct benefits for any organisation, such as a local authority, to use the term co-operative and associate itself with the co-operative movement. Market research that Co-operatives UK carried out in 2011 showed that co-operatives are part of everyday language and that associations of fairness and trust attached to a business being co-operative are high.1 Furthermore, there is strong evidence2 that co-operation is good for people emotionally, as well as advantageous for organisations and societies, so that bodies such as local authorities that are charged with securing the well-being of their citizens would do well to encourage co-operative behaviours and to lead by example in this respect.

Questions Posed by the Select Committee

(a) What is the difference between a co-operative council where services are supplied by not-for-profit businesses and other local authorities?

7. We think it is important to point out that the use of the term “not-for-profit” can be unhelpful and misleading. Co-operatives trade in the market place and in order to be successful they do aim to make a profit, in the sense that their earnings need to exceed their costs, with a sufficient margin to at the very minimum allow for future investment. But they differ fundamentally from “for profit” businesses in a number of ways:

They are not profit-maximisers, they are utility-maximers. Profit is a means to an end, not the end in itself.

Profit is not a reward for outside investors; rather, profits are reinvested in the co-operative, shared amongst everyday people—the members—and invested in the wider community. And unlike private businesses, this latter application of profits for community benefit is not discretionary “corporate social responsibility”, it is a defining, inescapable characteristic of co-operatives, enshrined in the seventh co-operative principle.

The distribution of any profits is decided democratically, by the members.

8. The term “surplus” is sometimes used instead of “profit” to make this distinction clearer.

9. Reinterpreting the question to one that addresses the differences between councils that deliver services through co-operatives and mutuals and those that don’t, we would expect to see the former:

Making explicit reference to the co-operative values and principles in policy and decision making.

Linking up with co-operatives in their area.

Creating specialist advice, training and other infrastructure to support the development of co-operatives.

Exploring ways of introducing co-operative ideas, values, cultures and ways of working within their own structures.

10. Many local authorities have been delivering services though co-operatives and mutuals for years. Examples include:

Leisure trusts, such as GLL, which provide sport and leisure services throughout the country and have a strong track record in quality and innovation.

Housing co-operatives and tenant management organisations, such as the Preston Community Gateway, the Walsall Association of Tenant Management Organisations and the recently established Rochdale Boroughwide Housing, which have an equally strong record in, for example, improving maintenance performance, reducing voids, innovating and improving their estates.

Social services, such as the highly successful Foster Care Co-operative, which is expanding into new areas of the country.

Schools, with over 200 co-operative schools (trusts, academies, specialist, primary and secondary).

11. There is a lack of systematic evidence-based research on the conditions under which local authorities adopt co-operative approaches to service delivery, but we suggest that they include:

An organisational culture, including both elected member and officer leadership, that includes being open to new ways of working.

An adequate understanding of what co-operatives and mutuals are at various levels of management and workforce, and/or a willingness to learn more.

Relations between employers and trade unions being sufficiently positive and collaborative.

(b) What arrangements need to be put in place to deliver services by not-for-profit businesses such as employee-owned mutuals?
(i)   More specifically, what are the barriers to establishing not-for-profit businesses to supply services?
(ii)   What role does a local authority have in promoting and incubating a not-for-profit business?
(iii)   And where does accountability lie?

12. It follows from what we have said above that a lack of knowledge and understanding of co-operatives by local authority members, management and staff is a major barrier to greater use of co-operative models.

13. A further barrier is the current context of reduced expenditure and pressure on jobs and conditions of service. This is a difficult setting in which to introduce new forms of delivery, which can easily be read as camouflage for that process. For many staff and their trade unions “mutualisation” is often portrayed as “back door privatisation”, to which they are strongly opposed.

14. Running a service as a business and outside the local authority’s structure will be unfamiliar to the people concerned and call on an extensive range of skills that they might not possess. There is a need for high quality, adequately resourced, co-operative business advice and support and, crucially, sufficient time for all concerned to make such a radical transformation in their working lives.

15. Accountability to stakeholders is through the well-tried democratic processes that are at the heart of co-operative structures. Accountability to the wider community continues to be through the local authority’s structures and electoral mandate.

(c) What are the advantages and drawbacks of providing services via not-for-profit businesses?

16. Co-operatives deliver greater engagement by stakeholders and enable those stakeholders to work together directly to provide the best quality services.

17. As local enterprises, co-operatives are rooted in, and loyal to, their communities, thereby retaining wealth in the area and providing services that are sensitive to local needs.

18. Drawbacks are that co-operatives often find it hard to access finance, some of the professionals they have to deal with are unfamiliar with them and it takes time for the co-operatives’ members to learn new ways of working.

4. Where services are delivered by not-for-profit businesses what difference will the local resident and taxpayer see?

19. We would expect to see greater citizen and staff engagement with service delivery, more innovative services and, frequently, a more efficient service as users, staff and the community are brought closer together and enabled to act in their mutual interests.

May 2012

THE STATEMENT ON THE CO-OPERATIVE IDENTITY

The Statement on Co-operative Identity was adopted at the 1995 General Assembly of the International Co-operative Alliance (ICA), held in Manchester on the occasion of the Alliance’s Centenary. The Statement was the product of a lengthy process of consultation involving thousands of co-operatives around the world.

The International Co-operative Alliance: Statement on the Co-operative Identity

Definition: A co-operative is 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.

Values: Co-operatives are based on the values of self-help, self- responsibility, democracy, equality, equity, and solidarity. In the tradition of their founders, co-operative members believe in the ethical values of honesty, openness, social responsibility, and caring for others.

Principles: The co-operative principles are guidelines by which co-operatives put their values into practice.

1st Principle: Voluntary and Open Membership

Co-operatives are voluntary organisations, open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political, or religious discrimination.

2nd Principle: Democratic Member Control

Co-operatives are democratic organisations controlled by their members, who actively participate in setting their policies and making decisions. Men and women serving as elected representatives are accountable to the membership. In primary co-operatives members have equal voting rights (one member, one vote) and co-operatives at other levels are organised in a democratic manner.

3rd Principle: Member Economic Participation

Members contribute equitably to, and democratically control, the capital of their co-operative. At least part of that capital is usually the common property of the co-operative. They usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all of the following purposes: developing the co-operative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the co-operative; and supporting other activities approved by the membership.

4th Principle: Autonomy and Independence

Co-operatives are autonomous, self-help organisations controlled by their members. If they enter into agreements with other organisations, including Governments, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their co-operative autonomy.

5th Principle: Education, Training and Information

Co-operatives provide education and training for their members, elected representatives, managers, and employees so they can contribute effectively to the development of their co-operatives. They inform the general public—particularly young people and opinion leaders—about the nature and benefits of co-operation.

6th Principle: Co-operation among Co-operatives

Co-operatives serve their members most effectively and strengthen the co-operative movement by working together through local, national, regional, and international structures.

7th Principle: Concern for Community

While focusing on member needs, co-operatives work for the sustainable development of their communities through policies accepted by their members.

Adopted in Manchester (UK) 23 September 1995.

1 Good business? Public perceptions of co-operatives, Giles Simon and Ed Mayo, Co-operatives UK, 2011.

2 See, for example, The Psychology of Co-operation, Oliver James, Co-operatives UK, 2011.

Prepared 6th December 2012