Building The Mutual State


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Contains a chapter by Geraint Day

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Building The Mutual State

  1. 1. The sponsoring The Mutual State is a citizens-orientedorganisations for this approach to public service reform. Byvirtual think-tank have bringing users into the frame and creatingbeen: a framework for social entrepreneurship, the Mutual State fosters more responsiveGreenwich Leisure Ltd public services, and helps to reweave democratic relations between citizen andCobbetts Solicitors state. This report draws together theCivitas findings from a virtual think-tank on mutualisation, designed to test, challengeCommunity Enterprise in and improve the core approach, runningStrathclyde over six months up to May 2002.Community Enterprise WalesDemosDevelopment Trusts Contributors:Association Tom Bentley, Demos Jonathan Bland, Social Enterprise LondonFabian Society David Boyle, New Economics Foundation Ann Blackmore, NCVO Geraint Day, Institute of DirectorsIPPR Jack Dromey, TGWU David Green, CivitasMutuo Peter Hunt, Mutuo David Leam, Social Market Foundation Paul Maltby, IPPRNew Economics Foundation Ed Mayo, New Economics Foundation Cliff Mills, Cobbetts SolicitorsPublic Management Henrietta Moore, LSEFoundation Angela Pulman, Community Enterprise Wales Andy Roberts Jane Steele, Public Management FoundationSocial Market Foundation Paloma Tarazona, Social Enterprise London Perry Walker, New Economics FoundationSocial Enterprise LondonThe Work Foundation
  2. 2. Building the Mutual State findings from the virtual thinktank edited by Ed Mayo and Henrietta Moore New Economics Foundation and Mutuo
  3. 3. The New Economics Foundation (NEF) was founded in 1986 by the leaders of The Other EconomicSummit (TOES), which has forced issues such as international debt on to the agenda of the G7/G8summit meetings. It has taken a lead in helping establish new coalitions and organisations, such as theJubilee 2000 debt campaign, the Ethical Trading Initiative, backed by the Government and leadingretailers, the UK Social Investment Forum and the Green Gauge "alternative" indicators of social andenvironmental progress.NEF is a registered charity, funded by individual supporters, trusts, business, public finance andinternational donors, and acting through policy, research, training and practical initiatives to promote a"new” economy - one which is people-centred, delivers quality of life and respects environmental limits.Its strategic areas currently include the global economy, corporate accountability, community finance andparticipative democracy. It is now recognised as one of the UKs leading think-tanks.To become a NEF supporter and receive its publications at a discount, contact us at the address below.New Economics Foundation Tel: 020 7089 2800Cinnamon House Fax: 020 7407 64736-8 Cole StreetLondon Email: info@neweconomics.orgSE1 4YH Web: www.neweconomics.orgRegistered charity number 1055254Mutuo is a not-for-profit think tank that brings together the different wings of the mutual sector topromote its common message of success. Working exclusively for the mutual sector, Mutuo has wellestablished links to mutual businesses, political agencies, think tanks and academics.Mutuo is committed to: • Conducting and publishing policy research on issues of importance to the mutual sector • Campaigning for a better understanding of the benefits of mutual businesses • Developing innovative new mutual businessesProjects are managed by Mutuo’s experienced team of staff, who work with sector specialists, journalistsand like-minded organisations to convey the mutual message to opinion formers and decision makers.Mutuo Tel: 020 7367 417777 Weston Street Fax: 020 7407 4476LondonSE1 3SD Web: no. 1899407499Published May 2002, (The New Economics Foundation and Mutuo)i
  4. 4. “The Mutual State is a stimulatingcontribution to the debate concerning ”the future of public services, andillustrates how a new and imaginativeapproach can refresh the old andincreasingly jaded argumentsconcerning the public/private divide.Professor Julian Le Grand, London School of Economics ii
  5. 5. INTRODUCTION Ed Mayo and Henrietta MooreP R I N C I P L E S F O R T H E M U T UA L S TAT E A.1 Co-production Perry Walker A.2 Accountability David Leam A.3 Citizenship Cliff Mills A.4 Human-scale David BoyleM O D E L S F O R T H E M U T UA L S TAT E B.1 Social Enterprises and Public Service Delivery Jack Dromey B.2 Legal Models for Mutualisation Cliff Mills B.3 The Voluntary Sector’s Role in Public Service Delivery Ann Blackmore B.4 Public Interest Companies Jane Steele B.5 Non-profit Public/Private Partnerships Paul MaltbyO P P O R T U N I T I E S F O R T H E M U T UA L S TAT E C.1 Mutual Healthcare Purchasing David Green C.2 Mutual Healthcare Provision Geraint Day C.3 Education and Care: Lessons from Southern Europe Jonathan Bland and Paloma Tarazona C.4 Mutual Education Tom Bentley C.5 Mutualisation in Wales Angela Pulman C.6 Community Housing Mutual – A New Opportunity For Social Housing Peter Hunt C.7 Social Housing – A Resident View Andy RobertsCONCLUSION Ed Mayo and Henrietta Mooreiii
  6. 6. S P O N S O R I N G O R G A N I S AT I O N S Greenwich Leisure Ltd Cobbetts Solicitors Civitas Community Enterprise in Strathclyde Community Enterprise Wales Demos Development Trusts Association Fabian Society IPPR Mutuo New Economics Foundation Public Management Foundation Social Market Foundation Social Enterprise London Work FoundationE D I TO R SEd Mayo is Executive Director of the New Economics Foundation. He is on the Boards of the LocalInvestment Fund, AccountAbility, the Social Investment Forum and OneWorld and is Chair of the LondonRebuilding Society. He has advised the Treasury on enterprise.Henrietta Moore is Professor of Social Anthropology at the London School of Economics. She is editorof Anthropological Theory Today (1999), The Health and Well-Being of Children and Young People in theUK (1997) and author of A Passion for Difference (1994). iv
  7. 7. I N T R O D U C T I O N – E D M AY O A N D H E N R I E T T A M O O R EBEYOND THE MARKET with league tables, performance where agencies and non- indicators and public service departmental bodies (those thatAND THE STATE agreements. But just as the in previous political times had limits to privatisation set in, so been damned as quangos) set upThe early anthem of privatisation have the limits to central control boards to oversee their work,was “rolling back the state”, and reform instituted from this was in many cases a parodyand yet, the state has emerged above. of true governance, with limitedfrom the era of privatisation in a powers and reappointment atposition of relative strength. This After all, what the best of the whim of central both in terms of its tax take as private sector management hasa proportion of the national already shown is the need to The search for more responsiveeconomy, after projected rises in limit the costs and distortions models for managing publichealth spending, and as the associated with layers of services, and the discovery offavoured mode of public service management, reduce hierarchy, the limits to market and state,delivery in the many cases, from focus on core business and start forms the background to thepolicing to health, in which the to move dynamically at the pace new-found interest in “socialprofit motive is not trusted by of the market. enterprise”. These are business-citizens. minded non-profits and The first attempt at moving voluntary organisations, led byThe idea of opening public beyond both privatisation and social entrepreneurs. Theyservices to competition in the the managerial state was operate with a public ethos, butopen market is of course therefore the attempt to create they are entrepreneurial, self-accepted in many areas formerly more autonomous business units governing and have provedrun by the state, from water and within government, operationally effective at engaging thetelecoms through to waste independent, but strategically participation of users.collection. The market may bring accountable. The model ofcost advantages, which is what “executive agencies” dates back Self-governance is an essentialdrove the early privatisations, to a report by Sir Robin Ibbs in recipe for what we havebut crucially is also seen to have 1988. Government spawned a described as the Mutual State.the capacity for responsiveness wave of internal agencies, units After all, if management is toand innovation. and czars, designed to be more have significant freedom to focused and innovative than innovate and respond to need,But as opportunities for multi-purpose departments. then creating single-purposeprivatisation dried up, what self-governing organisations isemerged was the “managerial There are examples of excellence the way to do it.state” of the Conservatives in this approach, sometimesunder John Major, and of Labour dubbed “agencification”, but in But how do you promote self-in the first term of Tony Blair. most cases the system simply bit governance without creatingOut of a perception that public back. Independence was incentives for free-riding, lack ofservices remained inflexible, notional rather than real, coordination and poor quality?bureaucratic and often of poor undermined in reality by systems The answer is to look for modelsquality, the aim was to drive up of appointment, reporting and of organisation that internaliseproductivity. In the development accountability. public service excellence and co-in the 1990s of “quasi-markets” operation with other parts of thein health, for example, with Independent-minded czars and public service jigsaw, rather thanpurchaser / provider splits, and commissioners, such as Elizabeth have to have this imposedcompulsory competitive Filkin overseeing MPs standards, through costly regulation. This istendering, the state in effect were not reappointed. Units the “new mutuality”.became the sponsor and such as the Small Businesschampion of market activity in Service never took on the The New Economics Foundationpublic services. intended life of their own, (NEF) and Mutuo launched ending up as fiefdoms of the inThe managerial state is replete same empire as before. Even October 2001 as a time-limited1
  8. 8. “virtual think-tank” on user The programme brought While weighted to contributorsparticipation and the possible together a unique alliance of that were clearly interestedmutualisation of public services. policy think tanks and enough in the ideas toThe rationale was that there is a practitioners concerned to participate in the debate, thelot of practice already going on, explore the role of social results suggest that there arebut it is rarely brought together ownership in public services. The significant untappedor properly understood. It site averaged around 185 opportunities for mutuality infollowed the publication of the participants and contributors in public services, but that theseNEF report we co-authored, The the debate per month, lack the backing of an enablingMutual State. contributing to online policy framework or even a discussion, review of regular licence for experimentation.The website was designed to think pieces and voting. Patriciagalvanise wider debate in order to: Hewitt MP, the Secretary of State The papers that are set out in for Trade and Industry, made the this report cover three main • learn and share what is initial contribution. areas. already happening across the public sector in terms Over the period of the • First, they outline the of user participation and programme, participants also underlying principles that social enterprise; contributed to an open national inform the new mutuality: • explore how new mutuality competition based on the co-production, could work in public website, to propose a new name accountability, citizenship services, and where it will for the successor body to and scale. not; Railtrack. The winning name was Trust Rail. • Second, they look at • refine and test the ideas for models for mutualisation, mutualisation as a model for The results of the key Debating covering legal and other public service investment Points are set out in Table 1. aspects designed to create and civic renewal. replicable social enterprises across public services. TA B L E 1 • Third, they explore DEBATING POINTS – VOTING RESULTS ON THE opportunities for creative MUTUAL STATE WEBSITE mutualisation across a range of public services. There is no real political will for meaningful participation. The driver for the Mutual State, Yes 80% No 20% as set out above, is the promotion of management and Is user participation too time consuming to be practical? staff freedom, within a Yes 11% No 89% framework of quality assurance. However, the decentralisation of Will mutualisation threaten pay and conditions for staff? power in this way also creates firstly, the need for new forms Yes 15% No 85% of accountability /governance and secondly, the opportunity Would you give up ownership to your employees? for new forms of citizens’ involvement. The key principles Yes 33% No 67% for building the Mutual State, as discussed by the contributors in The NHS should be broken up into self-governing mutuals. section A below, are co- Yes 75% No 25% production, accountability, citizenship and scale. 2
  9. 9. CO-PRODUCTION to unlock the knowledge and Walker argues, co-production contribution of service users, ensures that citizens are involvedCitizens’ involvement in public valuing them as partners. in public service design andservices is nothing new, but in delivery, and the result is anthe story of the welfare state as In the field of health, for improvement in the range andthe narrative of “professional” example, the concept of the quality of services.public services, it has often been “expert patient” has highlightedtaken for granted as discussed opportunities for NHS staff toby Ann Blackmore in section B draw on the knowledge of GOVERNANCE ANDbelow. Tony Crosland, decades patients with chronic illness, and ACCOUNTABILITYago, declared himself staggered indeed to use this to benefitby the extent to which statutory other patients, offering them not Co-production is clearly linked toservices depended on the just dispassionate advice but issues of governance andvolunteer. He was drawing on first-hand experience of how it accountability. Decentralisationhis visits to public services. In feels. moves decision-making closer tofact, the numbers were only users and improves the qualitycollated across public services The co-production approach also of service, whilst participation infor the first time in 2000. The addresses one of the major governance can clarify lines ofresults are still staggering: paradoxes of the welfare state, accountability and responsibility. which is that, in trying to target • 170,000 volunteers who assistance to people in need, it A report, It Takes Two to Tango work in the NHS, befriending can generate stigma and, in by the Development Trusts and counselling patients, fields such as welfare benefit, Association, Local Government driving people to hospital, deny people’s dignity. And where Association and New Economics fund raising, running shops inflexible systems combine with Foundation, offers a range of and cafes and so on; a lack of human scale, as David examples in which community Boyle argues in Section A, the organisations have taken on • 12 million meals a year that result is a public disservice. local services. Much is small- are prepared by volunteers to scale and has evolved according people in care; Citizens’ involvement of this to accidents of need and type also offers the prospect circumstance. • 1.85 million people are that public service reform can regular blood donors, with operate as a strategic Social housing, in the form of 8.2 million signed up as opportunity for democratic re- registered social landlords, offers potential organ donors; engagement. After all, people one of the clearest, larger-scale care about public services. They case studies of social enterprise. • 750,000 people volunteer in are important spaces for schools. community gathering, in the To meet the significant demand same way that Settlements, for housing in society, socialThe contemporary approach to community buildings set up by housing has received significantcitizens’ involvement widens the the churches and universities, subsidies from the public sector.focus from volunteering as part were intended to be in the inner This has included £25 billion ofof service delivery to the input cities of Victorian times. Co- concessional finance, in additionof users themselves. This is production is an opportunity for to development support andcharacterised by Edgar Cahn, the people to act as citizens from housing benefit for tenants thatUS pioneer of time banking, as the most effective of motives, underpin a revenue stream. The“co-production”. The idea of co- which is the combination of self- quid pro quo has been tight andproduction reconceives public interest and public concern. restrictive regulation on behalfservices. Instead of a traditional of government by the Housingmodel, in which disinterested In the framework of social Corporation. On the back of thisand expert professionals deliver capital, the real opportunities for funding; the assurance ofservices on behalf of, or for the rebuilding trust come not from regulatory scrutiny; theiruse of, passive users, co- what the state does, but the significant asset base; andproduction is about finding ways way that it does it. As Perry assured long-term income3
  10. 10. streams, registered social In section B below, several division between private andlandlords have raised around contributors discuss new models public. Successful innovations in£20 billion in funding from the for public service delivery within social enterprise stitch togethermarkets in private finance - with the Mutual State. A key concern aspects of the public, privatenot a penny of default. here is how to promote and voluntary sectors. What is at innovation and social issue here is capacity building:In addition, over 580,000 homes entrepreneurship allied to the development of skills andhave been transferred by local democratically managed and resources from across sectors toauthorities to registered social accessible services, improved develop future capacity withinlandlords since 1988. This now autonomy for workers, and more social enterprises.represents 35% of their housing control and choice for citizens asstock. In Glasgow, 80,000 discussed by Jack Dromey. Paul Maltby discusses howtenants voted in favour of Community Trusts - communitytransfer of their homes from the One solution is the public not-for-profit public/privatecity authority to the Glasgow interest company (PIC), discussed partnerships - could play a keyHousing Association, which in by Jane Steele that would role in regenerating deprivedturn promised a rent freeze and provide the UK with a legal form areas. The view here is thata £1.9 billion investment that offers an alternative to the regeneration projects are moreprogramme over ten years. In choice between public and likely to succeed if local peopleBirmingham, in contrast, tenants private. The PIC would be a form are involved, and if best use isopted to stay in municipal of organisation that would be made of public, private andcontrol. The Welsh Assembly both not-for-profit and voluntary sector expertise in thevoted in May 2002 to nominate permanently and securely local area. Co-ordination of“community housing mutuals”, committed to the public good. effort would lead to thedescribed by Peter Hunt in As the case of the building bundling together of assets andSection C, as the preferred societies has shown, community services on a neighbourhoodfuture model for stock transfer. membership is not enough on its basis. As community own to prevent demutualisation, organisations with an asset base,While it is still too early to judge with subsequent individual gain community trusts would attractthe overall success of this from mutual assets. financial support and be anapproach, voluntary transfer attractive new model fordoes appear to be accompanied New mechanisms such as this public/private evidence of improved tenant inevitably raise questions aboutsatisfaction, as the National who makes decisions and howHousing Federation has are they made. In the context of ENTREPRENEURIALdocumented. Giving tenants the the development of a non-profit CITIZENSHIPsay on transfer also seems successor to Railtrack, Cliff Millsdemocratic and fair. outlines the strengths and the Involving citizens in the design weaknesses of companies limited and delivery of public services,However, as Andy Roberts by guarantee, but shows how and thus in the running of thediscusses in section C below, legal form has a direct bearing Mutual State, inevitably changesthere are still real dilemmas in both on governance structures the relationship between theterms of forms of accountability and on the mechanisms for citizen and the state. In sum, itin non-state social housing and a funding the enterprise. All too extends the notion of citizenshipneed to restore a genuine ethos often debates about community for the simple reason that, inof mutuality as a means to participation take place in a contrast to the myth ofimproving internal accountability vacuum and underplay the legal standardised, universal services,in many housing associations. As and financial issues involved in the more you put in, the moreDavid Leam points out in Section designing mutual public services. you get out. As Cliff Mills pointsA, not-for-profit entities are not out in Section A below, thenecessarily linked to community What all the contributors in current debate about the rightownership and participation, and section B show is that the new form of ownership for publicdo not inevitably lead to models underpinning the Mutual services is not just about howimproved accountability. State will work outside the old those services should be funded 4
  11. 11. and who should carry the risks Government and civil society warns in his discussion of howof ownership, but about people’s initiatives recognise this new mutualism could be bestwillingness to engage as citizens emerging need, which has introduced into social a new way. recently transmuted into a demand for a renewed form of Social enterprises based on theThe interrogation of what it citizenship and for greater civic principles of new mutualism domeans to be a citizen has been participation in policy making. not just endeavour to step in tothe hallmark of the UK state in make up the deficit in thethe last decades of the 20 th This is the impetus behind the public/private relationship, butcentury. What lay behind this Mutual State. But, how can rather seek to reform and freshdebate was the question of how changing ideas about it in an innovative way. Theyto rework the relationship citizenship, democratic start from the principle thatbetween the economic and the participation, community and entrepreneurial activity can andsocial, between individual the social good be linked to the should work for the public good.benefit and the social good, changing role of the State andbetween the market and the to a new vision of the The basis for large-scaleState. This reformist impulse has relationship between the social involvement of citizens in thecontinued to be evident in and the economic? design and delivery of publicrecent Government initiatives - services would be a new notionthe attempt to spell out specific The key issue here, as we have of citizen linked to risk. One ofrights and responsibilities as the already stressed, is that the key factors in any enterprisebasis for new forms of social communities and individuals is how risk is managed. In acontract - and in contemporary need to be involved, alongside private company, shareholders aspolicy language - the “New the State and professionals, in owners drive the success of theDeal” and “working families”. the design and delivery of public company, and the returns on services. Adherence to this their investment are, in principle,These changing ideas about the simple principle has the a reflection of the risks they takerole of the State and the potential to bring about an as investors and owners.responsibilities of the citizen enormous change in the way wehave taken place alongside other think that the relationship of the The notions of risk andsocial changes, notably in a public and the private and the citizenship seem almostmarked growth in civil society role of the citizen in maintaining antithetical, and this is becauseand an expansion in the diversity and developing that relationship. historically the State has takenof its forms, accompanied by a responsibility for managing thecrisis in older forms of In the past, the management of relationship between thecommunity and in the family. the public/private relationships economy and the social good,The new forms of civil society was largely seen as the between the private and thehave fought to find expression responsibility of the State. And, public. In its redistributivewithin political forms that where the State could not or did function, the welfare state hasstruggle to accommodate them - not wish to function, then traditionally operated as aneither eco-warriors nor charity stepped in. Successive mechanism for pooling resourcesWomen’s Institute members governments have wanted to in order to manage risk andappear to find appeal to their shift some of that responsibility meet needs. ThroughMPs to be of much value. on to individual citizens, hence redistribution, the State ensures the calls for new forms of social that those who cannot manageThere is a sense in which the contract that have characterised their own relation to the marketnew forms of civil society are both past conservative are not disadvantaged anddemanding the creation of new governments and the current excluded. This is the theory. Indemocratic and public spaces government. These new forms of practice, the reality haswithin social life. Such spaces social contract are not easy to frequently been altogether moreare not necessarily antagonistic establish and without a sound, but certainly cannot be basis in participation can appearsimply mapped onto, older forms potentially coercive or Under the Mutual State, newof community and solidarity. neglectful, as Andy Roberts forms of entrepreneurial5
  12. 12. citizenship would emerge that the new education Mutual State is not just a matterinvolve the pooling of risk - infrastructure. Imagine, for of finance, but of investment ofthrough mutual social example, a scenario where a skills, time, and experience, asenterprises - rather than simply local social enterprise runs a Angela Putman discusses inthe pooling of resources. The local primary school. In such a section C below. Stakeholderscreation of social enterprises for case, it is not only the staff or invest not just to return financialthe delivery of public services employees of the enterprise who value to the community, but alsorun by citizens for the collective need to be participants, but the to build capacity, employability,social good, and thereby for consumers (parents) and the new skill sets and to reinvigoratetheir individual benefit, is a new supporters (grandparents, the community itself. This is theway of managing a relationship concerned individuals, local true dividend on whichboth to the State and to the philanthropists, employers, local entrepreneurial citizenship ismarket. In order to pool risk authorities). These individuals based.effectively, such social should have a mechanismenterprises would need to take whereby they can invest innew forms, both new forms of education in their area and for MULTI-STAKEHOLDERmutuality and/or new forms of their community. In other words, GOVERNANCEsocial investment. they should be social investors and equity holders. The The mutualisationWhy is social investment relationship between equity and announcement by Alan Milburn,important? Social investment is risk is crucial here, not only in the Secretary of State for Health,linked to forms of ownership and relation to financial returns, but in January 2002, that non-profitsit is this form of ownership that in relation to social ones as well. would be allowed a key role inwould drive the success of Accountability and transparency the management of the Nationalmutual social enterprises: the is based on equity holding and Health Service has broughtdrive for social returns or social return rather than simply health care mutuals to the fore.dividends. Entrepreneurial on committee representation. Alan Milburn said that newcitizens would take larger risks in “Foundation Trusts” couldorder to safeguard their futures, In Southern Europe, as Jonathan operate as independent bodies,and those of their dependants Bland discusses in section C offering a much greater range of(children, elderly etc) through the below, changes in legal freedoms to manage localmore active management of the frameworks have allowed new services, and benefits such as:quality and delivery of models for growth and access tooutresourced public services. finance to emerge. Official • having a clear public service recognition of the social aim of ethos and not-for-profitThe notion of citizen would social enterprises is linked to basis;draw on a much wider their status, and restrictions areunderstanding of civil society in place to prevent the • giving greater control toand revised notions of demutualisation of successful patients and service userscommunity to include a broader entities. The result is that social and opening up options fornotion of social investor. Under enterprises can raise equity greater accountability totraditional co-operative through capital or through local communities;structures, those who benefited financing members with limitedfrom mutuality were the staff or voting rights. Investing members • more active involvement andemployees, and their can be individuals, private sector control for both staff anddependants. In the new form of companies or local authorities. management;social enterprise, it is not only The key to success here is socialthe staff and employees who investment, where the return or • offering freedom from “top-need to be participants, but all dividend on that investment can down” management fromthe relevant constituencies. be ploughed back into or Whitehall; retained by the community.Tom Bentley in Section C argues • immunity to takeover bythat mutual engagement could However, the notion of social organisations which will notbecome an indispensable part of investment underpinning the provide such benefits. 6
  13. 13. Health mutuals exist in many income-generating opportunities bringing all stakeholders intoparts of the world and deliver could be developed or new processes of decision-makingprimary and hospital care, as funds raised by issuing ethical and ensuring full andwell as public health and investment NHS Bonds. appropriate information flow.ancillary services. These mutuals Within the Mutual State, thisare most usually owned either by What has still to be worked out model is not one that isusers (potential users), providers is how the governance of such a necessarily based on individualor non-co-operative enterprises mutual would work. In user or membership as in the mostinterested in joint purchasing. provider co-operatives of the familiar form of co-operativeHealth maintenance usual sort members are able to societies, but is one that allowsorganisations in the USA can be vote, receive information and both individuals and collectiveco-operatives and may organise appoint board members. In the stakeholders - employers,primary and hospital care, care case of Japan’s health mutuals, unions, local authorities, higherfor the elderly, public health and utilisation committees made up education institutions - to beancillary services, and medical of people directly elected by the members, and to serve at allhelp lines. membership work alongside the levels. Geraint Day and David board of directors and the Green discuss health mutualsIn Japan, health co-operatives management. In the USA, special and mutual health careown and operate medical interest groups are set up from purchasing in section C below,facilities, including screening the membership to deal with and they emphasise both theand public health. Asset special issues such as care for importance of gettingpurchases are funded by the elderly and mental health. governance structures right andmember’s share capital, the necessity to share risksmembers’ loans and interest- What is clear is that if citizens through mutuality.bearing bonds, and the income are to actively and seriouslycomes from public provision for participate in the design and What is crucial in such a modelhealth care, including social delivery of public services then is that multi-stakeholderinsurance systems, employer health mutuals would have to governance allows not only forschemes, local payments and have some form of multi- the participation of stakeholders,other charges. Such not-for- stakeholder governance. This especially citizens, in the designprofit providers are dependent would mean local citizens, staff and delivery of local healthfor the largest part of their and other stakeholders on the services, but it also allows eachincome on the State. But Board of Directors, but it might mutual social enterprise to formmembers play a key role in also entail multiple “Boards” - strategic alliances andraising capital and in providing customer and user forums, relationships with other playersadditional revenues through co- employee councils and a in the local health economy. Thispayments and other charges. community committee - whose is the critical added value of members report to a stakeholder mutuality. The social dividend onThe UK National Health Service council that provides feedback social investment is a mutualhas always been free at the to the main Board. The main web of public service provision,point of delivery and this Board of Directors would then with co-operation built in notprinciple has recently been re- have executive members, as well just to the culture of publiciterated in the new proposals for as representatives of the services but into its institutionsdecentralisation. However, what stakeholder owners. as well.makes potential health trustmutuals different is not just that The key here is the relationship The model of governancethey would offer greater between the stakeholder council developed for Foundation Trusts,freedom for managers but also and the main Board. A Board of alongside the pioneering workthat the members could begin to Directors cannot create strategy, of Glas Cymru in the waterhave a major say in how the manage finances and monitor sector, could provide the modelservice is designed and delivered management at the same time for other public service sectorsand it is they who would decide as being representative of all and for local governance as awhether co-payments or fixed interests. It is the stakeholder whole within the UK. An agendacharges for non-core services are council that informs and is of building the Mutual State isappropriate and whether new informed by the Board, thus now starting in earnest.7
  14. 14. A . P R I N C I P L E S F O R T H E M U T U A L S TAT EA.1 CO-PRODUCTION tyres on his teacher’s Lexus The benefits of co-productionPERRY WALKER because she kept him in after are: the people who need to be school for failing to hand in his involved are involved; peopleOne reason for the poor quality homework. He explained that he become more assertive; theof some public services is the lost control because he had range and quality of services isfailure to involve the public. Co- promised his parents that he improved; and a constituency ofproduction refers to the joint would bring his younger brother support is created for thatproduction of services by the and sister safely home across service.producer/expert and the gang territory from aconsumer/user. “Co-” does not Perry Walker is Director of neighbouring school and hismean that each party Participative Democracy at the teacher wouldn’t allow him tencontributes the same, or New Economics Foundation. minutes to do that.contributes equally. It does meanthat both parties are essential. The jury’s sentence was: A.2 ACCOUNTABILITY 1. Write a letter of apology toHere is an example that shows DAVID LEAM the teacher and make a goodhow radically it is possible to faith payback of at least $30 For the past decade or so therethink the current divide that you personally earned. private sector shareholder modelbetween producer andconsumer. In 1996 the has reigned supreme as theWashington DC Superior Court 2. Write a letter of apology to organisational form of choice.authorised a Time Dollar Youth your younger brother and sister, The twin trends of privatisationCourt, so that first offenders explaining to them why, despite and demutualisation seemed tocome before a jury of their the provocation, this was no way foreshadow only defeat forpeers. Sentences can be to act. They look up to you; you those advocating a Mutual service, restitution, need to put them straight thatcounselling or an apology. In acting this way is not right. But 2001/2 has seen theaddition, jury duty is now a shareholder model itself comemandatory element of every 3. Hang out a minimum of 20 under attack. In Wales privatelysentence. Jurors earn Time hours at a boys club over the owned Welsh Water has beenDollars that they can exchange next month. You need to be a taken over by Glas Cymru, afor a recycled computer. The kid and spend some time just newly established companyTime Dollar Youth Court is now being with your own age group. limited by guarantee. Inhandling over a third of first- Hackney, the local council hastime juvenile offenders in the rejected the private sector path To the Time Dollar staff theyDistrict. taken by, amongst others, said, “Get him another teacher. Islington, in favour of an A teacher who doesn’tThis approach benefits both jury independent not-for-profit trust understand what this kid wasand offender. The jury felt to take on the management and going through has no businessaffirmed enough to say things to delivery of its education services. being his teacher.”friends like, “If you stand at thatcorner, sooner or later you’re Most sensational of all has beengoing to get busted and Time banks are now spreading the demise of Railtrack, the runtsomeone is bound to be carrying widely across the UK. They are of the privatised litter. Unwanteddrugs”. Normally, saying such illustrations of a fundamental and unloved the company wasthings would be death to peer shift in power, possible in public finally left to starve by Transportacceptance. The offender is tried services, to validate the voice, Secretary Stephen Byers who,by people who know what it is choice and knowledge of users like many a grizzled commuter,like to be a teenager, because and affirm their worth and despaired of waiting forthat is what they are. dignity through appropriate Railtrack to deliver a service thatOne young man had slashed the forms of participation. seemed indefinitely delayed. 8
  15. 15. Supporters of mutuality could be Take the case of Glas Cymru, for brand. More positively, thereforgiven for cheering these example. In as much as its thirty may also be scope to helpdevelopments, but an obvious or so members are develop mechanisms for bridgingpoint demands to be made. representative of Wales, they are this accountability gap - whetherNone of these models are so in the way that the House of through the creation ofmutuals - although befuddled Lords is representative of the stakeholder boards or other suchcommentators may often refer to UK. They are not bad people - means.them as such. In none of them on the contrary, many are verydoes ownership transfer to the impressive - but they are not Time alone will tell whether thiscommunity in question. And in your ordinary man or woman in new breed of not-for-profitnone of them do enhanced the street. Now it could be models helps to take us closer toaccountability, public argued that this is no bad thing, the mutual state. But given someparticipation or community but that is surely not a vision of the dangers, advocates of ainvolvement feature as a that a new mutualism would new mutualism should treatnecessary consequence. want to embrace. them with caution.Just because these models are Similarly, it appears a feature of David Leam is a senior researchernot-for-profit, it does not this model that it is perfectly at the Social Market Foundation.necessarily follow that they are possible for senior management to be very highly remunerated.for the public - in the way that Again, if they deliver the service A.3 CITIZENSHIPmutuality’s proponents believe it then perhaps that is fair enough. CLIFF MILLSis. After all a banker does not But a new mutualism wouldbecome a doctor merely by surely part paths on this point Marking a cross on 15 ballotdonning a white coat and (and I doubt that the people and papers (a few more if localputting a stethoscope around his press of Wales will be elections are included) might be,neck. We must probe beneath particularly forgiving if such an and, for many people may wellthe not-for-profit garb and ask eventuality comes to pass). be, the sum total of theirourselves how this new breed oforganisation is likely to behave participation as a UK citizen in The point is this. The phrase their country’s democratic andand operate in practice. “not-for-profit” generally has civic process. positive connotations in theFor example, we might ask what minds of the public. Whilst The experience of the last 25 orare the rights of bondholders in policy wonks and the like so years of privatisation hasthese new not-for-profit models? appreciate that the phrase could made matters worse. Whilst theWhere will ownership rights in be used to describe a vast array removal of services from local orfact reside? Who are the of organisational forms, to most central government control maymembers and how did they get people the spectrum will blur have led to greater transparencythere? What are the corporate into one - and mutuals will and openness, the process hasgovernance arrangements? How inevitably be caught within this. also greatly increased theis management performance number of areas in which we aremeasured and, crucially, So how then should proponents all now customers or consumers.remunerated? And to what of mutuality react towards these Being treated as a customer orextent will ordinary people have new kids on their block? The consumer, we are likely to insista voice? most propitious approach could on our consumer rights, be to develop a critique of the demanding performance of theNow it may be that the answers recent wave of not-for-profit contract under which we areto these questions are still being models, focusing on the paying for services, and seekingformulated by the organisations accountability gap that lies at compensation if we do not getconcerned. Where there are their heart. At the very least this it. We are consumers, notanswers, however, I suspect that would help to differentiate the citizens.they would be unpalatable to mutual model and help guardthose currently engaged in against potential Our attitude may also bemutual service delivery. “contamination” of the mutual affected by the fact that it is a9
  16. 16. company selling us these just as strong a driver of public respect, is a desirable goal. Theservices, probably paying very services then as it was during benefits in reducing crime,substantial salaries to its the nineteenth and first half of promoting employment, andmanagement, and earning the twentieth centuries when improving the quality of life doprofits for its shareholders. Since the mutual movement was at its not need elaborating.our only relationship with the most active. The same is true Privatising public services so thatcompany is as a customer or today, when we are even more they are run for the profit ofconsumer, and since we have no dependent on public services shareholders destroys citizenshipother means of participating in because of our higher by turning the relationship withor influencing the company, far expectations and standards of users into a market contract. Itfrom having an interest in seeing living. weakens the ties that bind us,it prosper, our only interest is in and damages the basis neededgetting what we can out of it. Mutual forms of ownership not to make sure that democracyThis is the antithesis of only provide opportunities for flourishes.citizenship. people to play a part in the provision of the public services Giving ownership to people inOn the other hand, there are which they rely on, but they local communities is a means ofmany people who take part in actually use that participation to building robust, successful andpublic, voluntary or charitable drive the success and efficiency efficient services, re-invigoratingorganisations, participating in of the business. We can be more citizenship, and producing moreand providing advice and than just customers or stable caring in their local consumers, having a greatercommunities. There may be a interest and influence in the Cliff Mills is a partner withvariety of reasons for such success of the business providing Cobbetts Solicitors.activities including an innate the service, for the benefit ofsense of public service or duty, a ourselves and others.desire to support friends and A.4 HUMAN-SCALEfamily, or simply the desire to Clearly not everyone would be DAVID BOYLEplay an active part in society. interested in this sort of participation, though with There is a problem aboutThe debate about the right form modern communications resources invested in publicof ownership for our public systems, many are interested in services. Services in the UK haveservices is not just a debate receiving more information. suffered from underfunding forabout how those services should Modern mutuals are aware of generations compared withbe funded, and who should carry the need to nurture active those on the continent, but thethe risks of ownership. Where membership, and the variety of debate about resources obscurespeople are dependant on basic means of communication and the real problem. It’s whatservices such as healthcare, methods of engaging people are economists call “externalities”.water supply and transport, the being used to deliver this.role that those services play in Citizenship is the life-blood of We have created a generation ofpeople’s lives and their the new mutuality. monstrous schools with overwillingness to engage as citizens 1,500 pupils, controlled from(for any of the reasons referred Communities with an active Whitehall by the manipulation ofto above) in relation to those interest in the services they dubious exams and leagueservices should also be taken receive and the assets involved tables, and then we wonder whyinto account. in delivering those services will some pupils aren’t suited to the not only try to get the most out factory method. We have createdIn their landmark booklet The of those assets and services, but a parallel generation ofMutual State Ed Mayo and will also strengthen the links monstrous hospitals, and thenHenrietta Moore refer to the that bind people together. Few wonder why they are beset withhistorical origins of mutuality in would argue that a society in medical mistakes and super-bugs.the role of the guilds in medieval which such links are stronger,England. What we would now where people have respect for Anyone who has recently putcall citizenship (whether driven community assets, and where themselves in the hands of theseby altruism or self-interest) was they treat each other with will know what this means. 10
  17. 17. Different doctors with every B. M O D E L S F O R T H E M U T U A L S TAT Evisit. Long waits while you areignored by indifferent andharassed staff. Impersonal B. 1 SOCIAL ENTERPRISES initiative which has inspired ourservice, enlivened by the AND PUBLIC SERVICE work to develop the concept ofoccasional personality who DELIVERY a Public Interest Company.manages to break through the JACK DROMEYatmosphere of creaking We have seen how these typesmachinery. The Public Interest Company is a of initiatives benefit our new model of social enterprise members as citizens, asAccording to narrow bottom line consumers and as constituent for the delivery of public servicesmeasures, factory schools and members of the community. It ishospitals are supposed to be I argue that Councils and Unions this type of innovation whichmore efficient. They are evensupposed to provide better and should embrace the social will, given enough support andmore varied services. But the economy in the difficult debate time, protect our infrastructuretruth is that these models leave on the future of public service from the excesses ofout what’s really important - provision. globalisation by developing newlocal knowledge, personal tools in our armoury, whichcommitment, human-scale We have to find another way to protect us from the worst kindvalues. deliver good quality services in a of Private Sector provision, and way that puts the interests of giving the best kind of PublicOn health outcomes, it is small the public first. Sector Company a benchmark byand medium sized hospitals, forexample, that dominate the list which to assess their success.of top-performing “three star” In areas, the social economy has We should not let ourselves getNHS Trusts. In the field of been able to achieve this. into a position where we havetackling youth crime, some of Organisational structures like no choice, other than to givethe most promising innovations, worker co-operatives, Industrial what are fundamental servicessuch as Youth Offending Panels, and Provident Societies and for the long-term success of ourappear to be those that offer a community businesses are country away to the Privatereturn to the human scale in the finding new ways to serve the Sector.justice system. interests of local communitiesThe technocrats regard the and still make a profit and be That would be to leave ourselvesmistakes, the hospital bugs, the successful as enterprises. open and vulnerable togeneral atmosphere of herding exploitation as these companiescattle, simply as difficult In Bristol, the social economy then compete on a global scalepeculiarities that must be ironed now accounts for 5% of the with our assets and our futuresout - and don’t seem to grasp city’s employment and Public in their hands. If our onlythat they are the direct result of Sector services like leisure defence is regulation, we relyabandoning human-scale services have successfully too heavily upon the effectiveinstitutions. And so it is that transferred from Local Authority policing of the Private Sectorpoliticians debate the size ofclassrooms, but never the size of control to community control and the reliability ofschools; they debate the without making excessive independent verification. Whatmeasurement of hospitals but demands on the taxpayer, we need are alternatives, anever their size. without exploiting the workforce multi-provider economy which and yet vastly improving the makes appropriate use ofThat’s the key insight that the local service. different business models. AndMutual State approach could we need to do that, making aoffer - the concept of human- The money that local people pay case on behalf of our country, ascale. to swim or keep fit at any one land where we need toDavid Boyle is an associate at of Bristol Community Sports’ 13 strengthen local communities atthe New Economics Foundation sites is retained locally to benefit a grassroots level, where weand author of The Tyranny of the service and the local need to bring together what’sNumbers. community. And it is this kind of best for the people as11
  18. 18. consumers, as citizens and as B. 2 LEGAL MODELS FOR priority, and some kind ofconstituent members of a MUTUALISATION alternative purpose underlies thecommunity. CLIFF MILLS business. A somewhat puzzling debate is There are some interesting one-I think that this development taking place around the off examples of this in somecould be as significant as the proposals to replace Railtrack quite big businesses (Reuters)emergence of the Co-operative where some special purpose is with a “not-for-profit” companyMovement in response to limited by guarantee. being protected (in Reuters case,industrialisation. The Public editorial integrity). SocialInterest Company can offer ten There is explicit housing is also an example ofbenefits in the context of acknowledgement that the this, where local housingglobalisation: equity model has failed here; a companies use the CLG structure reasonable conclusion to draw to own housing stock. BUPA is when a company, which has another example. • first, economic development made a loss, has nevertheless and regeneration of local paid a dividend to its One of the advantages of a CLG communities; shareholders, and shortly is that the company can make its afterwards gone into insolvency own rules about who the • second, business efficiency, proceedings with (currently) no members are. Commonly the innovation and competitiveness; prospect of a distribution to board itself determines this, and shareholders. it is also common for the • third, sustainable economic members of the company to be development; The proposed solution of putting the members of the board. This the business into a company is obviously suitable in the • fourth, democratically limited by guarantee (CLG) charitable context, where those managed and accessible acknowledges that (i) the who are effectively the trustees services; business will not be funded by appoint their successors, thereby equity capital (a CLG does not ensuring that appropriate • fifth, opportunities for have any), and (ii) it will individuals continue to have workers to take on new therefore be controlled by a responsibility for the charitable roles; special group of people who objectives. have the opportunity to become • sixth, protection of the members (a CLG has members Big questions arise, however, values of the public sector; just like a company with a share when the CLG is owner of a capital; the difference is that substantial business where • seventh, more control and members have to give a accountability is important. If choice; guarantee rather than there are no shareholding subscribing for shares). investors with a right to remove • eighth, better targeted the board if they are failing to service provision; Is this a good idea? perform, how will executives be held to account? Who should be • ninth, ownership of wealth; A CLG is a commonly used responsible for choosing their vehicle in the charitable sector, replacements? What is the • tenth, involvement in the where it is convenient for a mechanism for driving efficiency charity to have a rather more and success in the organisation? management and forward sophisticated structure than a planning of community simple trust, perhaps because it And what about the customers? services. needs employees and other officers. The CLG is also used in It is interesting that the CLG isJack Dromey is National other situations where still used and promoted byOrganiser for the Transport and incorporation is required for lawyers in social housing, whereGeneral Workers Union, and is some reason, where generating such organisations are runningwriting in a personal capacity. profits for investors is not the very substantial businesses. 12
  19. 19. Actually, between [1960 and the along with this because from than two millions businessesmid 1990s], the majority of their point of view, housing is trading in the UK through thehousing organisations set up to relatively low risk in the sense company model.provide housing used the that the income stream isindustrial and provident society substantially guaranteed given There are two key points to note(IPS) model, trading for the the nature of the business. about choosing a company asbenefit of the community. In the legal framework for atruth, the traditional IPS housing You could make the same business. The first is that theassociation model which has comments about Glas Cymru, company is a vehicle for thebeen used is a CLG wearing the parent company of Welsh generation of profits. Thedifferent clothes - it has no Water, another CLG running a statutory framework and theconstitutional democracy within public utility: a low-risk legal doctrines that have built upit, which is the historical business, with a customer base over the last two hundred yearsbackground and backbone of the and basic service which is support this.industrial and provident society unlikely to change substantially(or mutual) sector. It is a over the foreseeable future. Here The second point is that thecompany limited by guarantee too, the democratic deficit company model elevates one ofdressed up as an industrial and features strongly, with those three essential ingredientsprovident society. The skin-deep bondholders (the business is - customers, workers and moneyattachment which housing really funded entirely by debt) having - and subordinates the others. Ithad to the IPS form has been very substantial rights and elevates money - share capital,amply illustrated by the trend protections. that is to say investors - to afrom the mid 1990s to use a place of greater importance thanCLG when it was found to be So is the use of a CLG (or a CLG customers and workers. It doeseasier than having to deal with pretending to be an IPS) a good this by giving to shareholdersthe sometimes difficult questions idea, for housing, hospitals, ownership. By giving themfrom the Registry of Friendly reservoirs or any other public ownership, this givesSocieties. assets? To answer that question, shareholders control, and the you need to start with some right to the profits. They canThe problem that has been fundamental points about the remove directors and appointidentified in housing is that the basic ingredients of a business, new ones, withdraw profitstraditional models - both CLG and how you drive a business’s earned or re-invest them toand IPS - leave a democratic success. So with apologies to expand the business, or they candeficit, and this is now high on management consultants, here sell their shares, or the entirethe agenda for change in the goes. business if they wish.housing sector. There are three essential The joint-stock company playedThe housing sector has survived ingredients to any business: a very significant part in theusing a CLG or non-democratic customers, workers and money. development of the UK andIPS model, without any If one of these is absent, the other economies. From theaccountability or democratic business will collapse. If all three industrial revolution, it has beencontrol, for two main reasons. are present, no particular legal the means by which new ideas -First because the regulator (the structure is needed for a railways, electricity, the internalHousing Corporation) plays a business to exist, and indeed to combustion engine - have beenvery active, some might say succeed, given the right developed and exploited. Byunduly interventionist role, environment. However, for any attracting investment, it hashelping to keep management number of reasons including provided the mechanism,under control. Second because stability, continuity, succession, through the incentive of profit,with a very high level if not legal commercial and other for encouraging businesses, and100% debt finance provided by requirements, the majority of competition between businesses.the major lenders, the lenders businesses are put into a legalthemselves have played a not structure. The limited or joint- By giving priority to the moneyinsignificant role in constraining stock company is the most ingredient, and subordinatingmanagement. Lenders have gone common form used, with more customers and workers, the13
  20. 20. company model has also been a the purpose of producing a lighter and less prescriptivemechanism for exploitation. profit. Instead, its purpose was statutory regime, simply aimedCustomers and workers do not to trade at a fair price, so that at providing a consistentenjoy any level of control, or nobody was exploited in the framework within which suchright to profits, in a traditional process. If at the end of the organisations can be structure. Those rights financial year it turned out thatbelong to the investors, and the the pricing had been too high, Indeed because of this lighterargument goes that the control any “surplus” left over after and less prescriptive regime, itand the right to the profits are making proper provision for was necessary to introduce newthe price or reward for the risk future needs was returned to restrictions on registration undertaken by investing in the customers in the form of a this legislation, as the growingbusiness (the price of equity dividend. In other words, the co- onerous obligations underfunding). Customers can of operative dividend was an after company law were, by the 1930scourse choose to buy what they the event means of adjusting making the company anneed from elsewhere if they price, not a means of unattractive model. Specifically,wish, and workers can withdraw distributing profits. entrepreneurs did not like thetheir labour and work elsewhere. prospectus requirements that Co-operatives like any other had been introduced forWhere in reality customers business required capital, but in companies to protect investors,cannot buy elsewhere because the co-operative context, capital and sought to evade them bythere is a real or effective was only entitled to a low rate incorporating and sellingmonopoly, and where economic of interest - sufficient only to securities in industrial andconditions do not provide other secure the necessary funding. provident societies.opportunities for workers, these There was no entitlement totwo groups have in the past profit. This led to the Protection ofsuffered from exploitation. Fraud Investments Act 1939, The legislation under which which in essence introduced newThis played an important part in mutual organisations were restrictions on what could bethe birth of the mutual incorporated was different and registered under the Industrialmovement. The early building separate from that applying to and Provident Societies Act,societies, permanent societies, companies. The Industrial and specifically aimed at excludingand co-operative societies all Provident Societies Acts, Friendly businesses that should behad in common the idea that Societies Acts and Building registered as companies. Untiltheir customers were the Societies Acts are a different that date, it was the nature ofowners, not a separate group of world from the Companies Acts. the business that dictatedinvestors. The three basic They have different aims and whether or not registrationingredients are still needed, of objectives. under the IPS legislation wascourse, but the mutual models possible. The 1939 Act changedfound other ways of providing it Company law, on the one hand, this, and made registrationwithout giving ownership to has to provide a framework in depend instead upon theoutside investors. Instead, which proper protection is given underlying purpose of theownership was given to those to those who entrust their business instead. It thereforeparticipating in the business, investments into the hands of permitted bona fide co-and this evolved into the others who are charged with the operatives to be registered, andconsumer co-operative responsibility of running the businesses that were being runmovement and the worker co- company (directors). The current for the benefit of theoperative movement. volume of primary and community. secondary legislation applying toThere was another key companies bears testimony to With hindsight, this was adifference, which evolved as co- the extent to which such defining moment for the mutualoperative political theory protection is needed. movement. Not only did it drawdeveloped. This was the idea a line between the profit-driventhat unlike a company, a co- Industrial and provident society investor-owned company sectoroperative was not trading with law, by contrast, is a much and the mutual, community 14
  21. 21. benefit sector, but it also made The IPS model is not prescriptive But it is more than just who thethe Registry of Friendly Societies about who ownership is given to. owners are that matters. It is the(now Mutual Societies In the retail co-operative underlying purpose of theRegistration at the FSA) the movement, ownership is given organisation which is inextricablygatekeeper of mutual status. For (largely) to customers. In the linked to that ownership issue.the Registrar not only had control worker co-operative sector it is The difference with a co-operativeover entry to mutual status as a given to workers. There are or community benefitregistered IPS, but also had organisation is that their reason interesting historical examplescontinuing responsibility to for being is based upon the (not that common) of co-monitor such continuing status fulfilment of a need, and those partnership societies where bothincluding the approval of any rule who own and control such workers and customers arechanges. What this means is that organisations have it within their members. The retail co-operative power to ensure that the need iscompliance with the basic movement is effectively going met. The organisation is thereforeregistration criteria is regulated, through a re-examination of that run according to guidingthereby ensuring that a registered option in re-appraising the role of principles, and the owners are thesociety remains true to its employees within its democratic custodians of those principles,purpose. structures. whether they be co-operative orWe therefore have available to us community-based a choice of legal structures In truth, in an IPS or mutual model you can choose either So how do you choose the rightfor holding businesses. This customers, or workers, or a structure? How should publicchoice is particularly under combination of both as owners, assets be held?examination at the moment in thecontext of the debate about and therefore the ones who drive the success and efficiency of the There are two key issues, the firstpublic services, and public or of which is the funding assets. What is the business. Funding or money is the oxygenright legal structure for holding without which no business canand operating these? The choice of who should have operate. If funding can only be ownership will depend upon the obtained from investors willing toOn the one hand there is the nature of the business. For take a risk, there is no realcompany vehicle, which has as its example, a residential care home alternative to a joint stockunderlying purpose the for the elderly is a type of company. It is expensive becausegeneration of profits. As noted business whose success is entirely investors require a high level ofabove, the basic model is one dependent on the commitment return to reward them for thewhere ownership is given to the and performance of its workers. risks they take.providers of the money, normally The workers have a very closeexternal investors. The profit- relationship with those for whom If funding can be obtained fromseeking instincts of investors are they are caring, and without their other sources, other options mayused to drive efficiency and be available. A low risk business, commitment and support, thesuccess for the business care home is unlikely to flourish. or one that can be reduced to a(measured by the level of profits). low risk business with a captive It is a worker intensive business. market and long-term demandThe other option is the IPS model, A water company by comparison such as housing, and utilitywith an underlying purpose of the businesses illustrate the point. is a capital-intensive business. Theco-operative principles, or theclosely related purpose of physical assets it needs, and the Other options also exist where,providing a benefit to the state those assets are in, are a for example, a local authoritycommunity. It is often key part of the success of that needs to do something with onecharacterised as the “not-for- business. Workers are important, of its services under a best valueprofit” sector, which whilst being but in practice you can get by review, and might be prepared toa technically accurate description with a small work force because support what would be a start upby comparison with the company you can subcontract a great deal of a new self-standing business,sector, it conjures up unhelpful from invoicing to engineering. In either with an endowment, orimages of inefficiency and that case, customers are the more favourable terms for use of landunprofessionalism. appropriate owners. or other assets.15