Contains a chapter by Geraint Day

1. The sponsoring The Mutual State is a citizens-oriented
organisations for this approach to public service reform. By
virtual think-tank have bringing users into the frame and creating
been: a framework for social entrepreneurship,
the Mutual State fosters more responsive
Greenwich Leisure Ltd
public services, and helps to reweave
democratic relations between citizen and
Cobbetts Solicitors
state. This report draws together the
Civitas
findings from a virtual think-tank on
mutualisation, designed to test, challenge
Community Enterprise in and improve the core approach, running
Strathclyde over six months up to May 2002.
Community Enterprise Wales
Demos
Development Trusts Contributors:
Association Tom Bentley, Demos
Jonathan Bland, Social Enterprise London
Fabian Society David Boyle, New Economics Foundation
Ann Blackmore, NCVO
Geraint Day, Institute of Directors
IPPR
Jack Dromey, TGWU
David Green, Civitas
Mutuo Peter Hunt, Mutuo
David Leam, Social Market Foundation
Paul Maltby, IPPR
New Economics Foundation
Ed Mayo, New Economics Foundation
Cliff Mills, Cobbetts Solicitors
Public Management Henrietta Moore, LSE
Foundation Angela Pulman, Community Enterprise Wales
Andy Roberts
Jane Steele, Public Management Foundation
Social Market Foundation Paloma Tarazona, Social Enterprise London
Perry Walker, New Economics Foundation
Social Enterprise London
The Work Foundation

2. Building the Mutual State
findings from the virtual thinktank
www.themutualstate.org
edited by Ed Mayo and Henrietta Moore
New Economics Foundation and Mutuo

3. The New Economics Foundation (NEF) was founded in 1986 by the leaders of The Other Economic
Summit (TOES), which has forced issues such as international debt on to the agenda of the G7/G8
summit meetings. It has taken a lead in helping establish new coalitions and organisations, such as the
Jubilee 2000 debt campaign, the Ethical Trading Initiative, backed by the Government and leading
retailers, the UK Social Investment Forum and the Green Gauge "alternative" indicators of social and
environmental progress.
NEF is a registered charity, funded by individual supporters, trusts, business, public finance and
international 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 and
participative democracy. It is now recognised as one of the UK's 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 2800
Cinnamon House Fax: 020 7407 6473
6-8 Cole Street
London Email: info@neweconomics.org
SE1 4YH Web: www.neweconomics.org
Registered charity number 1055254
Mutuo is a not-for-profit think tank that brings together the different wings of the mutual sector to
promote its common message of success. Working exclusively for the mutual sector, Mutuo has well
established 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 businesses
Projects are managed by Mutuo’s experienced team of staff, who work with sector specialists, journalists
and like-minded organisations to convey the mutual message to opinion formers and decision makers.
Mutuo Tel: 020 7367 4177
77 Weston Street Fax: 020 7407 4476
London
SE1 3SD Web: www.mutuo.co.uk
ISBN no. 1899407499
Published May 2002, (The New Economics Foundation and Mutuo)
i

4. “
The Mutual State is a stimulating
contribution to the debate concerning
”
the future of public services, and
illustrates how a new and imaginative
approach can refresh the old and
increasingly jaded arguments
concerning the public/private divide.
Professor Julian Le Grand, London School of Economics
ii

5. INTRODUCTION
Ed Mayo and Henrietta Moore
P 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 Boyle
M 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 Maltby
O 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 Roberts
CONCLUSION
Ed Mayo and Henrietta Moore
iii

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 Foundation
E D I TO R S
Ed Mayo is Executive Director of the New Economics Foundation. He is on the Boards of the Local
Investment Fund, AccountAbility, the Social Investment Forum and OneWorld and is Chair of the London
Rebuilding Society. He has advised the Treasury on enterprise.
Henrietta Moore is Professor of Social Anthropology at the London School of Economics. She is editor
of Anthropological Theory Today (1999), The Health and Well-Being of Children and Young People in the
UK (1997) and author of A Passion for Difference (1994).
iv

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 E
BEYOND THE MARKET with league tables, performance where agencies and non-
indicators and public service departmental bodies (those that
AND THE STATE
agreements. But just as the in previous political times had
limits to privatisation set in, so been damned as quangos) set up
The 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 parody
and yet, the state has emerged
above. of true governance, with limited
from the era of privatisation in a
powers and reappointment at
position of relative strength. This
After all, what the best of the whim of central government.
is both in terms of its tax take as
private sector management has
a proportion of the national
already shown is the need to The search for more responsive
economy, after projected rises in
limit the costs and distortions models for managing public
health spending, and as the
associated with layers of services, and the discovery of
favoured 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 the
policing to health, in which the
to move dynamically at the pace new-found interest in “social
profit 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 by
The idea of opening public
beyond both privatisation and social entrepreneurs. They
services to competition in the
the managerial state was operate with a public ethos, but
open 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 proved
run by the state, from water and within government, operationally effective at engaging the
telecoms through to waste independent, but strategically participation of users.
collection. The market may bring accountable. The model of
cost advantages, which is what “executive agencies” dates back Self-governance is an essential
drove the early privatisations, to a report by Sir Robin Ibbs in recipe for what we have
but 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 to
and 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-purpose
privatisation dried up, what self-governing organisations is
emerged was the “managerial There are examples of excellence the way to do it.
state” of the Conservatives in this approach, sometimes
under 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 creating
Out of a perception that public back. Independence was incentives for free-riding, lack of
services 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 models
quality, the aim was to drive up of appointment, reporting and of organisation that internalise
productivity. In the development accountability. public service excellence and co-
in the 1990s of “quasi-markets” operation with other parts of the
in health, for example, with Independent-minded czars and public service jigsaw, rather than
purchaser / provider splits, and commissioners, such as Elizabeth have to have this imposed
compulsory competitive Filkin overseeing MPs standards, through costly regulation. This is
tendering, the state in effect were not reappointed. Units the “new mutuality”.
became the sponsor and such as the Small Business
champion of market activity in Service never took on the The New Economics Foundation
public services. intended life of their own, (NEF) and Mutuo launched
ending up as fiefdoms of the www.themutualstate.org in
The managerial state is replete same empire as before. Even October 2001 as a time-limited
1

8. “virtual think-tank” on user The programme brought While weighted to contributors
participation and the possible together a unique alliance of that were clearly interested
mutualisation of public services. policy think tanks and enough in the ideas to
The rationale was that there is a practitioners concerned to participate in the debate, the
lot of practice already going on, explore the role of social results suggest that there are
but it is rarely brought together ownership in public services. The significant untapped
or properly understood. It site averaged around 185 opportunities for mutuality in
followed the publication of the participants and contributors in public services, but that these
NEF report we co-authored, The the debate per month, lack the backing of an enabling
Mutual 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. Patricia
galvanise 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. CO-PRODUCTION to unlock the knowledge and Walker argues, co-production
contribution of service users, ensures that citizens are involved
Citizens’ involvement in public valuing them as partners. in public service design and
services is nothing new, but in delivery, and the result is an
the story of the welfare state as In the field of health, for improvement in the range and
the narrative of “professional” example, the concept of the quality of services.
public services, it has often been “expert patient” has highlighted
taken for granted as discussed opportunities for NHS staff to
by Ann Blackmore in section B draw on the knowledge of GOVERNANCE AND
below. Tony Crosland, decades patients with chronic illness, and ACCOUNTABILITY
ago, declared himself staggered indeed to use this to benefit
by the extent to which statutory other patients, offering them not Co-production is clearly linked to
services depended on the just dispassionate advice but issues of governance and
volunteer. He was drawing on first-hand experience of how it accountability. Decentralisation
his visits to public services. In feels. moves decision-making closer to
fact, the numbers were only users and improves the quality
collated across public services The co-production approach also of service, whilst participation in
for the first time in 2000. The addresses one of the major governance can clarify lines of
results 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, social
The contemporary approach to community buildings set up by housing has received significant
citizens’ 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 of
of service delivery to the input cities of Victorian times. Co- concessional finance, in addition
of users themselves. This is production is an opportunity for to development support and
characterised by Edgar Cahn, the people to act as citizens from housing benefit for tenants that
US 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 and
production reconceives public interest and public concern. restrictive regulation on behalf
services. Instead of a traditional of government by the Housing
model, in which disinterested In the framework of social Corporation. On the back of this
and expert professionals deliver capital, the real opportunities for funding; the assurance of
services on behalf of, or for the rebuilding trust come not from regulatory scrutiny; their
use of, passive users, co- what the state does, but the significant asset base; and
production is about finding ways way that it does it. As Perry assured long-term income
3

10. streams, registered social In section B below, several division between private and
landlords 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 together
markets in private finance - with the Mutual State. A key concern aspects of the public, private
not 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 and
have been transferred by local democratically managed and resources from across sectors to
authorities to registered social accessible services, improved develop future capacity within
landlords since 1988. This now autonomy for workers, and more social enterprises.
represents 35% of their housing control and choice for citizens as
stock. In Glasgow, 80,000 discussed by Jack Dromey. Paul Maltby discusses how
tenants voted in favour of Community Trusts - community
transfer of their homes from the One solution is the public not-for-profit public/private
city authority to the Glasgow interest company (PIC), discussed partnerships - could play a key
Housing Association, which in by Jane Steele that would role in regenerating deprived
turn promised a rent freeze and provide the UK with a legal form areas. The view here is that
a £1.9 billion investment that offers an alternative to the regeneration projects are more
programme over ten years. In choice between public and likely to succeed if local people
Birmingham, in contrast, tenants private. The PIC would be a form are involved, and if best use is
opted to stay in municipal of organisation that would be made of public, private and
control. The Welsh Assembly both not-for-profit and voluntary sector expertise in the
voted 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 the
described by Peter Hunt in As the case of the building bundling together of assets and
Section C, as the preferred societies has shown, community services on a neighbourhood
future 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 attract
the overall success of this from mutual assets. financial support and be an
approach, voluntary transfer attractive new model for
does appear to be accompanied New mechanisms such as this public/private partnerships.
by evidence of improved tenant inevitably raise questions about
satisfaction, as the National who makes decisions and how
Housing Federation has are they made. In the context of ENTREPRENEURIAL
documented. Giving tenants the the development of a non-profit CITIZENSHIP
say on transfer also seems successor to Railtrack, Cliff Mills
democratic 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 the
discusses in section C below, legal form has a direct bearing Mutual State, inevitably changes
there are still real dilemmas in both on governance structures the relationship between the
terms of forms of accountability and on the mechanisms for citizen and the state. In sum, it
in non-state social housing and a funding the enterprise. All too extends the notion of citizenship
need to restore a genuine ethos often debates about community for the simple reason that, in
of mutuality as a means to participation take place in a contrast to the myth of
improving 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 more
David Leam points out in Section designing mutual public services. you get out. As Cliff Mills points
A, not-for-profit entities are not out in Section A below, the
necessarily linked to community What all the contributors in current debate about the right
ownership and participation, and section B show is that the new form of ownership for public
do not inevitably lead to models underpinning the Mutual services is not just about how
improved accountability. State will work outside the old those services should be funded
4

11. and who should carry the risks Government and civil society warns in his discussion of how
of ownership, but about people’s initiatives recognise this new mutualism could be best
willingness to engage as citizens emerging need, which has introduced into social housing.
in a new way. recently transmuted into a
demand for a renewed form of Social enterprises based on the
The interrogation of what it citizenship and for greater civic principles of new mutualism do
means to be a citizen has been participation in policy making. not just endeavour to step in to
the hallmark of the UK state in make up the deficit in the
the last decades of the 20 th This is the impetus behind the public/private relationship, but
century. What lay behind this Mutual State. But, how can rather seek to reform and fresh
debate was the question of how changing ideas about it in an innovative way. They
to rework the relationship citizenship, democratic start from the principle that
between the economic and the participation, community and entrepreneurial activity can and
social, 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 and
between the market and the to a new vision of the The basis for large-scale
State. This reformist impulse has relationship between the social involvement of citizens in the
continued to be evident in and the economic? design and delivery of public
recent Government initiatives - services would be a new notion
the attempt to spell out specific The key issue here, as we have of citizen linked to risk. One of
rights and responsibilities as the already stressed, is that the key factors in any enterprise
basis for new forms of social communities and individuals is how risk is managed. In a
contract - and in contemporary need to be involved, alongside private company, shareholders as
policy language - the “New the State and professionals, in owners drive the success of the
Deal” 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 take
role of the State and the potential to bring about an as investors and owners.
responsibilities of the citizen enormous change in the way we
have taken place alongside other think that the relationship of the The notions of risk and
social changes, notably in a public and the private and the citizenship seem almost
marked growth in civil society role of the citizen in maintaining antithetical, and this is because
and an expansion in the diversity and developing that relationship. historically the State has taken
of its forms, accompanied by a responsibility for managing the
crisis in older forms of In the past, the management of relationship between the
community 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 the
have fought to find expression responsibility of the State. And, public. In its redistributive
within political forms that where the State could not or did function, the welfare state has
struggle to accommodate them - not wish to function, then traditionally operated as a
neither eco-warriors nor charity stepped in. Successive mechanism for pooling resources
Women’s Institute members governments have wanted to in order to manage risk and
appear to find appeal to their shift some of that responsibility meet needs. Through
MPs 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 manage
There is a sense in which the contract that have characterised their own relation to the market
new forms of civil society are both past conservative are not disadvantaged and
demanding the creation of new governments and the current excluded. This is the theory. In
democratic and public spaces government. These new forms of practice, the reality has
within social life. Such spaces social contract are not easy to frequently been altogether more
are not necessarily antagonistic establish and without a sound brutal.
to, but certainly cannot be basis in participation can appear
simply mapped onto, older forms potentially coercive or Under the Mutual State, new
of community and solidarity. neglectful, as Andy Roberts forms of entrepreneurial
5

12. citizenship would emerge that the new education Mutual State is not just a matter
involve the pooling of risk - infrastructure. Imagine, for of finance, but of investment of
through mutual social example, a scenario where a skills, time, and experience, as
enterprises - rather than simply local social enterprise runs a Angela Putman discusses in
the pooling of resources. The local primary school. In such a section C below. Stakeholders
creation of social enterprises for case, it is not only the staff or invest not just to return financial
the delivery of public services employees of the enterprise who value to the community, but also
run 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 reinvigorate
their individual benefit, is a new supporters (grandparents, the community itself. This is the
way of managing a relationship concerned individuals, local true dividend on which
both to the State and to the philanthropists, employers, local entrepreneurial citizenship is
market. In order to pool risk authorities). These individuals based.
effectively, such social should have a mechanism
enterprises would need to take whereby they can invest in
new forms, both new forms of education in their area and for MULTI-STAKEHOLDER
mutuality and/or new forms of their community. In other words, GOVERNANCE
social investment. they should be social investors
and equity holders. The The mutualisation
Why 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-profits
it is this form of ownership that in relation to social ones as well. would be allowed a key role in
would drive the success of Accountability and transparency the management of the National
mutual social enterprises: the is based on equity holding and Health Service has brought
drive for social returns or social return rather than simply health care mutuals to the fore.
dividends. Entrepreneurial on committee representation. Alan Milburn said that new
citizens would take larger risks in “Foundation Trusts” could
order 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 local
more active management of the frameworks have allowed new services, and benefits such as:
quality and delivery of models for growth and access to
outresourced public services. finance to emerge. Official • having a clear public service
recognition of the social aim of ethos and not-for-profit
The notion of citizen would social enterprises is linked to basis;
draw on a much wider their status, and restrictions are
understanding of civil society in place to prevent the • giving greater control to
and revised notions of demutualisation of successful patients and service users
community to include a broader entities. The result is that social and opening up options for
notion of social investor. Under enterprises can raise equity greater accountability to
traditional co-operative through capital or through local communities;
structures, those who benefited financing members with limited
from mutuality were the staff or voting rights. Investing members • more active involvement and
employees, and their can be individuals, private sector control for both staff and
dependants. In the new form of companies or local authorities. management;
social enterprise, it is not only The key to success here is social
the 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 from
the relevant constituencies. be ploughed back into or Whitehall;
retained by the community.
Tom Bentley in Section C argues • immunity to takeover by
that mutual engagement could However, the notion of social organisations which will not
become an indispensable part of investment underpinning the provide such benefits.
6

13. Health mutuals exist in many income-generating opportunities bringing all stakeholders into
parts of the world and deliver could be developed or new processes of decision-making
primary and hospital care, as funds raised by issuing ethical and ensuring full and
well as public health and investment NHS Bonds. appropriate information flow.
ancillary services. These mutuals Within the Mutual State, this
are most usually owned either by What has still to be worked out model is not one that is
users (potential users), providers is how the governance of such a necessarily based on individual
or non-co-operative enterprises mutual would work. In user or membership as in the most
interested in joint purchasing. provider co-operatives of the familiar form of co-operative
Health maintenance usual sort members are able to societies, but is one that allows
organisations in the USA can be vote, receive information and both individuals and collective
co-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, higher
for the elderly, public health and utilisation committees made up education institutions - to be
ancillary services, and medical of people directly elected by the members, and to serve at all
help lines. membership work alongside the levels. Geraint Day and David
board of directors and the Green discuss health mutuals
In Japan, health co-operatives management. In the USA, special and mutual health care
own 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 the
and public health. Asset special issues such as care for importance of getting
purchases are funded by the elderly and mental health. governance structures right and
member’s share capital, the necessity to share risks
members’ loans and interest- What is clear is that if citizens through mutuality.
bearing bonds, and the income are to actively and seriously
comes from public provision for participate in the design and What is crucial in such a model
health care, including social delivery of public services then is that multi-stakeholder
insurance systems, employer health mutuals would have to governance allows not only for
schemes, local payments and have some form of multi- the participation of stakeholders,
other charges. Such not-for- stakeholder governance. This especially citizens, in the design
profit providers are dependent would mean local citizens, staff and delivery of local health
for the largest part of their and other stakeholders on the services, but it also allows each
income on the State. But Board of Directors, but it might mutual social enterprise to form
members play a key role in also entail multiple “Boards” - strategic alliances and
raising capital and in providing customer and user forums, relationships with other players
additional revenues through co- employee councils and a in the local health economy. This
payments and other charges. community committee - whose is the critical added value of
members report to a stakeholder mutuality. The social dividend on
The UK National Health Service council that provides feedback social investment is a mutual
has 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 not
principle has recently been re- have executive members, as well just to the culture of public
iterated in the new proposals for as representatives of the services but into its institutions
decentralisation. However, what stakeholder owners. as well.
makes potential health trust
mutuals different is not just that The key here is the relationship The model of governance
they 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 work
that the members could begin to Directors cannot create strategy, of Glas Cymru in the water
have a major say in how the manage finances and monitor sector, could provide the model
service is designed and delivered management at the same time for other public service sectors
and it is they who would decide as being representative of all and for local governance as a
whether co-payments or fixed interests. It is the stakeholder whole within the UK. An agenda
charges for non-core services are council that informs and is of building the Mutual State is
appropriate and whether new informed by the Board, thus now starting in earnest.
7

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 E
A.1 CO-PRODUCTION tyres on his teacher’s Lexus The benefits of co-production
PERRY WALKER because she kept him in after are: the people who need to be
school for failing to hand in his involved are involved; people
One reason for the poor quality homework. He explained that he become more assertive; the
of some public services is the lost control because he had range and quality of services is
failure to involve the public. Co- promised his parents that he improved; and a constituency of
production refers to the joint would bring his younger brother support is created for that
production of services by the and sister safely home across service.
producer/expert and the gang territory from a
consumer/user. “Co-” does not Perry Walker is Director of
neighbouring school and his
mean that each party Participative Democracy at the
teacher wouldn’t allow him ten
contributes the same, or New Economics Foundation.
minutes to do that.
contributes equally. It does mean
that both parties are essential.
The jury’s sentence was:
A.2 ACCOUNTABILITY
1. Write a letter of apology to
Here is an example that shows DAVID LEAM
the teacher and make a good
how radically it is possible to
faith payback of at least $30 For the past decade or so the
rethink the current divide
that you personally earned. private sector shareholder model
between producer and
consumer. In 1996 the has reigned supreme as the
Washington 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 privatisation
Court, so that first offenders explaining to them why, despite and demutualisation seemed to
come before a jury of their the provocation, this was no way foreshadow only defeat for
peers. Sentences can be to act. They look up to you; you those advocating a Mutual State.
community service, restitution, need to put them straight that
counselling or an apology. In acting this way is not right. But 2001/2 has seen the
addition, jury duty is now a shareholder model itself come
mandatory element of every 3. Hang out a minimum of 20 under attack. In Wales privately
sentence. Jurors earn Time hours at a boys club over the owned Welsh Water has been
Dollars that they can exchange next month. You need to be a taken over by Glas Cymru, a
for a recycled computer. The kid and spend some time just newly established company
Time Dollar Youth Court is now being with your own age group. limited by guarantee. In
handling over a third of first- Hackney, the local council has
time juvenile offenders in the rejected the private sector path
To the Time Dollar staff they
District. taken by, amongst others,
said, “Get him another teacher.
Islington, in favour of an
A teacher who doesn’t
This approach benefits both jury independent not-for-profit trust
understand what this kid was
and offender. The jury felt to take on the management and
going through has no business
affirmed enough to say things to delivery of its education services.
being his teacher.”
friends like, “If you stand at that
corner, sooner or later you’re Most sensational of all has been
going to get busted and Time banks are now spreading the demise of Railtrack, the runt
someone is bound to be carrying widely across the UK. They are of the privatised litter. Unwanted
drugs”. Normally, saying such illustrations of a fundamental and unloved the company was
things would be death to peer shift in power, possible in public finally left to starve by Transport
acceptance. 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 for
that is what they are. dignity through appropriate Railtrack to deliver a service that
One young man had slashed the forms of participation. seemed indefinitely delayed.
8

15. Supporters of mutuality could be Take the case of Glas Cymru, for brand. More positively, there
forgiven for cheering these example. In as much as its thirty may also be scope to help
developments, but an obvious or so members are develop mechanisms for bridging
point demands to be made. representative of Wales, they are this accountability gap - whether
None of these models are so in the way that the House of through the creation of
mutuals - although befuddled Lords is representative of the stakeholder boards or other such
commentators may often refer to UK. They are not bad people - means.
them as such. In none of them on the contrary, many are very
does ownership transfer to the impressive - but they are not Time alone will tell whether this
community in question. And in your ordinary man or woman in new breed of not-for-profit
none of them do enhanced the street. Now it could be models helps to take us closer to
accountability, public argued that this is no bad thing, the mutual state. But given some
participation or community but that is surely not a vision of the dangers, advocates of a
involvement feature as a that a new mutualism would new mutualism should treat
necessary consequence. want to embrace. them with caution.
Just because these models are Similarly, it appears a feature of David Leam is a senior researcher
not-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 CITIZENSHIP
mutuality’s proponents believe it
then perhaps that is fair enough. CLIFF MILLS
is. After all a banker does not
But a new mutualism would
become a doctor merely by
surely part paths on this point Marking a cross on 15 ballot
donning a white coat and
(and I doubt that the people and papers (a few more if local
putting 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 well
the not-for-profit garb and ask
eventuality comes to pass). be, the sum total of their
ourselves how this new breed of
organisation is likely to behave participation as a UK citizen in
The point is this. The phrase their country’s democratic and
and operate in practice.
“not-for-profit” generally has civic process.
positive connotations in the
For example, we might ask what
minds of the public. Whilst The experience of the last 25 or
are the rights of bondholders in
policy wonks and the like so years of privatisation has
these new not-for-profit models?
appreciate that the phrase could made matters worse. Whilst the
Where will ownership rights in be used to describe a vast array removal of services from local or
fact reside? Who are the of organisational forms, to most central government control may
members and how did they get people the spectrum will blur have led to greater transparency
there? What are the corporate into one - and mutuals will and openness, the process has
governance arrangements? How inevitably be caught within this. also greatly increased the
is management performance
number of areas in which we are
measured 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 or
extent will ordinary people have new kids on their block? The consumer, we are likely to insist
a voice? most propitious approach could on our consumer rights,
be to develop a critique of the demanding performance of the
Now it may be that the answers recent wave of not-for-profit contract under which we are
to these questions are still being models, focusing on the paying for services, and seeking
formulated by the organisations accountability gap that lies at compensation if we do not get
concerned. Where there are their heart. At the very least this it. We are consumers, not
answers, however, I suspect that would help to differentiate the citizens.
they would be unpalatable to mutual model and help guard
those currently engaged in against potential Our attitude may also be
mutual service delivery. “contamination” of the mutual affected by the fact that it is a
9

16. company selling us these just as strong a driver of public respect, is a desirable goal. The
services, 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, and
management, and earning the twentieth centuries when improving the quality of life do
profits 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 that
company is as a customer or today, when we are even more they are run for the profit of
consumer, and since we have no dependent on public services shareholders destroys citizenship
other means of participating in because of our higher by turning the relationship with
or influencing the company, far expectations and standards of users into a market contract. It
from having an interest in seeing living. weakens the ties that bind us,
it prosper, our only interest is in and damages the basis needed
getting what we can out of it. Mutual forms of ownership not to make sure that democracy
This 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 in
On the other hand, there are which they rely on, but they local communities is a means of
many people who take part in actually use that participation to building robust, successful and
public, voluntary or charitable drive the success and efficiency efficient services, re-invigorating
organisations, participating in of the business. We can be more citizenship, and producing more
and providing advice and than just customers or stable caring communities.
support in their local consumers, having a greater
communities. There may be a interest and influence in the Cliff Mills is a partner with
variety of reasons for such success of the business providing Cobbetts Solicitors.
activities including an innate the service, for the benefit of
sense of public service or duty, a ourselves and others.
desire to support friends and A.4 HUMAN-SCALE
family, or simply the desire to Clearly not everyone would be DAVID BOYLE
play an active part in society. interested in this sort of
participation, though with There is a problem about
The debate about the right form modern communications resources invested in public
of ownership for our public systems, many are interested in services. Services in the UK have
services is not just a debate receiving more information. suffered from underfunding for
about how those services should Modern mutuals are aware of generations compared with
be funded, and who should carry the need to nurture active those on the continent, but the
the risks of ownership. Where membership, and the variety of debate about resources obscures
people are dependant on basic means of communication and the real problem. It’s what
services 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 of
people’s lives and their the new mutuality. monstrous schools with over
willingness to engage as citizens 1,500 pupils, controlled from
(for any of the reasons referred Communities with an active Whitehall by the manipulation of
to above) in relation to those interest in the services they dubious exams and league
services should also be taken receive and the assets involved tables, and then we wonder why
into 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 created
In their landmark booklet The of those assets and services, but a parallel generation of
Mutual State Ed Mayo and will also strengthen the links monstrous hospitals, and then
Henrietta Moore refer to the that bind people together. Few wonder why they are beset with
historical 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 put
call citizenship (whether driven community assets, and where themselves in the hands of these
by altruism or self-interest) was they treat each other with will know what this means.
10

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 E
visit. Long waits while you are
ignored by indifferent and
harassed staff. Impersonal B. 1 SOCIAL ENTERPRISES initiative which has inspired our
service, enlivened by the AND PUBLIC SERVICE work to develop the concept of
occasional personality who DELIVERY a Public Interest Company.
manages to break through the JACK DROMEY
atmosphere of creaking We have seen how these types
machinery. The Public Interest Company is a of initiatives benefit our
new model of social enterprise members as citizens, as
According to narrow bottom line consumers and as constituent
for the delivery of public services
measures, factory schools and
members of the community. It is
hospitals are supposed to be
I argue that Councils and Unions this type of innovation which
more efficient. They are even
supposed to provide better and should embrace the social will, given enough support and
more varied services. But the economy in the difficult debate time, protect our infrastructure
truth is that these models leave on the future of public service from the excesses of
out what’s really important - provision. globalisation by developing new
local knowledge, personal tools in our armoury, which
commitment, human-scale We have to find another way to protect us from the worst kind
values. deliver good quality services in a of Private Sector provision, and
way that puts the interests of giving the best kind of Public
On health outcomes, it is small
the public first. Sector Company a benchmark by
and medium sized hospitals, for
example, 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 get
NHS Trusts. In the field of been able to achieve this. into a position where we have
tackling youth crime, some of Organisational structures like no choice, other than to give
the most promising innovations, worker co-operatives, Industrial what are fundamental services
such as Youth Offending Panels, and Provident Societies and for the long-term success of our
appear to be those that offer a community businesses are country away to the Private
return to the human scale in the
finding new ways to serve the Sector.
justice system.
interests of local communities
The technocrats regard the and still make a profit and be That would be to leave ourselves
mistakes, the hospital bugs, the successful as enterprises. open and vulnerable to
general atmosphere of herding exploitation as these companies
cattle, simply as difficult In Bristol, the social economy then compete on a global scale
peculiarities that must be ironed now accounts for 5% of the with our assets and our futures
out - and don’t seem to grasp city’s employment and Public in their hands. If our only
that they are the direct result of Sector services like leisure defence is regulation, we rely
abandoning human-scale
services have successfully too heavily upon the effective
institutions. And so it is that
transferred from Local Authority policing of the Private Sector
politicians debate the size of
classrooms, but never the size of control to community control and the reliability of
schools; they debate the without making excessive independent verification. What
measurement of hospitals but demands on the taxpayer, we need are alternatives, a
never their size. without exploiting the workforce multi-provider economy which
and yet vastly improving the makes appropriate use of
That’s the key insight that the local service. different business models. And
Mutual State approach could we need to do that, making a
offer - the concept of human-
The money that local people pay case on behalf of our country, a
scale.
to swim or keep fit at any one land where we need to
David Boyle is an associate at of Bristol Community Sports’ 13 strengthen local communities at
the New Economics Foundation sites is retained locally to benefit a grassroots level, where we
and author of The Tyranny of the service and the local need to bring together what’s
Numbers. community. And it is this kind of best for the people as
11

18. consumers, as citizens and as B. 2 LEGAL MODELS FOR priority, and some kind of
constituent members of a MUTUALISATION alternative purpose underlies the
community. 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 some
could 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” company
Movement in response to limited by guarantee. being protected (in Reuters case,
industrialisation. The Public editorial integrity). Social
Interest Company can offer ten There is explicit housing is also an example of
benefits in the context of acknowledgement that the this, where local housing
globalisation: 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 is
Jack Dromey is National other situations where still used and promoted by
Organiser for the Transport and incorporation is required for lawyers in social housing, where
General Workers Union, and is some reason, where generating such organisations are running
writing in a personal capacity. profits for investors is not the very substantial businesses.
12

19. Actually, between [1960 and the along with this because from than two millions businesses
mid 1990s], the majority of their point of view, housing is trading in the UK through the
housing organisations set up to relatively low risk in the sense company model.
provide housing used the that the income stream is
industrial 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 as
benefit of the community. In the legal framework for a
truth, the traditional IPS housing You could make the same business. The first is that the
association model which has comments about Glas Cymru, company is a vehicle for the
been used is a CLG wearing the parent company of Welsh generation of profits. The
different clothes - it has no Water, another CLG running a statutory framework and the
constitutional democracy within public utility: a low-risk legal doctrines that have built up
it, which is the historical business, with a customer base over the last two hundred years
background 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 the
company limited by guarantee too, the democratic deficit company model elevates one of
dressed up as an industrial and features strongly, with those three essential ingredients
provident society. The skin-deep bondholders (the business is - customers, workers and money
attachment which housing really funded entirely by debt) having - and subordinates the others. It
had 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 a
from the mid 1990s to use a place of greater importance than
CLG when it was found to be So is the use of a CLG (or a CLG customers and workers. It does
easier than having to deal with pretending to be an IPS) a good this by giving to shareholders
the sometimes difficult questions idea, for housing, hospitals, ownership. By giving them
from the Registry of Friendly reservoirs or any other public ownership, this gives
Societies. assets? To answer that question, shareholders control, and the
you need to start with some right to the profits. They can
The problem that has been fundamental points about the remove directors and appoint
identified in housing is that the basic ingredients of a business, new ones, withdraw profits
traditional models - both CLG and how you drive a business’s earned or re-invest them to
and IPS - leave a democratic success. So with apologies to expand the business, or they can
deficit, and this is now high on management consultants, here sell their shares, or the entire
the agenda for change in the goes. business if they wish.
housing sector.
There are three essential The joint-stock company played
The housing sector has survived ingredients to any business: a very significant part in the
using a CLG or non-democratic customers, workers and money. development of the UK and
IPS model, without any If one of these is absent, the other economies. From the
accountability or democratic business will collapse. If all three industrial revolution, it has been
control, 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 internal
Housing Corporation) plays a business to exist, and indeed to combustion engine - have been
very active, some might say succeed, given the right developed and exploited. By
unduly interventionist role, environment. However, for any attracting investment, it has
helping 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, and
100% debt finance provided by requirements, the majority of competition between businesses.
the major lenders, the lenders businesses are put into a legal
themselves have played a not structure. The limited or joint- By giving priority to the money
insignificant role in constraining stock company is the most ingredient, and subordinating
management. Lenders have gone common form used, with more customers and workers, the
13

20. company model has also been a the purpose of producing a lighter and less prescriptive
mechanism for exploitation. profit. Instead, its purpose was statutory regime, simply aimed
Customers and workers do not to trade at a fair price, so that at providing a consistent
enjoy any level of control, or nobody was exploited in the framework within which such
right to profits, in a traditional process. If at the end of the organisations can be registered.
company structure. Those rights financial year it turned out that
belong to the investors, and the the pricing had been too high, Indeed because of this lighter
argument goes that the control any “surplus” left over after and less prescriptive regime, it
and the right to the profits are making proper provision for was necessary to introduce new
the price or reward for the risk future needs was returned to restrictions on registration under
taken by investing in the customers in the form of a this legislation, as the growing
business (the price of equity dividend. In other words, the co- onerous obligations under
funding). Customers can of operative dividend was an after company law were, by the 1930s
course choose to buy what they the event means of adjusting making the company an
need from elsewhere if they price, not a means of unattractive model. Specifically,
wish, and workers can withdraw distributing profits. entrepreneurs did not like the
their labour and work elsewhere. prospectus requirements that
Co-operatives like any other had been introduced for
Where 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 by
there is a real or effective was only entitled to a low rate incorporating and selling
monopoly, and where economic of interest - sufficient only to securities in industrial and
conditions do not provide other secure the necessary funding. provident societies.
opportunities for workers, these There was no entitlement to
two groups have in the past profit. This led to the Protection of
suffered from exploitation. Fraud Investments Act 1939,
The legislation under which which in essence introduced new
This played an important part in mutual organisations were restrictions on what could be
the birth of the mutual incorporated was different and registered under the Industrial
movement. The early building separate from that applying to and Provident Societies Act,
societies, permanent societies, companies. The Industrial and specifically aimed at excluding
and co-operative societies all Provident Societies Acts, Friendly businesses that should be
had in common the idea that Societies Acts and Building registered as companies. Until
their customers were the Societies Acts are a different that date, it was the nature of
owners, not a separate group of world from the Companies Acts. the business that dictated
investors. The three basic They have different aims and whether or not registration
ingredients are still needed, of objectives. under the IPS legislation was
course, but the mutual models possible. The 1939 Act changed
found other ways of providing it Company law, on the one hand, this, and made registration
without giving ownership to has to provide a framework in depend instead upon the
outside investors. Instead, which proper protection is given underlying purpose of the
ownership was given to those to those who entrust their business instead. It therefore
participating 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, and
consumer co-operative responsibility of running the businesses that were being run
movement and the worker co- company (directors). The current for the benefit of the
operative movement. volume of primary and community.
secondary legislation applying to
There was another key companies bears testimony to With hindsight, this was a
difference, which evolved as co- the extent to which such defining moment for the mutual
operative political theory protection is needed. movement. Not only did it draw
developed. This was the idea a line between the profit-driven
that unlike a company, a co- Industrial and provident society investor-owned company sector
operative was not trading with law, by contrast, is a much and the mutual, community
14

21. benefit sector, but it also made The IPS model is not prescriptive But it is more than just who the
the 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 the
Registration at the FSA) the movement, ownership is given organisation which is inextricably
gatekeeper 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-operative
over entry to mutual status as a given to workers. There are or community benefit
registered IPS, but also had organisation is that their reason
interesting historical examples
continuing 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 both
including the approval of any rule who own and control such
workers and customers are
changes. What this means is that organisations have it within their
members. The retail co-operative power to ensure that the need is
compliance with the basic
movement is effectively going met. The organisation is therefore
registration criteria is regulated,
through a re-examination of that run according to guiding
thereby ensuring that a registered
option in re-appraising the role of principles, and the owners are the
society remains true to its
employees within its democratic custodians of those principles,
purpose.
structures. whether they be co-operative or
We therefore have available to us community-based ones.
today a choice of legal structures In truth, in an IPS or mutual
model you can choose either So how do you choose the right
for holding businesses. This
customers, or workers, or a structure? How should public
choice is particularly under
combination of both as owners, assets be held?
examination at the moment in the
context of the debate about and therefore the ones who drive
the success and efficiency of the There are two key issues, the first
public services, and public or
of which is the funding question.
community assets. What is the business.
Funding or money is the oxygen
right legal structure for holding
without which no business can
and operating these? The choice of who should have
operate. If funding can only be
ownership will depend upon the
obtained from investors willing to
On the one hand there is the nature of the business. For
take a risk, there is no real
company vehicle, which has as its example, a residential care home alternative to a joint stock
underlying purpose the for the elderly is a type of company. It is expensive because
generation of profits. As noted business whose success is entirely investors require a high level of
above, the basic model is one dependent on the commitment return to reward them for the
where ownership is given to the and performance of its workers. risks they take.
providers of the money, normally The workers have a very close
external investors. The profit- relationship with those for whom If funding can be obtained from
seeking instincts of investors are
they are caring, and without their other sources, other options may
used to drive efficiency and be available. A low risk business,
commitment and support, the
success 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 demand
The other option is the IPS model,
A water company by comparison such as housing, and utility
with an underlying purpose of the businesses illustrate the point.
is a capital-intensive business. The
co-operative principles, or the
closely 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 authority
community. It is often key part of the success of that
needs to do something with one
characterised as the “not-for- business. Workers are important, of its services under a best value
profit” sector, which whilst being but in practice you can get by review, and might be prepared to
a technically accurate description with a small work force because support what would be a start up
by 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, or
images of inefficiency and that case, customers are the more favourable terms for use of land
unprofessionalism. appropriate owners. or other assets.
15

22. If there are alternative ways of opportunities for citizenship and There are many examples where
funding which do not involve the engagement of people in the sector has led the way in
equity, the second question can their local communities, would setting standards. For example,
be posed - ownership. Who is to be a more healthy society. the Autism Services
be given the ownership, and Accreditation Scheme, run by
how will ownership drive the Cliff Mills is a partner with the National Autistic Society, has
success of the business or Cobbetts Solicitors. been a pioneer in benchmarking
service? based on quality standards and
has opened its membership to
Shareholders drive the success of B. 3 THE VOLUNTARY private and public providers of
companies and it may still be SECTOR’S ROLE IN autism services. Indeed some
appropriate to use a company PUBLIC SERVICE local authorities have joined the
even though alternative forms of DELIVERY scheme specifically to ensure
finance are available, if ANN BLACKMORE that they are not providing a
shareholder control is desirable
“cheap option” service.
for some reason. By contrast,
A debate is going on in this
customers or workers drive the
country, which has, until Voluntary organisations are
success of mutuals. This works
recently, ignored a significant already accountable to their
where there is some other
group of organisations who funders but have also been
purpose to the business than
employ one in 50 of the accountable to their donors,
earning a reward for investors.
workforce, contribute nearly 2% supporters and beneficiaries.
If, for example, the real purpose
of a service is not to generate a of GDP and provide support and Quality management in the
return, but to provide a service advice to nearly every member voluntary sector is in fact being
to a community, the community of the population from cradle to driven more by an internal desire
through the customers and/or grave. for greater accountability and
workers may well be the continuous improvement than it
appropriate people to drive That debate is about the future is by external pressures from
success, and therefore to be of public services. And it is the funders and standards
given ownership. voluntary sector that is being authorities.
largely ignored. But why is the
Customers, for example, could voluntary sector being ignored Our services have always been
drive the success of a water when an ICM poll carried out for devolved to the front line -
company. A combination of NCVO in October 2001 shows indeed most evolved from the
workers, residents and their that 6 out of 10 people agree front line in the first place,
families and friends could drive that specialist not-for profit growing out of the local
the success of a residential care organisations are better placed creativity of many who we now
home. to deliver many of our public refer to as social entrepreneurs.
services than profit making As a direct result the voluntary
Where a community based
businesses? We are ignored sector is now one of the most
service is benefiting from some
because those responsible for diverse sectors and continues to
level of central or local
providing public services are evolve and retain its diversity
government financial support, an
rarely aware of what the based on the right of free
IPS model which forbids
voluntary sector can bring to the association.
distribution, but uses ownership
delivery of public services
by customers to drive efficiency
and success may well be an So first of all we need to step
attractive model. If the Prime Minister is serious back and look at the bigger
about making public services picture. We need to ask what
A co-operative or mutual user-led - putting the consumer role voluntary organisations play
structure which puts the first - then he should turn first in society, what their
interests of the community at to the voluntary sector which relationship with government
the top of the agenda has clear has led the way in developing should be and also ask where
advantages. A society where user-led services. And the same they fit in a mature democracy.
such organisations played a applies to his other principles of There are three possible
bigger part, with greater public service reform: scenarios for how this
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