Workers’ Cooperatives: Something borrowed or something new?

This article was first published in Public (Guardian) on 3 March 2010.

When David Cameron announced the new Conservative plans to transform the public sector by allowing public servants "to become their own boss" the well-informed readership of Public might have asked themselves whether the Conservatives have been paying attention. What he appeared to be announcing was something that was already Government policy. There have already been numerous initiatives to encourage third sector organisations (charities and other not-for profit- social enterprises) to take over services traditionally delivered by the state. In particular "The Right to Request" was launched in 2008 to give NHS staff the ability to create social enterprise businesses to deliver healthcare services to NHS patients. There is even a sponsoring department within the Cabinet Office (the Office for the Third Sector) that exists to make this sort of thing happen.

An uncharitable view might be that the Conservatives are deliberately attempting to steal Labour’s clothes.  But in fact the Conservatives’ proposal is different in one key way: the Conservatives see the delivery vehicle being workers’ cooperatives, rather than charities or quasi-charitable social enterprises.

In theory it is easy to distinguish these two types of organisations. Workers cooperatives are run on mutual principles primarily for the benefit of workers. Social enterprises are set up primarily to benefit the community. But in practice this distinction is often blurred.  Workers' cooperatives can and often do provide public benefits –indeed the International Cooperative Alliance’s statement of cooperative principles emphasises ethical values that include social responsibility, caring for others and concern for the community. Social benefit organisations generally show concern to provide good working conditions and job satisfaction for workers. Given also that the same legal formats (industrial and provident societies and companies limited by guarantee) are commonly used for both purposes, it is little wonder that it is sometimes difficult to tell apart these two modes of organisation.

Even so the distinction is important. The policy ramifications of giving the conduct of public services to an organisation that is set up in the interests of its workers are significant. How do you specify service standards without creating the bureaucracy that this is designed to avoid? How far (and for how long) can you justify outsourcing a service without undertaking a tender competition? Often outsourcing to social benefit organisations has required grant funding. Can you justify this as easily for an organisation set up to benefit its workers? How will insurance be dealt with –can the organisation shield behind Government self-insurance? Pensions will be key to this as employees are unlikely to volunteer in droves to leave state-backed schemes. The NHS scheme allows former NHS employees of third sector organisations who exclusively perform NHS contracts to continue in the NHS scheme. Additional protections may be needed if the organisations are worker controlled with no protection for a public benefit mission. It may also be that something is needed beyond TUPE (the regulations that protect a transferring worker’s terms and conditions) to persuade workers that this does not prejudice job security, and if the deal is that the workers benefit if the service goes well but are protected if it goes badly we are into the area of moral hazard.

These issues all arise when contracting with third sector organisations to deliver public services, but the more the organisation is recognisably set up to benefit its workers rather than society, the more difficult it is to justify treating the arrangements differently from a commercial outsourcing. 

If the Conservatives are elected and start to grapple with these issues, we can expect to see the policy justification start to emphasise the public benefit more and the advantages of workers becoming their own bosses less, and some of the distinctiveness of the Conservative policy may be lost.  But it is only after the details are worked out that we will be able to see whether this “blue” policy looks like something borrowed or something new.

For further information, please contact Nicholas Thompsell.