A Conservative Government will give public sector workers a powerful new right to form employee owned co-ops to take over the services they deliver.
This will empower millions of public sector workers to become their own boss and help them to deliver better services.
This is the most significant shift in power from the state to people since the sale of council houses in the 1980s, which gave millions of people across Britain greater freedom, security and control over their lives.
Groups of staff will be empowered to set up independent co-operative enterprises — organisations that operate for a social purpose and are fully owned by all staff, not just directors. Under a Conservative Government we will:
• Create a powerful new right to become your own boss. Staff in the vast majority of front-line public service functions will be able to bid to transfer to independence by creating a co-operative enterprise — there are already legally-recognised organisational forms they can simply adopt ‘off the shelf’
• Enable shared ownership. Staff in the new co-operative would be genuine owners of the enterprise. Like employees in co-owned businesses, they would all be able to benefit from its financial success and could vote on how things are run
• Create the freedom to innovate. They would be contracted by a relevant government department to deliver the desired outcomes — no more bureaucratic process targets dictating how to achieve them
• Allow staff co-ops to bring in the best expertise. To help overcome the barriers to rapid progress that co-ops can experience, they will be able to go into joint-venture with outside organisations. Partners could be offered a share of the revenues in exchange for management and operational expertise
• Give staff co-ops the freedom to grow. Once successful, staff co-ops will be able to bid for other areas of government activity, or merge with other co-ops
• Ban profiteering. While staff will fully own their new organisation, they will not be able to sell off any of the state’s assets they continue to use, like land and buildings. And because we expect them to make big efficiencies and improvements to services, their contracts will ensure any big surpluses they make will be shared with the taxpayer.
Despite record levels of spending on public services under Labour, all the targets, meddling and managerial oversight, the Government’s own figures show that public sector productivity has not risen, but actually fallen by over three per cent since 1997. By contrast, private sector productivity has grown by around 1.5 per cent on average every year in the last ten years.
At the same time, the morale of public sector staff is drastically low. Research shows 40 per cent of staff in the public sector say morale is low in their organisation, compared to only 16 per cent in the private sector and six per cent in the not-for-profit sector.
The comparison with the increasing number of organisations which are opting to be co-owned by employees, thereby giving them a direct stake in their success, could not be starker. Studies show that, compared to other organisations, co-ops and mutuals enjoy higher productivity and profit, and have lower staff absence and turnover, because both business and employee interests are closely aligned.
Staff not only benefit by sharing in the organisation’s financial success, but also by feeling a greater sense of pride, well-being and commitment in their work — they are even more likely to be motivated to report and tackle poor practice.
Employee ownership can help organisations become hugely successful. The most famous example is the John Lewis Partnership, whose department stores and supermarkets in its portfolio are all staff-owned. Research by the Employee Ownership Association has also shown that that companies owned by their employees are more resilient than conventionally structured companies, outperforming the market during the downturn and demonstrating a lower risk of business failure.
We want public sector staff to benefit from this model too by creating their own employee co-operatives through which they can directly take over services. It has huge potential to restore the desire and enthusiasm for public service improvement that brought them into their professions in the first place, but which is now being neutered by stifling state bureaucracy.
A new report by the independent think tank, the Innovation Unit, shows how staff taking ownership of public services would yield exactly the same benefits as those seen in business, by creating the ‘engagement ethic’ missing in today’s state-run public services. The report says this will not only improve their effectiveness and cost-efficiency, but will also create economic spin-out benefits for local communities.
The Government’s recent research cites independent polling that says two thirds of people would prefer public services to be run through this social enterprise model, while only one in ten chose the government.
The closest example of staff ownership in public services is the ‘Right to Request’ scheme for NHS staff, which allows them to make proposals to Primary Care Trusts for creating independent enterprises.
But even this one small initiative is not achieving the right results. A Director at the Department of Health recently told the Social Enterprise journal that Right to Request “was going over the heads of the health staff who had the potential to make a difference”. Ministers have admitted that only around 20 enterprises have been allowed since the scheme was introduced in 2008.
There is no alternative to delivering public services than uniform state provision for staff, unless they leave the profession and work for an organisation that delivers outsourcing contracts for the Government.
While a direct link to a government contract will overcome problems with start-up funding that many social enterprises experience, the other big issue is achieving longer term survivability and growth. This is where co-ops may need to bring in more dynamic skills and expertise to really progress and achieve larger scale. We will give co-ops freedom to go into joint-ventures with outside experts, buying in managerial and operational expertise where necessary.
Joint venture is the best way to grow co-ops without pumping in more state money, which in the present economic crisis we cannot afford to do.
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