The coalition government has made a lot of noise about ‘community’ in the four years since the last general election, but how successful have its policies been in empowering communities?
As part of its community drive, My Community Rights was introduced by the Department for Communities and Local Government as a set of powers which, it said, “give you more control over your community — putting power back into the hands of local people where it belongs”.
DCLG provided over £60m in the form of advice, support and grants (available until 2015) and works closely with community enterprise network Locality (formed in 2011), Social Investment Business and other partners, including the Plunkett Foundation, Social Enterprise UK and Urban Forum.
We have spoken to nine individuals associated within the co-operative movement to see what the scheme has achieved, what the failures are – and what the hope is for future policy.
WHO WE SPOKE TO:
- Jo Bird: Director, Co-operative Business Consultants
- Dave Boyle: Consultant, Principle Six
- Nathan Brown: Co-operative development specialist, Cooperantics
- Peter Couchman: Chief executive, Plunkett Foundation
- Dave Hollings: Director, Co-operative and Mutual Solutions
- Mike Perry: Head of communications, Plunkett Foundation
- Paul Salvesen: Chairman, Red and Green Club
- Ian Snaith: Consultant solicitor, DWF
- James Wright: Policy officer, Co-operatives UK
Community Rights have provided a massive opportunity for an explosion in the number of community co-ops. Government funded the creation of the Community Shares Unit which has provided support to over 500 community-owned enterprises.
Policies such as tax incentives for employee buyouts have significantly increased the business community’s understating of and interest in employee ownership.
Big Society has been more of a mixed bag. The general drive has presented opportunities, as co-op models have proven to be most effective in organising citizen action. But it’s come under fire for being ill-defined and co-operative policy has potentially been hindered by this.
The Coalition’s Public Service Mutuals agenda hasn’t created as many public service co-ops as we’d have liked but it’s not been without its successes, and lessons can be learned from national and local governments in creating quality public service co-ops.
The Coalition has done a lot to provide opportunities for co-operative growth, but no government can do it all.
‘Big Society’ has, in the main, toxified what was a decent idea. In the absence of meaningful encouragement for genuine employee or citizen-led mutuals, we’ve had a potpourri of enterprises called mutuals which don’t meet any definition respected by the sector.
Social Investment Tax Relief could be very helpful for community benefit societies who want to use loanstock, and will be even more helpful if the government can lift the cap of £290,000 per enterprise. The feed-in tariff is a critical problem in community energy,
and the rhetoric against renewables does nothing to help. On employee buyouts, unleashing the creativity of employees to run their companies starts to get lost amidst labyrinthine structures built to minimise tax liabilities.
Under Labour, we got some stuff, well done. Under the coalition, we’ve had more stuff, less well done. We’re still awaiting a government that can do lots, well.
We’ve found the government, in general, open to understanding and engaging with community based co-ops. This doesn’t mean all departments have been as υ
υ supportive, that we’ve agreed with every policy or that austerity hasn’t hit some of this work hard.
What’s been most striking has been the prime minister’s personal support for communities seeking to save vital services through co-ops. Continuing support for community shares, which began under the last Labour government, has been an important factor in sector growth.
The hype around the Big Society has had a reputational effect on the voluntary sector, making some politicians, especially Labour, more suspicious of community activities.
The overall ‘austerity’ policy has had a hugely debilitating effect on local and regional economies, which is bound to have an impact on co-ops as people have less to spend.
The Labour Party needs to wake up, recognise its co-operative heritage and place social enterprise at the heart of its economic policies.
Coalition policies have had a marked effect in some co-operative sectors, such as renewable energy and banking, but not others.
Many co-operative development agencies tried to access the government-funded Mutuals Information Service, but it was mostly a waste of time. Large profit-driven agencies secured most of the contracts. I haven’t heard of a single co-op successfully supported through it.
But the impact of coalition policies pale in comparison to its role in the demutualisation of the former Co-operative Bank.
Raising the upper limit on withdrawable shares and the abolition of the upper limit on transferable shares could transform how societies are capitalised, and goes back to our roots of using members’ share capital.
These raised upper limits are already being used by advisors in the community shares movement looking to raise up to £1m. But have any of the medium-to-large societies thought outside the box and, instead of borrowing capital from the banks, launched a share offer for, say, £10m? The opportunity is there.
The Social Investment Bank has real potential for co-ops. Pre-feasibility study grants are useful for a community looking to take over an asset, say a pub or a shop.
There’s also great potential for the Rural Community Energy Fund to be used to kickstart locally-owned co-op energy projects. But is the movement geared up for this? I’ve seen nothing which suggests any sort of co-ordinated approach to what could be a huge opportunity.
The fivefold increase in the individual withdrawable share capital holding limit is a significant boost. Our modelling tells us the new higher limit can save societies an average of £2.5m a year in financing costs, while allowing new co-ops to reach scale sooner and with less exposure to debt finance.
Support for community shares has brought new opportunities. All societies, community-owned or otherwise, can learn lessons here.
Social Impact Bonds could assist in the financing of co-ops looking to deliver public services. Work on the creation of a functioning social investment market may provide a great source of both debt and equity finance for co-ops who get the social impact metrics right.
Social Investment Tax Relief means many co-ops, especially those that are community owned, can now attract additional investment.
Sadly, those using the bona fide co-operative legal form are excluded.
The coalition has delivered on a number of fronts, most significantly with reforms to create a modernised, more enabling, legislative environment. Making good on 2010 manifesto promises, the coalition agreement committed government to ‘supporting the creation and expansion of co-operatives’. Following this we were able to work closely with civil servants to design a legislative agenda.
We saw firm government action that’s already resulted in a fivefold increase in the investment limit for co-operative societies, the option of administration for insolvent co-ops previously only open to companies, assured coverage by the Pension Protection Fund for co-op employees and a level regulatory playing field for co-ops, giving their registrar a power which already exists for Companies House.
All this will be brought together in August with the passing of the first consolidated Co-operatives Act.
There have been several minor changes which are useful, such as making electronic communication easier and abolishing the minimum age for membership. If the government delivers on a new Co-operatives and Community Benefits Act, the first primary society legislation since 1968, this would be a huge benefit.
The government’s support for Co-operative UK’s initiative to consolidate the law has been extremely helpful. The Co-operatives and Community Benefit Societies Bill has now passed all its stages in Parliament and will come into force on 1 August 2014.
This reduces the difficulty of finding and using the law and gives an opportunity to promote co-ops as a business structure among legal, accountancy and other advisors.
If the government also supports Lord Naseby’s House of Lords private members’ bill on mutual share capital, that will provide even more positive support for the sector.
The Right to Bid was described as a law to make it easier for people to save their shop, their pub or their post office. In other words, to start a co-op. The reality is that it isn’t a solution, but it is a very useful tool for communities.
It’s noticeable that its main use has been with communities facing belligerent property owners, such a some pubs or football clubs.
It’s a really important new policy that gives communities another tool to save what’s important to them. An Asset of Community Value can’t be sold to anyone but groups who’ve registered an interest in it for up to six months.
But it can’t impact upon inflated land and asset prices or deal with unwilling sellers. Communities using the Community Right to Bid are likely to need a range of other tools, for example raising capital through a community share issue.
The Right to Bid is a double-edged sword to be used rarely. It gives co-ops a six month window to bid. But it also triggers a tender process for the only-for-profit private sector.
It’s been really helpful as a simple, easily-achievable right for community groups looking to run community assets through
co-operative structures and put down flags for the future. Unfortunately, it’s just a right to bid. What’s needed is a proper right to buy, as the Scottish Government is working on.
Also, the rights are all about land, which doesn’t directly capture buildings or services.
At first glance it provides a great opportunity. However, all it does is provide a six month window within which to business plan and raise finance. It does nothing to guarantee the sale price will be affordable or compel the vendor to sell to the community.
For example, a developer may be willing to pay over the odds because they’ll make profits on completion and will outbid the co-op seeking to build affordable housing.
It has to be seen in the context of rising property prices, councils needing to raise as much as possible from the sale of assets and developers desperate to find a site.
It has great potential. The Community Shares Unit tells us they’ve worked with plenty of community enterprises that have exercised this right. Starting from a low base (zero), over time more communities will do so.
In the main, community co-ops tend to be volunteer run, and they’re up against authorities who might like the idea of enabling a community to operate an asset, but need the cash selling it can bring in in a time of devastating cuts.
This offers some advantages over the Right to Bid in that it enables councils to dispose of properties to community organisations at a discounted price, in recognition of community value. But it can be a poisoned chalice.
A lesson should be learned from voluntary stock transfer of housing from local authorities. These ‘assets’ sometimes turned out to be toxic because the repairs to bring them up to a suitable standard after years of underinvestment, neglect or inappropriate use made them a liability.
My advice is use CAT while you can, but fully explore all maintenance and renovation costs.
Again, there’s great potential. There’s an opportunity for existing community owned co-ops to expand their activities, and for communities to create new co-ops to run local pubs and shops.
The regulations place great emphasis on the need to define and ensure community benefit and social purpose, which essentially means a social enterprise has to be created.
The regulations don’t require or even promote democratic ownership and control. The challenge then is to educate communities about the benefits of co-operative models.
The danger is that having challenged, you have to win a bid, and could easily be gazumped by a leaner, meaner beast with better economies of scale and better access to capital. We need a Right to Challenge which enables bids from community-owned enterprises to be scored more highly, giving them greater priority.
As with the Right to Bid, this is an example of the law of unintended consequences. A group of workers or service users of a public body might use it with the aim of turning over management of a service to stakeholder control but at the same time open up the process to other bidders. The Right to Challenge could trigger privatisation.
The movement has to recognise that the landscape has changed fundamentally. Public sector support for one man and his dog start-up businesses has all but disappeared in most parts of the country.
There’s a pattern to government initiatives in the social enterprise (including co-operative) field – they’re looking at bigger projects, usually asset-based, supported by contracts and/or investments. These are funded on a one-off basis to advisors and groups who can provide evidence that they’re capable of delivering the projects.
The co-op movement needs to re-orientate itself to take advantage. Other sectors certainly are.
Use them to create a new cost for rival enterprises to co-ops. They’re spanners in the works of the normal, external investment-driven models of property development and service delivery and they give you space and time to show your skills and seriousness to the community and build momentum.
Don’t rely on them. Rely on tried and tested ways to start and grow co-operatives, such as trading with other co-ops, community shares and trading with a surplus for re-investment.
We need to grasp the nettle of saying community and co-operative ownership contain virtues a government wishes to see supported.
We need to better demonstrate value, through co-ops and community benefit societies, proving they’re better at delivering on outcomes and outputs that benefit the most people.
Co-operatives UK does a great job of shouting for the sector. We need to support that with data that builds a case you can’t argue with.
A Community Right to Try, which would go beyond individual policies and create a culture where communities seek to solve problems through co-operation, should be supported and should not face barriers.
A big issue is promoting social enterprise as a solution to the private sector as well as a means of effectively privatising public services. Workers should have a ‘right to buy’ in private firms as well as in the public sector.
We need members to make meaningful financial and other contributions to their co-operative business. We need a culture of effective and transparent engagement with members, including through online channels. And we need a diverse economy, including democratic member-owned enterprises. No privileged treatment for one form of ownership above others.
We’d like Community Right to Bid powers strengthened. An asset listed as an Asset of Community Value should trigger the removal of permitted development rights which, for example, allow pubs to be converted into shops, restaurants and offices.
The government gave the minister for civil society responsibility for championing social enterprise. While civil society organisations have an important role to play in a functioning society, conflating them with social enterprise really missed the point.
Co-ops and other forms of social enterprise are businesses in the social economy, which is distinct from civil society.
We’d like the next government to appoint a minster for the social economy, sitting not in the Cabinet Office but in the department for business, innovation and skills.