Making It Mutual: The way of the future

21^st March 2013

Cabinet Minister Francis Maude MP introduces ResPublica’s latest publication

Britain is in a global race for the jobs and opportunities of the future. We cannot afford to ignore the potential of co-operative and mutual business models to drive growth and help build a more resilient economy. Employee-owned firms have, on average, 4-5% higher productivity than other businesses and 98% of co-operative start-ups are still trading after their first three years, compared to 65% of all businesses. The Coalition Government is taking action to enable these models to flourish in both the private and public sectors. This paper provides a valuable insight into the current debate as we move beyond the United Nations Year of the Co-operative.

Early last year, the Prime Minister set out the Government’s vision for a fair economy. He spoke passionately about our determination to go beyond paying down the deficit and encouraging growth in these difficult economic times, to give more people a stake in the economy and a share in the rewards of success. As part of this, he committed to an overhaul of the long neglected legal framework for co-operatives. This will make it much simpler for people to set up co-operatives and mutuals, which typically out-perform mainstream businesses and create more jobs, particularly during times of recession.

The Deputy Prime Minister continued to drive momentum when he announced an independent review of employee ownership. Led by Graeme Nuttall, the review set a blueprint for growing the number of employee-owned businesses in the economy. We are now implementing the recommendations made across three main barriers: raising awareness with new businesses and those transitioning from other models; exploring a perceived lack of resources; and reducing the legal and regulatory complexities. This is good news for employees and good news for the economy – the Employee Ownership Index has outperformed the FTSE All Share Index by an average of 10% annually since 1992.

There are clear advantages to diversifying ownership and freeing people to work together, for each other and for their communities. Nowhere is this more true than in the public sector. Here, one of the most dedicated and highly trained workforces is shackled to a hierarchical state monopoly. All too often this results in a ‘one-size fits all’ approach, stifled innovation, low morale and low customer satisfaction. ResPublica’s 2009 report, The Ownership State, highlighted the shocking productivity gap between the public and private sectors. As more borrowed money was pumped in, the gap just got bigger. Now, burdened with debt, the choice is either to cut vital services or to find better ways of doing things. The evidence is clear; mutuals raise productivity by unleashing the dedication and innovation of frontline staff.

Today, there are nearly seventy mutuals, from just nine in 2010, delivering around a billion pounds of public services. They are raising the bar for competition, driving growth, improving services and saving tax-payers money. For example, Social adVentures in Salford increased its annual turnover by 262%; employees at Hull City Health Care Partnership found efficiency savings of £600,000 and boosted patient satisfaction; and Central Surrey Health raised productivity in its stroke ward by 41%. That’s why I am backing frontline staff with the £10m Mutuals Support Programme and encouraging new projects in services ranging from healthcare to libraries and housing to fire and rescue.

This Government is on the side of people who work hard and want to get on. We are reversing decades of centralisation, returning power to citizens and making it possible for more people to share the rewards of success. The conditions are right for a resurgence of co-operative, mutual and reciprocal activity. And we will keep cutting back the red-tape and breaking the monopolies which constrain people who simply want to help each other. This is what our economy needs, it is what our public services need and I have no doubt it is the way of the future.

This article was originally published in ResPublica’s Making it Mutual: The ownership revolution that Britain needs, a collection of essays covering all areas of policy – energy, financial services, education, infrastructure, welfare, public services, competition – proposing entrepreneurial and innovative policy proposals for structural reform.