PCS on the reality behind the government’s mutualism agenda
Public and Commercial Services Union | pcs.org.uk
By mutual consent? PCS on the reality behind the government’s mutualism agenda
Foreword
The government has embarked upon a
programme of unprecedented cuts to public
services. The government has said all public
services “should be open to a range of
providers”, and this includes schools, prisons,
welfare and the NHS.
Yet the term “privatisation” is barely
mentioned; instead it has used euphemisms
such as “open public services” and “mutual
joint ventures”. By using words like open and
mutual it is aiming to disguise its policies with
a veneer of respectability.
Mutuality implies some common interest
and suggests consent. In reality privatisation is
being imposed on an unwilling workforce.
PCS has consistently campaigned against
public service privatisation, but this is a new
threat designed to seduce both public opinion
and workers into accepting changes that will
reduce accountability, worsen staff terms and
condition, and result in a loss of expertise.
The trade union and co-operative
movements have a long history of working
together. We welcome the role that both play
The myths and the truth
Mutuality implies some
common interest and
suggests consent. In
reality privatisation is
being imposed on an
unwilling workforce.
in the UK economy – empowering people in
the workplace.
Real co-operatives and mutuals have a
proud record of respecting their workforce and
delivering a good service for customers.
What the current government is proposing
is privatisation packaged as mutualism. It is
no such thing, as some PCS members have
already witnessed.
This pamphlet sets out the importance of
publicly accountable public services delivered
by public servants and the difference between
real mutualism and the government’s
privatisation agenda.
Hugh Lanning
Deputy General Secretary
Myth: The government will facilitate
employee owned co-operatives.
Truth: There are absolutely no plans
for genuine workers’ cooperatives.
Cooperatives are fully or mainly owned by
their members and operate with the consent
of the workforce. They are often non-profit
organisations. The government has no
intention of facilitating such organisations.
Myth: The “mutuals” are a new way of
delivering public service that is neither a
state service nor a private sector business.
Truth: The government’s model of
“mutualisation”, that of the “Mutual Joint
Venture” (MJV) is a commercial arrangement
between two or more separate businesses,
organisations and public bodies. It is a
contractual arrangement or a separate legal
entity under which a new business is created
in which the parties work together, sharing
the risks and the profits arising. If a mutual did
create a separate legal entity in a joint venture
with a private sector company, it would not
really be a mutual at all in the accepted sense.
That is why Michael Stephenson, general
secretary of the Co-operative Party, has
described the government’s programme as
“Thatcherism disguised as mutualism”.
Myth: The government will only proceed
with creating mutuals out of the public
sector if the majority of employees wish to
exercise their right to participate
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Truth: The government is not even asking
employees if they wish to participate or to
transfer. In the first example of “mutualisation”
in the civil service, the move to a mutual was
imposed by cabinet minister Francis Maude.
Staff were never asked.
Myth: The government has moved
beyond privatisation and traditional
methods of outsourcing.
Truth: Traditional outsourcing is not only
continuing but is being stepped up. We are
seeing this across all departments, e.g the
government’s plans to market test many of the
UK’s prisons and transfer them to the private
sector. Privatisation is on the increase.
Myth: The government’s intention is to
devolve power from big organisations to
staff and service users.
Truth: Not so. There is no suggestion that
worker controlled mutuals be introduced in
to the privatised water and energy utilities,
to transform monopoly services where the
interests of service users and the profit motive
often clash. Unlike the major energy companies
the UK’s only not-for-profit energy provider
Ebico, which was set up specifically to counter
the market pressures that are increasing
poverty and social inequality, is a social
enterprise without shareholders. It re-invests
surpluses, uses renewable energy and assists
customers who cannot pay their bills. The
government’s mutuals are nothing like this.
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By mutual consent? PCS on the reality behind the government’s mutualism agenda
What is a mutual?
The coalition government claims to have
moved beyond the type of privatisation we
saw in the last three decades. Instead of
straightforward outsourcing, it claims that
it will give services back to service users and
local communities as part of its “Big Society”.
The Big Society aims, ostensibly, to transfer the
delivery of public and welfare services to local
communities, voluntary bodies, and charities.
PCS does not believe this is the real aim, or
the likely outcome. All evidence indicates that
the programme is cover for massive public
spending cuts, and that delivering public
services to “any willing provider” will in fact
transfer them to big private sector firms like
Capita and Serco. Most recently Circle Health,
who is the first private operator to take over an
NHS hospital, was described by the Observer as
a “social enterprise run by the world’s hardest
hedge fund managers”
Under the umbrella of the Big Society, the
government also claims that they will provide
“a new right for public sector workers to
form employee-owned cooperatives and
mutuals to take over the services they
deliver” (Comprehensive Spending Review,
October 2010).
This is not true. In its plans for mutuals the
government is propagating myth as truth.
Trade unions and mutuals
Despite these concerns about the applicability
of the coalition government’s mutualisation
agenda to public and welfare services, PCS is
not against mutualism in principle.
Mutualism and the co-operative principle
are a legitimate and valued part of the
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labour movement tradition. Most workers’
cooperatives follow the “Rochdale Principles”,
a set of core principles for the operation of
cooperatives first set out by the Rochdale
Society of Equitable Pioneers in 1844 in the
heat of the industrial revolution. This was
a response to a growing desire amongst
displaced and exploited artisans for workers
self-management.
Though there is no universally accepted
definition of a cooperative, they are usually
defined as businesses that make a product or
offer a service where the workers are members
or worker-owners. Unlike conventional firms,
the ownership and decision-making power of
The government’s version
of ‘mutualism’ is market
orientated, retains
managements’ privilege
and control, and seeks
partnerships with big
private sector firms.
a worker cooperative is vested solely with the
worker-owners, who control the resources of
the cooperative and the work process, such as
wages or hours of work. The modern version
of this ideal is centered on ideas for “coproduction”, which seeks an active input from
those who are the intended beneficiaries of
services, alongside front line staff, in equal and
reciprocal partnerships.
The guiding principle of the co-operative
and mutuals movement was genuine
workplace democracy, replacing hierarchies
that gave a small number of managers greater
power and reward than most workers. The
government’s version of “mutualism” has
nothing in common with this ideal. It is market
orientated, retains managements’ privilege
and control, and seeks partnerships with
big private sector firms. There is no mutual
interest, and no mutual consent.
A real mutual
The Mondragon Corporation is a federation
of worker cooperatives based in the Basque
region of Spain. Founded in the town of
Mondragon in 1956, it was originally a
small technical college and workshop
producing paraffin heaters. It is now Spain’s
seventh largest company in terms of asset
turnover and the leading business group in
the Basque Country.
At the end of 2010 it was providing
employment for 83,859 people working
in 256 companies in four areas of activity:
Finance, Industry, Retail and Knowledge.
The Mondragon Cooperatives operate to
a business model which develops highly
participative companies rooted in collective
values, with a strong social dimension but
without neglecting business excellence. The
Co-operatives are owned by their workermembers and power is based on the principle
of one person, one vote.
Depending on the particular context,
cooperatives, mutuals and social enterprises
can play a useful role in delivering niche
services to the vulnerable and socially
excluded. These can add value if used carefully
and as additional support to a comprehensive
and properly resourced national network
of public services delivered by public sector
professionals. They are not, and can never be, a
substitute for that network.
Without state provided incentive and
support, smaller social enterprises will be
excluded from the market and new mutuals
– of whatever kind - will find it very difficult
to stay afloat. They will inevitably morph into
commercial concerns run by bigger private
sector consortia, as has proven the case in
other countries such as Australia, where in the
last decade an ambitious plan for rolling out
so-called mutuals was attempted in a similar
climate of public spending cuts.
An Australian example
In 2000 a group of Australian
radiologists set up Medical Imaging
Australasia (MIA) to sell X-ray and scan
services, previously delivered in-house.
After floating on the stock exchange
the radiologists retained a 60%
majority holding, and stock options.
They expanded, and won contracts in
the UK with the NHS. Yet in 2004
MIA was bought by DCA Group Ltd,
one of Australia’s top 100 companies,
for $700 million, making MIA’s
directors quite rich.
It went through several more
changes of ownership before being
incorporated into Dubai International
Capital. At that point it had no relation
at all to its ostensible initial purpose,
which was that as an “employee-led”
Mutual Joint Venture it could provide
better personalised services than the
Australian Health Service.
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By mutual consent? PCS on the reality behind the government’s mutualism agenda
The reality
Some “Public Service Mutuals” appear to be
more acceptable to trade unions than MJVs.
But we must beware what the Co-operative
Party call “Trojan horse privatisation”, referring
specifically to the breakup of the NHS and the
example of Circle Health, which now runs an
entire hospital. Claimed by the government
as “mutual” because 49% of its ownership is
in staff hands, Circle Health is a commercial
private sector firm that aims to make profits
and reward shareholders, also enabling
individual doctors in its employ to profit
from healthcare.
In reality the wider political context is that
“mutuals” are being foisted on the public
sector merely to deliver services on the cheap,
and thus to assist in delivering public spending
cuts. To test this let’s look at what is happening
in practice. What exact model of a mutual is
being offered? Do employees and service
users really have control? Is there genuine
choice as to its operating model and
governance structure?
Introducing “Mutuals” into
the civil service
In 2010 cabinet office minister Francis Maude
announced that mutuals would be “employee
led mutuals” (ELMs) and was clear that if they
were not then they would not proceed. But
the government’s terminology, and the policy
itself, has mutated.
Starting with ELMs, it now refers solely
to Mutual Joint Ventures. Maude also said
that “as a market develops, the newly
established Mutual Joint Ventures will have to
bid for contracts along with other potential
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contractors” such as Serco, Capita and A4E. It
does not take much prescience to predict who
will win the bidding war, and any
mutual could easily be bought out by
predatory multinationals.
The government’s instructions are that
mutuals will have to demonstrate “efficiency”
savings and “innovate to cut costs”. In a
market environment, driven by a desire to
make profits, one obvious way to innovate to
cuts costs will be to cut staff, increasing share
options for those that remain.
The government’s claims to be creating
progressive and innovative kinds of mutuals
are transparently false. For example, the
government’s “Open Public Services” White
Paper makes claims about empowering
public sector staff by giving them “new rights
to form mutuals and bid to take over the
services they deliver”.
The White Paper also claims that “We will
not dictate the precise form of these mutuals;
rather, this should be driven by what is best
for the users of services and by employees as
co-owners of the business”. But the example
offered by the White Paper – that of MyCSP, the
body which administers over 1.5 million civil
service pensions - proves the very opposite.
My Civil Service Pension (MyCSP)
In late 2010 Cabinet Office Minister Francis
Maude decided – with no consultation with
unions or staff – that MyCSP was to become a
Mutual Joint Venture. The “precise form” of
the mutual (a Mutual Joint Venture with
external commercial partners) was the only
option on the table.
MyCSP refused to canvass staff views on
the proposal. PCS balloted its members in
MyCSP on industrial action, and they voted by
a clear majority to take strike action. A well
supported strike and overtime ban followed.
In a subsequent survey conducted by PCS –
filled in by 55% of MyCSP staff across all its
offices – 94% of respondents said they did not
agree with Francis Maude that turning MyCSP
into a MJV would “empower staff and drive
up performance”. More than 95% said they
wanted to retain civil service status.
As of November 2011, the preferred bidders
for a private sector stake in MyCSP were Capita,
JLT Ltd, Wipro and Xafinity. If it proceeds, it will
be what the Co-operative Party calls a “quasi
‘Mutuals’ are being
foisted on the public
sector merely to deliver
services on the cheap,
and thus to assist
in delivering public
spending cuts.
mutual private enterprise”, not a workerowned co-operative or a real mutual.
The government’s “Enterprise Incubator” is
now asking departments to submit proposals
to turn other areas of the civil service into
MJVs. Already the MoJ’s Court Enforcement
Service is at risk. These plans have one thing in
common – the employees’ “right” to transform
their organisation into a mutual is not a right
at all, in that a) they have no choice in whether
they wish to exercise this “right” or not, and
b) the precise model of the mutual they will
work in is being dictated by government and
imposed from above.
Mutuals – a flawed concept
for public services
It is clear that the government’s mutualism
agenda is flawed at conception. But beyond
that, there are many unanswered questions
about whether mutualism can ever be
consistent with the effective delivery of
essential public services.
Amongst the key issues the government
continues to evade:
• Can mutuals supply the universal
coverage that public and welfare
services demand? Would they simply
fragment those services, leading to an
unequal and many tiered service?
• Are mutuals as accountable as the public
sector? The public sector has clear lines
of democratic accountability, whilst
the private sector (which these mutuals
would inhabit) is shielded by contractual
and commercial arrangements.
• What if a mutual fails? What is the risk
assessment, and what would happen to
the service users if failure occurs? Would
taxpayers be obliged to bail them out?
• What happens to the terms of conditions
of staff that may transfer to a mutual?
• Why is the government not keen on
exporting “employee-led” mutualism
and the co-operative principle to the
private sector, to big corporations,
energy firms etc?
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Conclusion: the government’s
mutualisation programme is a myth
5236
It is designed to save
money and deliver
spending cuts.
It is driven entirely by the
market and by commercial
values. It is rhetorical cover
for a massive programme
of privatisation.
PCS opposes the government’s mutualisation
programme because we believe it conceals
the true objective of transferring public
services to the private sector.
It does not derive from a genuine desire
to hand power to ordinary people and
empower them at the workplace, an ambition
historically shared by the co-operative and
trade union movements. If that were so, we
would be seeing an extension of workplace
democracy in the private sector, which
routinely denies workers greater control over
their working lives through its hostility to
trade unions. Instead, the government’s plans
rest on imposing unpopular ideas on unwilling
staff, whilst adamantly refusing to put
their proposals to a vote to determine
employees’ wishes.
The government’s “mutualism” agenda is
confined entirely to a public sector subject to
massive cutbacks. It is designed to save money
and deliver spending cuts. It is driven entirely
by the market and by commercial values.
It has no time for genuine social solidarity,
voluntarism or industrial democracy. It is not
a model that will improve the delivery of the
country’s public services.
There is no mutual interest or consent. It is
rhetorical cover for a massive programme
of privatisation.
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