Sunday 13 November 2011

Mutualisation and Privitisation of the Public Services

David Cameron is quoted on the Independent website today as stating that he wants to take 1 million workers out of the public sector and into employee owned mutuals. Should we be afraid-very afraid- or is this a wonderful opportunity?
Well, in better times, under different circumstances it might be a good opportunity- However, in the present climate I am very skeptical.
The theory behind mutuals is that if workers are independent of large scale public bodies then they can be freed uo to be more creative and less cautious. Also, since the workers are essentially working for themselves they will be more committed and more willing to pitch in to get things done- relationships with service users will improve and sickness absence will go down. There are, apparently, examples of this happening.
However,there are a number of issues which should, rightly make employees cautious about any transfer of their employment rights.

1. Trust. The present Govt has been hostile towards the public sector-rhetoric about dependency cultures and gold-plated pensions reveal a cynicism about the public sector and the work which people in the public sector do.

2. Previous form on privitisation. Previous bouts of privitisation under the conservatives and new labour have been ways of achieving wage reductions by the back door. Services which are contracted out by local authorities such as home care are done so at hourly rates so low that they could only be achieved by paying the workers very low wages. By contracting out these services local Govt can avoid being accused of paying low wages since the workers are not on their payroll. The cost of human services is largely made up of labor costs so the only way of significantly reducing the cost of services is by paying workers less. Workers have some grounds for being suspicious that any transfer in employment will involve cutting back their pay and conditions.

3. The present economic situation. This is not a good time to be launching any type of business, mutual or otherwise whose main customer is the Government or customers who are paid for by the Government. In times of expansion, we might have confidence that there would be continued and/or increasing demand for our services. A period of contraction in the public sector as a result of swingeing cuts is not the best time to be starting any new venture- even if it is a continuation of an ecisting service. At the moment many voluntary sector and private sector providers are going to the wall. Not because they are inefficient or bloated but simply because public services are being pared back to the bone and then cut even more. The present eurozone crisis can only make things worse. The Government is making progress on the deficit and as it is still committed to deficit reduction worse cuts lie ahead.

4. Lack of security. Mutuals may intially win contracts to provide services but there is no guarantee that they will these contracts again when they come uo for renegotiation several years later. Workers may find that these lose out to another mutual or a private provider and find themselves forced to work for a new employer under poorer conditions. They could be moving into privitisation by the back door.

5. Lack of incentives. Running a private business such as a restaurant, a shop or samll manufacturing business involves high risk. A large percentage of businesses close down often with their owners losing everything they own. The only reason that people take on such a high risk is that if they are successful then they (and/or their shareholders)will reap large rewards. Public sector employment, by contrast is normally a low risk undertaking. The worst that can happen is that you are made redundant and hopefully you will find another job quickly. The only downside is that you are not paid very much. Social enterprises and mutuals offer the worst of both types of endeavour. They offer the high risks of private enterprise with the low returns of public sector employment. Owners of public interest companies (social enterprises) are not allowed to sell the business which they have built up at a profit or take out more than a certain amout out of the business relative to the turnover. I don't know what restrictions exist for mutuals but I doubt very much that they will receive any additional recompense for shouldering the added risk and responsibility or the worry and strain it will put on their families. Bankers get obscene profits for taking risks with other people's money. Public sector workers are expected to accept a pat on the back as reward for putting their own careers and finances on the line.

6. Lack of flexibility. If people in a public service form a mutual what do they do if they see a new way to grow their services or invest to improve how they deliver their services? I read a story recently about an employee owned mutual provider in the health service. The article suggested that they only had one months salary for all the workers in the bank at any one time. How can such an oirganisation invest in improving its business model to cope with change or expand what it offers? Private businesses can borrow money from banks or the stock market to expand or change their focus. What opportunities will there be for mutuals to raise money to grow and change? Will they be frozen in time, forced to continue in the same form as they were when they were first spun off, until the service they offer is no longer appropriate to the times? Maybe I don't fully understand mutuals but nothing I have read so far has answerted these questions for me.

7. Are mutuals and social enterprises the right business models for public services? I suspect the Government is pushing these models forward becuse they are considered more politically acceptable than outright privitisation. In taking this path the Government could be headed for even more trouble in the long term. Most people who work in health and social care have no aspiration to be business owners of any kind. They come to work because they enjoy working with people and there is nothing wrong with that.
Ministers are constantly trotting the example of the John Lewis partnership. The reason for this is that there are few co-operatives who are market leaders in their field. There are a growing number of successful companies who have more level structures and more democrative and participative types of management- but that is not the same as being employee owned.
I strongly suspect the mutualism agenda is a fig leaf of repectability for privitisation rather than a genuine belief that it is the best way forward.

Anyway- that was my slighly jaded take on mutuals and social enterprises. Its only a personal opinion and perhaps there is a lot I just don't know aboiut mutuals and social enterprises. I supect I probably know, more, however, than many of the poor public sector workers who will have to make decvisons about mocving their employment if Cameron gets his way.

Maybe I will be proved wrong and there will be lots of very happy people celebrating the day they got spun off from the council/NHS.What do you think?

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