Can co-operatives and mutuals play a greater role in providing public services? And what can governments do to foster their development?

These questions are addressed in a recent book, The Third Sector Solution – Delivering public policy in collaboration with not-for-profits and business. Among contributors are Cliff Mills, consultant at Anthony Collins solicitors, and Melina Morrison, chief executive of Australia’s Business Council of Co-operatives and Mutuals.

They focus on expanding the role of co-operative and mutual enterprises in delivering public services. They argue that the state-based and tax-funded model has become economically unsustainable due to demographic factors and spiralling demands on services at a time when states are impacted by economic crises.

Trying to analyse how to disrupt the status quo, they look at mutuality which, they argue, originates from self-help.

The essay warns that introducing the idea of mutuality and co-operation into discussion about cross-sector working poses a challenge because it proposes an alternative approach. The authors believe many politicians, public servants and professional advisers who are trying to create public sector mutuals fail to understand that mutuality emerges spontaneously.

“Self-help emerges; you cannot do it to people,” they write.

The essay explains how co-ops were initially set up because of a market failure in the availability of basic food and provisions. Agricultural co-ops were also established when farmers needed to collaborate to reach scale and access markets. Friendly societies and building societies were created in response to the need for financial support and access to financial services.

Furthermore, Mr Mills and Ms Morrison argue that the origins of public services in the UK and Australia were not legal statutes but communities and individuals. When the state did step in – in the mid-20th century – there were already services provided by mutual and philanthropic organisations.

They look at public sector mutuals in the UK and in Australia while explaining why mutuals cannot be created from top down, by “government diktat”. Commissioning private sector professionals with no experience of mutuality to convert existing public organisations into something different is also unlikely to bring positive results, they warn.

The chapter notes a number of examples of successful member based organisations providing public services, such as Rochdale Boroughwide Housing, which developed a new tenant and employee-based model, and employee owned and controlled care providers such as Care Plus Group or Anglia Community Services.

In Australia, two such initiatives are the National Health Co-operative set up 2010 and the Co-operative Home Care, a non-residential, home care agency in Sydney that is owned by its employees.

Case study: The National Health Co-operative of Canberra

Mr Mills and Ms Morrison also note that some critics of the UK public sector mutualisation process have pointed out that it has been a mask for privatisation, to reduce the number of individuals on the payroll.

They suggest a different route to creating public sector mutuals by shifting the emphasis from the legal structure to the actual goals; this can be done by looking at the actual services provided, where staff want to deliver differently and work more closely with users and citizens.

“Real change, shifting emphasis from profit-making to benefiting the public, can only be brought by people, not by leaders and organisations,” they write.

The second step suggested in the piece is to ask whether mutual and co-op principles can help usher in a vision for the next stage of development of those services.

Another problem Mr Mills and Ms Morrison identify is the “done-to” approach to service delivery. They explain how services once provided by and within communities have seen a change of purpose: they are now aimed at generating growth, rather than caring for people.

Changing the ownership and governance structure of such commoditised services will not solve the issues, they say. A different approach is needed which would also involve service users and care professionals working together, co-operatively, to optimise health and wellbeing.

“This is the starting point for modern mutual innovation: envisaging wholly new relationships as a context for more enlightened services, supported by a modern business and organisational model,” they write.

And while different approaches are needed from sector to sector, the common thread should be the people involved at the grassroots.

The piece also highlights lessons to be learnt, particularly in terms of the use of language. They highlight that the definition provided to mutuals by the UK’s Cabinet Office “reveals a limited understanding of mutuality” as “an organisation that has spun out of the public sector … and continues to deliver public services … and involves a high degree of employee control”.

By contrast, the Australian Business Council of Co-operatives and Mutuals defines a public sector mutual as “an organisation which wholly or in part delivers public services through a co-operative or mutual governance structure, whereby members of the organisation are able to be involved in decision-making, and benefit from its activities, including benefits emanating from the reinvestment of surpluses”.

The authors explain how the UK Cabinet Office approach has led to a number of professional firms with no experience or understanding of mutuality creating mutuals.

“Many have adapted the traditional consultancy and transactional approach used in privatisation (and in private sector sales and acquisitions) and then labelled the process ‘mutualisation’,” they argue.

In their recommendation of shifting from a top-down to a community approach, Mr Mills and Ms Morrison highlight a number of elements needed to enable member-owned enterprises to emerge from public services. They emphasise that visionary leadership and the willingness to give away power are important aspects in ensuring the success of mutuals.

Their second requirement is understanding how a co-operative approach to service delivery can contribute to “a better, more appropriate and relevant way of providing / accessing that service”.

“Mutuality is not a panacea or a magic wand,” they say, “but it may have something significant to offer where the real engagement and participation of users, employees and citizens will transform a service from a binary, done-to approach to something much more dynamic and productive, to reduce costs or generate additional income or produce other substantial benefits and savings.”

Legislation can also play an important role in creating a favourable environment for the creation of public sector mutuals. But Mr Mills and Ms Morrison warn that this should be approached “cautiously”. In Wales, recent legislation in health and social care requires the promotion of co-ops and social enterprises in the provision of care and support.

“This has been well received, but it remains to be seen if it is effective,” say the authors.

Other positive legislative steps suggested include creating financial or fiscal advantages to encourage different types of businesses to emerge. “Where competition law has the effect of inhibiting co-operation, this should be examined to check whether it is operating against the public interest,” they say.