The co-operative approach to reform

Public policy may not usually be perceived as 'hip', but it can be as prone to fashions and trends as the fastest-moving consumer goods. As pre-electoral tension mounts, politicians and policymakers are increasingly looking towards the mutual, co-operative and co-owned sectors for solutions to some of the problems regarding public sector reform. There is much speculation that Labour's manifesto will look to present co-operative and co-owned forms of provision on public services and today's announcement by shadow chancellor George Osborne demonstrates Conservative interest in this area. The John Lewis halo effect? Why has the mutual, co-operative movement come back into policy vogue now? Various factors are at play here. The impact of the economic recession cannot be under-estimated. Despite these conditions, there have been consistently impressive trading figures from the John Lewis Partnership (perhaps the UK's highest-profile employee partnership). All of its full-time staff become members of the partnership, and receive a share of the business's annual profits. John Lewis's managers can be held to account by staff through democratic mechanisms at every level of the organisation (although its chair Charlie Mayfield recently told a conference that, in practice, this right is used proportionately and sparingly). A limit to market mechanisms The use of market mechanisms in public sector reform during most of Labour's time in office was facilitated by booming UK economic growth. Providing more staff, new buildings or technology and the capacity to offer choice were viable options in the context of a growing economy. The medium-term likelihood for UK economic growth currently looks weak-to- anemic. One key result of this is to try to get any extra capacity out of existing providers through efficiency and productivity gains. Research suggests that one of the methods of achieving this is to examine successful examples of the mutual sector, where studies cite increased staff morale and commitment to frontline delivery as critical success factors. Another factor is the Labour Party's shortage of cash. Private donors have been distancing themselves from the party ever since it began to look electorally mortal. The trades unions will therefore be Labour's major source of funding for the election campaign ahead. They do not welcome private for-profit providers, but are not against mutuals and social enterprises. In health, the NHS has already seen a significant policy U-turn away from market contestability in provision of services, with Health Minister Andy Burnham's policy announcement last autumn that the NHS is to be regarded as the "preferred provider" where existing service provision is reviewed. Nothing new in mutual and third sector providers Many not-for-profit and mutual providers already provide various public services. The 'third sector' of charity and social enterprises (also known in some organisational forms as community interest companies) already successfully provide mental health and drug rehabilitation services and social care through such bodies as Turning Point. Charities in particular often deliver excellent, responsive and patient-centred services to specific groups (such as Macmillan Nurses and the Maggie's Centres in cancer care). The hospice movement for the terminally ill is almost entirely provided by this sector, and receives less than one-third of its funding from the government and the NHS. Prior to the new GP contract in 2004, much of the out-of-hours provision of general practice was done by not-for-profit co-operatives of willing GPs. Nor is some element of mutuality exclusive to commercial investment. Circle Healthcare is an organisation established in 2004, which mixes 49.9 ownership by its partners (mainly consultant surgeons and anesthetists to date, though some GPs are now joining) and 50.1% ownership by private equity investors and venture capitalists. Circle provides both private and NHS care, and is currently expanding and building and acquiring provider facilities. It is Europe's largest professional partnership healthcare organisation. The impact of Circle's top-down, devolved decision-making approach to management of its facilities can be seen in its acquisition of three independent sector treatment centres – units which do high volumes of low-complexity surgery such as cataracts or joint replacement on relatively healthy patients - from a private provider. Within one year, these facilities (in Bradford, Burton and Nottingham) saw revenue day case volume increase by 22%; cost reduced by 19%; and overall revenue increased 26%. The semi-independent NHS foundation trust sector of provider hospitals and mental health trusts was also described as a 'modern return for mutualism' by its legislative proponents to win the support of unwilling Labour MPs back in 2003, when the legislation was becoming law. Foundation trusts (FTs) win autonomy through proving high performance on financial stability and clinical quality to sector regulator Monitor. On achieving their authorisation, FTs become accountable only to Monitor, rather than to the health secretary. They also elect their board of governors. However, the mutuality aspect of FTs is overstated and unclear: their facilities remain owned by the NHS (or the Private Finance Initiative consortia, if relevant). Monitor's outgoing executive chair Dr Bill Moyes confessed in valedictory interviews that the FT sector had not shown the degree of innovation he had hoped. Over the past five years, turnouts at FT governor elections have almost halved, while, the proportion of governors' posts that have gone uncontested has risen by 81%. And although FTs have a theoretical right to vary their terms and conditions to improve on those offered in NHS national contract negotiations, in practice none yet do so. A more authentic example of mutual-type provision is the community services provider company Central Surrey Health: a not-for-profit, limited liability company, in which each staff member has a 1p share. Its creation followed the policy decision to re-emphasise NHS commissioning (purchasing and shaping health services), with the associated implication that the primary care trusts who also provided community services should have no conflict of interest as providers - becoming commissioning-only organisations. Availability of the generous NHS pension remains a major sticking point for staff interested in working in differently-owned organisations. The Department of Health has since announced that staff transferring to new social enterprises could remain in the NHS pension scheme. However, if a social enterprise's staff also provide non-NHS services, to diversify their business, they become ineligible for NHS pension arrangements Last summer, health thinktank the Nuffield Trust published NHS Mutual, a detailed report into the potential for mutual-type provision in health by Jo Ellins and Professor Chris Ham. Ellins and Ham suggest five broad options: greater voice and participation; employee-owned community health services; multi-professional partnerships in general practice (addressed in another 2009 Nuffield Trust report, Beyond practice-based commissioning: the local clinical partnership); a social enterprise model for primary care and community health services; or multi-professional chambers within NHS foundation trusts. The wicked issues Government-backed pensions are a predictable stumbling block to persuading public sector employees to consider other organisational forms of employment. Governments don't go bust (they just raise taxes), so safety-wise, their pensions are pretty gold-plated. Others report that the position of VAT, which is charged on the income of social enterprise, makes the economics of moving to that form of provision marginally attractive. Clearly, an indebted government needs all the tax revenue it can get, so expecting movement on the VAT issue may be Micawberish optimism. Likewise, contracts would need to be offered for sufficiently long periods for the creation of new organisations to be an attractive option. Given the government's row-back on a mixed economy of provision in health, the signals here may be too mixed for many. There are also real issues about capital: newly-formed provider social enterprises would probably be too small to raise capital effectively. Extant facilities are, by their very nature, designed for current or past patterns of healthcare provision. Given the government's desire to see more care provided outside hospital in community settings, the future for big, old-fashioned hospital buildings may not look bright. Yet the biggest element may be the fit of mutual-type approaches with the professed 'public sector values'. Just as important to staff in the public sector might be the ability to be more in control of their own destiny, following a decade or more of 'command-and-control' centralised approaches to reform (memorably characterised by Bevan and Hood as "targets and terror"). Paradoxically, the bossiness of central government could be one of the most persuasive arguments for moving provision into mutual forms – if they can really offer some meaningful independence on a basis that looks secure enough to tempt staff out of their 'Stockholm Syndrome'-type relationship with the state as a direct employer. Andy Cowper is the editor of Health Policy Insight