Incapacity and Marketisation

Despite undoubted expertise and enthusiasm in many smaller local support organisations, current national structures for the cooperative and social enterprise movement remain institutionally incapable of delivering Labour’s 2019 Election Manifesto commitment to double of the size of the cooperative economy.

Recent suggestions from New Economics Foundation and others of new legal structures, obligations on government ministers to promote wider ownership, tax and financial reliefs will encounter severe problems when the existing third sector infrastructure lacks enthusiasm. Even in response to the government’s ‘flagship’ Levelling Up White Paper, no national third sector cheerleader has suggested that place-based regeneration under the Levelling Up Fund, UK Shared Prosperity Fund, Towns Fund or Freeports are incapable of redistributing wealth or changing ownership.

These cheerleaders for third sector involvement in procurement operate with wider national encouragement from Pioneers Post, Social Finance, Social Investment Business, Oxford’s Blavatnik School of Government, KPMG, PWC and major accounting corporates which promote their services globally, funded and delivered through private impact investment and output measurement. No wonder that, as long ago as 2014, the British Council was predicting that ‘as the funding pendulum swings away from grants towards loans and venture capital, priorities start to be assessed based on which social outcomes can be profitable, monetised or marketised.

Social issues where it’s difficult to put a financial value on the outcomes will become much harder to fund. This will lead to a new ‘underclass’ of social causes.’

National Organisations

So what does the co-operative and ‘social enterprise’ sector consist of today? The Financial Conduct Authority’s (FCA) Mutuals Public Register currently shows that we have 9,659 credit unions, housing associations, cooperatives, community benefit societies and mutuals. The 2020 Annual Report from Cooperatives UK shows ‘800 direct members with a further 3,500 co-ops and mutuals represented through our federal members’. Since this represents only a fraction of those on the FCA’s Register, Cooperatives UK has ceased to represent the aspirations of the fastest growing sectors.

The Cooperative Party’s structure reflects little ‘on the ground’ activism and is unable to attract the faster growing parts of a wider cooperative and mutual movement, especially from community energy cooperatives. There is no Cooperative Party equivalent of Labour Party ‘affiliated societies’ membership, which might permit external organisations to affiliate and support the Coop Party. This failure to connect is reminiscent the way that in the 1980s, the Cooperative Party resisted the idea of affiliation by workers’ cooperatives.

Cooperatives UK now works with the Employee Ownership Association to promote ‘ownership hubs’ to encourage employees to buy shares, as it moves further away from its original objectives. Rather than promoting democratic accountability for companies or affiliation to form a wider cooperation assembly, Coops UK now follows other national organisations as they acquiesce in third sector neoliberalisation and financialisaton, typified by the Power to Change programme, to ‘protect the services people rely on and address local needs through community businesses’. When translated, this means using National Lottery funding to apply New Public Management principles for community organisations as an interim to their own delivery of public services.

The Cooperative Councils Innovation Network (CCIN), though originally formed by more progressive councillors, is now open to all UK councils, regardless of political affiliation, and welcomes members from professional bodies, policy groups and other associations. This enables the CCIN Officers’ Network to offer a career structure vehicle for ‘transformation officers’ who offer advice for their councillors on outsourcing to deliver low cost public services, through more cooperatives becoming involved in the market through procurement.

Social Enterprise UK (SEUK) conceals the numbers of its real social enterprises and proclaims that its members are not just social enterprises but private businesses, charities and public sector organisations. On behalf of these SEUK ‘has created the world’s largest commitment to social procurement through the Buy Social Corporate Challenge’. With Foreign Office funding, the British Council and SEUK publish country ‘mapping reports’ internationally, most of which, irrespective of domestic political priorities, advocate frameworks for impact investment from external private sources. As an example, British Council has advocated a ‘Social Stock Exchange’ for Jamaica and the Caribbean.

Suggestions for Reform

Before Covid, the wider cooperative movement held an annual ‘Which Way Forward for Coops (WWF)?’ conference in Manchester. But this was no cooperatives’ or commons’ replication of left-wing initiatives in the Labour Party such as Momentum or The World Transformed.

WWF has no relationship with the Cooperative Party and attracts little support, affiliation or attendance from infrastructure organisations below. Despite Radical Routes, Stir to Action, the Worker Coop Solid Fund and others, there is no cooperative or commons equivalent of activist structures, which, though they may not endorse ‘mainstream’ thinking, promote a rich diversity of ideas which may find a route into Cooperative or Labour Party policy.

But there are some models which show how an insurgent energy could be brought back into the cooperatives. One is the Industrial Common Ownership Movement (ICOM). Many organisations in the 1980s were members of this movement, with funding from the Industrial Common Ownership Fund (ICOF) after Labour’s 1976 Industrial Common Ownership Act. This Act provided a working definition for common ownership cooperatives, most of which were registered through ICOM.

Though there is considerable debate about common and co-ownership, ICOF would not fund organisations without a democratic structure. In 2001 ICOM merged with the Cooperative Union to become Cooperatives UK. ICOF now trades as Cooperative and Community Finance. Following approval by the Worker Co-op Council a new process is underway to set up a new ICOM-style federal structure for worker co-ops.

Another would be the Community Benefit Societies. The Co-operative and Community Benefit Societies Act 2014 requires a community benefit society to ‘carry on a business, industry or trade’ that is ‘being, or intended to be, conducted for the benefit of the community’. The Act’s description of community benefit relies strongly on guidance from the Financial Conduct Authority (FCA), which focuses on four key characteristics: benefit for the community, democratic membership, surpluses used for the community and an ‘asset lock’, permitting sale only to a similar organisation.

An advantage of this structure is that communities can raise funding directly without financial intermediaries. Despite the growth of more than 1,000 new community benefit societies since 2010, most of which issue community shares, it is unfortunate that Power to Change and the minority social investment intermediary community, supported by Social Enterprise UK, still focus on social investment.

Community Energy Cooperatives are another example. Collaboration and democratic control are core principles of community energy. In 2020 there were 424 community energy organisations across the UK, employing 431 staff and 3,096 volunteers. Many are now community benefit societies. During Covid, their workshops, home visits, webinars and phone calls have reached 358,000 people.

Despite a sizeable UK community energy potential, it is the European Federation of Renewable Energy Cooperatives (RESCoop) which has led arguments to establish legal entities for ‘energy communities’, which might have helped UK municipal companies like Robin Hood Energy in Nottingham, Plymouth Energy Community, Bristol Energy and Warrington’s Together Energy.

In contrast to these progressive moves in mainland Europe, from 2012 the UK became the leader in abandoning renewable energy subsidies like Feed in Tariffs, which were hugely beneficial to community energy, in favour of auctions and competitive bidding among international finance and multinational suppliers, so that community energy is  largely being squeezed out of the system altogether. Examples based on ‘citizen ownership’ and community energy elsewhere show that it is possible to insert additional criteria benefitting smaller bidders or exemptions rules, using a ‘public goods’ approach, which permit them to receive discrete support.

But instead of making these arguments, in April 2018 the UK Cooperative Party in ‘Ownership Matters: Democratic Public Ownership for the 21st Century’ advocated cooperatives against the TUC’s unanimously agreed public ownership position. Without exemptions from auctions or additional support, cooperatives find it very difficult to compete against multinational energy corporates—something which does not seem recognised by the Cooperative Party or Cooperatives UK.

Cooperative Housing, similarly, should be able to thrive in a situation where the  market has obviously failed to address needs. Currently, across the UK, there are 685 housing co-operatives, with a membership of 70,000. These include cohousing, community land trusts, housing cooperatives and self help housing. Student housing cooperatives flourish at Birmingham, Edinburgh, Sheffield, Glasgow, Leeds, Norwich and Nottingham Universities. Student Coop Homes seeks to increase capacity for student housing co‑ops to 10,000 beds by 2023, one third of the current market share of iQ2, the largest private student housing provider.

Student housing cooperatives offer an alternative to the ‘residential capitalism’ described in Josh Ryan’s 2018 book Why Can’t you Afford a Home? In London and Manchester, the 14th Annual Demographia International Housing Affordability Survey in 2018 showed London and Manchester median house prices rising to seven times median incomes.

No wonder that to attract private investors, Unite Students housing boasts of ‘sustainable growth of 3.0 to 3.5% rental growth and a 5,000 bed development pipeline’. No wonder also that some students find it cheaper to stay at Premier Inns when they need to be on campus. Student cooperative homes represent an alternative to private landlords. As an example, Edinburgh Student Housing Coop offers accommodation at £170 a month cheaper than the Edinburgh average rent.  But these arguments are rarely heard from the Cooperative Party, Coops UK or even the National Union of Students.

A Theory for Change

After Labour’s ‘Alternative Models of Ownership’ policy paper in June 2017, the politics of cooperatives, mutuals and community owned organisations have almost completely disappeared from progressive discourse. Despite many positive and topical arguments, typified above by student housing and community energy, proposals from the Cooperative Party, Cooperatives UK and Social Enterprise UK are advanced almost exclusively within a market economy.

The central question that drives Eleanor Ostrom’s 1990 ‘Governing the Commons: The Evolution of Institutions for Collective Action’ is how a group of individuals in an interdependent and multi-dependent situation can organise and govern themselves to obtain continuing joint benefits ‘when all face temptations to free-ride, shirk, or otherwise act opportunistically.’ She demonstrates that societies and groups regularly devise autonomous rules and enforcement mechanisms that stop the degradation of nature. Her work is never mentioned by Cooperatives UK or Social Enterprise UK.

In January, the latest rendition from Social Enterprise UK and the minority social investment community ‘Reclaiming the Future: the Final Report of the Commission on Social Investment’ defined social investment as ‘any form of repayable finance (unsecured loan, mortgage, bond, repayable grant) or equity that is given to or invested into social enterprises’. Despite the report’s emphasis on equality and diversity, funding like this is irrelevant to the needs of those organisations which have done most to support local communities throughout Covid.

With central and local government grants diminishing, organisations offering support for local communities will become prey for a gradual injection of private finance and market competition. While not recommending any new superstructure for these organisations described above, surely there is a need for a movement to expand cooperation, mutuality and community capacity, especially among disadvantaged communities? Because our national third sector structures are now too dependent on funding which diverts their political objectives and diminishes their representative potential, new voices are needed.