Mutuo Chief Executive, Peter Hunt said:

“This will greatly increase choice on the high street for consumers that are looking to do business with a customer focused and owned bank.  It will increase corporate diversity in the financial services sector and help to challenge the banking monoculture that led to the financial crisis.”

The result, viewed dispassionately, has been a great deal of confusion and comparatively little concrete change. The debate has been largely theoretical and, because each form of mutual has its own passionate advocates, it has not led to any shared understanding even on what a mutual is. In illustrating the benefits of mutuality, the Cabinet Office has pointed mainly to employee owned enterprises but the biggest examples of public service mutuals – NHS Foundation Trusts and co-operative schools – give wider ownership and offer service users a voice. Whilst the debate has been going on local authorities, faced with an imperative to reduce cost, have been achieving this by the tried and tested method of large scale redundancies; in some services, this has significantly compromised the chances of establishing a new enterprise before the idea has even been considered.

Three principles have informed the development of the Mutual Business Detector:

• If mutuals are to play a part in the delivery of public services, there is a need to make and implement decisions quickly

• Councils do not have the resources to carry out sweeping, large-scale options appraisals

• There needs to be a focus on practice rather than theory – the question is not whether mutuals are a good thing but whether a particular service in a particular place will operate effectively as a mutual

How can the Government best develop a policy strategy to implement the Coalition’s commitment to promote mutuals?

The Group accepts that the Coalition Government has been in power for just over a year and so there are limitations to how easily one can gauge their success in promoting mutuality over such a limited period of time.  However, from the evidence given to the Inquiry, it is clear that the Government has not yet developed a clear strategy to promote mutuals.

The Inquiry found that the Government appears to have concentrated its policy efforts on encouraging the development of new mutuals to provide public services rather than to support the existing financial mutual sector.

The Inquiry was convinced that the existing mutual sector would like to help the Government to deliver its policy agenda, but in return it would require continuing practical help and support from the Government to maintain and enhance existing mutual businesses.

Members heard that building societies had benefited over the last twelve months from a positive working relationship with HM Treasury and FSA officials, which it is hoped will yield positive results on the search for new capital instruments.

At the same time, mutual insurers and friendly societies have reported that they face serious threats to their future as a result of the FSA’s attitude to their sector, and HM Treasury’s apparent unwillingness to engage with them.

Evidence from both the FSA and HM Treasury witnesses has done nothing to contradict the impression that insufficient support is being provided to this crucial part of the mutual sector.

The All-Party Group takes note of the Government’s initiatives so far, but is not convinced that the Government has so far been able to articulate a clear vision for promoting mutuals.

This Group has therefore concluded that:

• HM Treasury appears to have taken a reactive stance to the mutual sector – beginning to deal with important issues such as building society capital, but little else of substance.

And  recommends that:

• It is imperative that the Coalition urgently adopts a comprehensive policy strategy to implement its Coalition Agreement commitment to promote mutuals.

• HM Treasury should act as a strong advocate for mutual businesses, in particular in its dealings with the Financial Services Authority and subsequent new regulatory authorities.

• HM Treasury should pro-actively promote the interests of financial mutuals within Government, and ensure that balance is given to understanding and promoting mutuals across all Government departments

Mutuals Yearbook 2011

The current economic and political imperative is to promote ways of organising finance, risk, public service and enterprise, that are both dynamic and responsible at the same time. For a while, ‘social enterprise’ appeared to offer a third way, between state and market; today, we’re told that it is the ‘Big Society’.

Regulators and policy-makers are seeking principles via which to distinguish the ‘socially useful’ parts of the private sector, from those which seek only to inflate private earnings as fast as possible. Mutualism adds much-needed clarity to all of this, by offering well understood, viable organisational structures, that are entirely alien to both Whitehall and the deal-makers in the City.

The organisations and sectors described in this report all share an ethos, that treats profit as a possible side-effect of co-operation and worthwhile service delivery, but never the purpose. Now that Britain has painfully discovered that money cannot be magically turned into more money, without hard work, long-term commitment and good management in between. There is a pressing need to learn from, expand and add to these mutuals, in both public and private sectors.

Social Housing: Made Mutual

Over recent months, RBH has been working with tenants and employees to develop a new ownership and governance model for the future of council housing in Rochdale.

The vision is based on co-ownership, with tenants and employees as members, to build into the fabric of the organisation a sense of shared priorities and working together.

This concept emerged from the deliberations of an Investment and Involvement Commission set up by Rochdale Metropolitan Borough Council in 2009 to examine the future options for the Council’s housing stock. The final recommendation of the Commission was to transfer the housing stock, which is currently owned by the Council and managed by RBH as an arms-length management organisation, to a new mutual model co-owned by tenants and employees. It saw this as the best way to secure long-term financial sustainability and to give tenants and employees a stronger sense of ownership in providing high quality housing service for the future. The transfer is subject to the approval of the tenants in a ballot and final Council and Ministerial consent.

This approach is put forward as a new form of public ownership. It is a community benefit society (industrial and provident society) with a legal commitment to public purpose, and retention of any surplus for the benefit of the community. Through democratic governance arrangements involving tenants, employees, the Council and other key local interests, those responsible for delivering services are directly accountable to those most affected by them.

This new co-operative or collaborative approach, which is consistent with the co-regulatory approach followed by the Tenant Services Authority, has the potential to break down binary or dualistic relationships, and to get people, bodies and agencies working together much more effectively for the benefit of the community. It also forms a new basis for collaborative working with the Council itself. It is a model which other ALMOs may be interested in exploring. For the reasons discussed below, it may also be a model which existing housing associations would like to explore.

NHS community services are undergoing a seachange. These fundamental services which rarely attract the headlines – including health visiting, midwives, rehabilitation, community and specialist nursing, therapies such as speech and language, physiotherapy and podiatry – account for about 10% of NHS expenditure.

As part of the Coalition Government’s plans to create the “largest social enterprise sector in the world”, a significant number of community health service providers are being separated out from Primary Care Trusts and established as independent social enterprises.

Four of these new providers, which are featured in this publication, have been set up as member-based organisations, with democratic governance, and a professional board of executive and non-executive directors. As independent trading organisations, they need to operate in a business-efficient way and to make a profit (income exceeding expenditure) in order to survive; but they exist to provide services for the public benefit, not to trade for private benefit.

Although they are no longer state-owned and controlled, they are constitutionally and culturally committed to providing services for the public benefit, according to traditional NHS values and principles. They are led by people who are convinced that this is the way to secure the long-term future of NHS services.

These new organisations are not yet well-known or understood; but they are examples of the future of public ownership.

It features:

- Nationally renowned speakers in plenary sessions
- Specialist break-out sessions to appeal to all interests
 
The Mutuals’ Forum is a once in a year opportunity for senior executives and elected representatives to meet to discuss the main issues facing mutuals, and to hear from Government representatives about how they intend to work with the sector.
 
The Mutuals Forum is now open for booking, click here for more information.

The report concluded that the Government has so far been unable to articulate a clear vision for promoting mutuals. Key findings of the Inquiry include:

Government has concentrated its policy efforts on encouraging the development of new mutuals to provide public services rather than focusing on the importance of the existing financial mutual sector

Government needs to urgently adopt a comprehensive policy strategy to implement its Coalition Agreement commitment to promote these mutuals.

The priorities of the Financial Services Authority are not aligned with this Government objective to promote mutuals.

Upcoming legislation to establish the new regulatory authorities must specifically commit them to promote mutuals and foster diversity.

Jonathan Evans MP, Inquiry Chairman, said:

“We applaud the Government’s enthusiasm for creating new mutuals in the public sector, but similar attention should also be focused on those mutuals that have served consumers well for generations. During the financial crisis, we saw that mutuals fared better than their plc counterparts, showing the importance of a plurality of corporate form. A year into the new Government, we now need to see a clear strategy that helps avoid another financial crash. Mutuals will play their part in helping to develop this, but it is essential that the Government takes notice of our Group’s recommendations to deliver on this important Coalition commitment.”

Notes

1. The All-Party Parliamentary Group (APPG) for Building Societies & Financial Mutuals was established to discuss and support building societies and financial mutuals. There are 126 Members of the Group, representing all parties in Parliament.
2. The report was written by Peter Hunt and Matthew Ball from Mutuo, which acts as Secretariat to the APPG.
3. This report is a response to the Coalition Government’s Agreement of 12 May 2010, (Page 9) which stated “We want the banking system to serve business, not the other way round. We will bring forward detailed proposals to foster diversity in financial services, to promote mutuals and create a more competitive banking industry.”

For further information please contact:

Jonathan Evans MP, 020 7219 7205

Peter Hunt, Mutuo, 07785 223846

Dowload the PDF