How do we communicate the case for a co-operative economy?

We all tend to tell the stories that reaffirm our existing beliefs. So where we flock together with others that share our assumptions, we tend to communicate in ways that work for us – but don’t persuade anyone else of those things we are already persuaded of… we have become closed, not open.

Technology and social media widens the envelope of who we reach, but can reinforce the same effect of people clustering around affinities of belief.

The idea of framing is that we have a mental model that we project on and out into the world. One classic work of political science that examines this is by George Lakoff: Don’t Think of an Elephant: Know Your Values and Frame the Debate. His argument is that we live our life in stories and metaphors, and prompted by one or another story, we respond – and vote – in different ways.

A excellent new Report on this is published by the New Economics Foundation and partners. It explores the frames that can reach out to a wider audience and that reinforce positive values of social justice or environmental sustainability.

When it comes to the economy, many people feel a sense of fatalism or helplessness. It is a force which acts on people, but is not one which they can shape.

Two frames the authors explore to overcome this are to harness people’s frustrations with this, pointing to big business which is running that economy, or to harness their values, by setting the economy within a wider frame of the common good. With those starting points, conversation can go wider.

I think these are great tools for those who work in co-operative education or want to communicate the benefits of co-operative action. They are worth testing. And if they are reinforced by other organisations and campaigns that share the same values, the multiplier effect could potentially be significant.

A cookbook for co-operatives

Co-operation started with food, when the Rochdale Pioneers set up shop. If we thought of growing the co-operative sector like preparing a meal, what would be our cookbook?

First the ingredients. Co-ops are people centred businesses, and so they start with people’s needs and stand or fall by the extent that people work together and take responsibility. But they can’t be just any people. They have to be a little bit organic – willing to put their ego aside and to work with others. There are many entrepreneurs in the co-operative sector, but theirs is the entrepreneurialism of the team. It is not for everyone even if most people have skills of co-operation and can learn more; what we have always called ‘co-operative education’.

Second the timing. Some co-ops are rapid, pop-up businesses that emerge in response to crisis. When the Star Inn in Salford was put up for auction, it was the only pub left within a twenty minute walk. Local people rallied together to raise the money to save the pub. When foot and mouth disease struck farmers in Lincolnshire, the local independent co-operative helped to organise them into a co-op, so that they could keep more of the money from the livestock in future. Other businesses take time, because they rely on relationships. Sometimes co-ops can be slower to start as a result. But they can also be slower to fail, as well, because having people onside is key to survival when things get tough.

Third, the preparation. There is no one chef for the co-operative sector. It is a plastic model that is constantly being renewed and reinvented. One of the fastest growing areas is co-operatives with multiple constituencies of members (sometimes called ‘multi-stakeholder’) – with new approaches developed for their design and governance. But it can help to have recipes and for many initiatives, there will be a template or set of examples that can be drawn upon and adapted. Co-operatives UK runs a programme called The Hive, with support from the Co-operative Bank, as part of its continuing commitment to an Ethical Policy. One way or another, there is advice out there for would-be co-operatives.

It is an exciting time to be in the co-operative sector, with a strong commitment to its growth from leading politicians, reflected in this week’s Ways Forward conference in Manchester. We are a bottom up movement, so the state can’t create co-operatives directly but it can challenge a business environment which privileges investor ownership, to create a more sustainable balance with which co-operatives can thrive. Co-operatives UK is working with our members and partners of the sector to feed ideas into this process.

And like the best food, after all the work, with co-operative success comes the sharing.

How to double the UK co-operative sector

I am speaking today at a conference organised by the Labour Party on different models of ownership. This follows an open and substantive report on new technology and co-operative and mutual models of business in today’s economy from last year – the Alternative Models of Ownership report.

One of the manifesto commitments Labour made going into the last election was an aspiration to see the UK co-operative sector double in size.

In the co-operative sector, we are not waiting for national government and we will work with all parties in power. The Lib Dems deserve credit for backing renewable energy co-ops when in government, the SNP for overseeing a renewal of farmer co-operatives and local food in Scotland.

But the commitment by Labour, with input from the Co-operative Party, is an unprecedented recognition of the power of co-operation to spread entrepreneurial action, to harness innovation and to engage communities and workforces at a time of risk.

As the Confederation of British Industry (CBI) said recently: “it is vital that employees are engaged with and motivated by the businesses they work for and co-operatives can be a way of delivering this.” The think tank IPPR has published an excellent agenda for action to promote co-operative and employee ownership. Worldwide, Oxfam last month pointed to the way in which successful co-operatives are successful in helping to spread wealth.

It helps in Brexit times, of course, that co-operatives tend to have rooted ownership, contributing to local economies and, as pioneers of the Fair Tax Mark, believe in the values of social responsibility when it comes to paying tax.

Here is a wonderful video of one recent community co-operative, Glenwyvis Distillery, supported through the Hive Programme backed by the Co-operative Bank.

So, how would a government go about creating the conditions for that growth?

The co-op sector itself has developed its own bootstrap ambitions and actions under the theme of Do It Ourselves in the form of a National Co-operative Development Strategy. This recognises that growth is of value if it is growth not just in turnover, but the growth of people’s participation and the spread of values of equality and sustainability. It also looks at examples of successful co-operative sectors across the world, in research by the Co-operative College. Regions such as Basque Spain, Emilia Romagna in Northern Italy and countries such as Finland, Brazil and Switzerland benefit from a ‘co-operative effect’.

On the back of this, I will suggest that there are four key steps for policy action to accelerate co-operative action.

Labour four steps

This is an open conversation, not limited to our sector or to any one brand of politics. It is a good time to imagine what our economy could be.

What are your ideas?

Fake Non-Profits – lies, damned lies and Carillion’s non-profit companies

One of the ripples that has emerged out of the failure of Carillion is the use by private companies of ‘non-profit’ companies as a front for delivering public services.

What could be more trustworthy than a community enterprise which makes no profit out of essential services?

Well, the answer is that these can be fake non-profits, simply serving as a way for investor-owned outsourcing companies to launder the proceeds.

In June 2013, Carillion (then John Laing Ltd, subsequently Carillion Integrated Services Ltd) was awarded the contract by Ealing and Harrow Councils to run their library services for ten years, covering:

• Six static libraries

• Libraries back office support services

• Home Library Service

• Schools Library Service.

But there was a fig leaf thrown in, in the form of a non-profit company with a heartwarming name – Cultural Community Solutions, responsible for day-to-day management.

When we look at the accounts submitted to Companies House, the story becomes visible. Cultural Community Solutions made no profit because it looks as if it has paid all of its profit out to others including companies in the Carillion family. From year to year, gross profit is simply eaten up by the ‘administrative expenses’. In 2016, they were exactly the same figure.

As a non-profit, they could also do something that other commercial, or indeed in-house services, could not, which is to claim discretionary relief on business rates payable on library premises. As with the big fostercare companies financed by offshore venture capital, designed to escape taxation, the financial profits this non-profit passed through to Carillion were in every possible way a gift from the taxpayer.

This then is not a non-profit company. It is a for-profit operation, masquerading as a non-profit and presumably using time honoured techniques of transfer pricing – a device for corporate groups to shift monies between legal entities through inflated charging.

Devices like these, some charitable, have been used in the leisure sector as well. This is one part of public services where true social enterprises, like Freedom Leisure, Fusion Lifestyle and GLL, have a successful track record. Outsourcing companies have sought to get back into the market through a similar device of non-profit trusts. Serious questions surely now need to be asked about these.

It is not a new issue. Wolves will snap up some sheep’s clothing if they see a bargain and allowed to get away with it. In 2012, Social Enterprise UK’s Shadow State report helped to shine a light on companies like A4E, banned that same year from calling itself a ‘social purpose company’, since its primary purpose was always shareholder profit.

Cultural Community Solutions wasn’t a Community Interest Company, a specific form of social enterprise, nor necessarily marketing itself as a social enterprise, but it appears as if it was assumed to be such by some commentators.

Anyone can call themselves a non-profit, just as many can claim to be a social enterprise, but there is an underlying first principle that needs to be recognised, as in the International Statement of Co-operative Identity, which is that of independence.

The Financial Conduct Authority for example, rightly tests co-operative and community benefit societies against this measure of independent ownership and control, including any close links that societies may have. We need that same test more widely when claims of being community are made – in the name or in the legal form of a company.

If a business is set up with a dependency on others, whether state or private investors, the nature of the company will ultimately reflect the interests of those dominant partners.