Westminster blog

Three reasons why Tory co-operatives may be a radical idea that few workers will want to take up in practice:

1) Demand

The NHS already have a “right to request scheme”, which is a similar to the Tory co-operative model. But so far there has been limited take-up. The Tories say this is down to poor promotion. But there are other reasons. Assuming the financial risks of delivering public services, through good times and bad, is a big undertaking. The process of forming a co-operative and sorting out its managerial structure is a complicated business. Most public sector workers have plenty of other things to worry about.

2) The risks of failure

The Tory co-ops will be “responsible for any poor performance, not the taxpayer”. Fair enough. But presumably then the applicants will have to show that they have the financial resources to cope with their business plan going wrong (which will entail raising capital). The Tories may waive this to encourage more co-ops. But then what does happen when a co-op does fail? The taxpayer will be on the hook because the co-op won’t have any money to absorb the hit. The contract will presumably be re-tendered in the end. The ultimate losers will be a) the customers b) the taxpayer paying to cover the break in service c) the co-op workers losing their jobs.

3) Flexibility

The public finances are dire. The co-op business plan will have to assume the state will be paying less and less for their services over time. Yet somehow they’ll have to work out how to make a surplus to make the venture attractive. This could make sense with a high degree of flexibility over staff pay and terms and conditions. But in the case of nurses and teachers, contract terms would be transferred from the public sector, which gives the workers protection. So the flexibility will come in paying more, or paying any new staff less. Over time this will make a big difference and could be the basis for a decent business model. But big barriers remain, not least the generous public sector pension terms. Will the potential surpluses really be enough to convince public sector workers to become entrepreneurs?