Handle with Care

The Co-operative Party is increasingly enthusiastic about co-operative councils. But it lacks a coherent philosophy and rationale for its position. We need to be cautious, argues JOHN HALSTEAD.

The Co-operative Party is getting enthused by the idea of co-operative councils. It has already taken action to support local government councillors through a co-operative councils network, shortly to be strengthened through new organisational and funding arrangements.

In large measure this is a response to the austerity measures imposed since the 2010 general election by the coalition government, but co-operators should be adopting a co-operative councils policy even in more favourable conditions. The Co-operative Party lacks a coherent philosophy and rationale for its current position.

It’s important to recognise that our political problem is more fundamental and deep-rooted, historically speaking, than the immediate difficulties arising from the coalition’s austerity programme.coop councils group

The Co-operative Party was founded in 1917 in order to defend co-operative retail organisations from political assault by private capital. The party came into being at a time of severe First World War privation for working-class communities and on the eve of the Labour Party’s spectacular electoral advance in the years running up to 1929.

It was during 1914-18 that the Fabian socialist economic prescription of nationalisation and state action (statism) became fixed in Labour’s DNA. This was reinforced during the Second World War and by Labour’s third (or Attlee) government of 1945-51.

From an electoral point of view, the Co-operative Party has been an adjunct to Labour, which in its discovery of the state as an instrument of working class and economic advance, neglected the working-class co-operative tradition. This may have been due to the success of co-operation as a consumer movement, rather than a producer movement, for Labour came into being as an alliance with producer interests, the trade unions.

The story of the 20th century then is about the growth of the state as an economic actor. The state, due to inefficiencies in private sector industries and supply failures, extended public ownership of productive enterprise and marginalised self-help activity in fields such as health. But the growth of state economic activity, together with international economic developments that impinged on national economies, produced a reaction.

The consensus about the mixed economy and the social settlement started to unravel at the end of the 1960s and accelerated during the 1970s. Margaret Thatcher’s 1979 election victory assured the triumph of neoliberalism over social democracy. Thatcher’s attempt to ‘roll back the state’ had mixed success. She was not able to reduce substantially the share of public sector activity in the gross domestic product although she did eventually curb the trade unions and privatise large state-owned productive enterprises.


More relevant to the question of local authorities, however, was the idea, imported from America, that public authorities should be enablers of services rather than providers. This notion is the basis for outsourcing public services from local authorities to any willing and able provider. It is based on the ideology of market fundamentalism – the belief that ‘the market’ is always and necessarily more efficient in economic delivery than any other form of organisation, that previously insulated activity should be marketised.

The development of markets in public services, and of competitive tendering in outsourcing, has been in progress for many years and pre-dates the onset of the current crisis or the coalition’s austerity measures. In Sheffield, for example, the chief executive, Bob Kerslake, was responsible for outsourcing services from the local authority’s direct labour department to private sector company Keir. All major areas of local authority activity followed: many town hall activities, such as finance, were outsourced to Capita; environmental services went to Veolia; and, more recently, highways to Amey Construction.

The result of these exercises is to pass from the city council to the main contractor responsibility for sub-contracting in areas over which councillors and officers previously had direct control. The companies winning these contracts are multinationals with foreign ownership. In these circumstances, there is no possibility that they will use or promote co-operatives or local not-for-profit organisations for supplying services. The same applies to other fields, such as the National Health Service.

The ‘big society’ agenda might produce some apparent movement in favour of co-operatives, or other forms of third sector organisation, but there is no guarantee this will result in a stable situation. Indeed, this is not intended, for it is a smokescreen for the eventual transfer of services to competitive, private capital.

There is undoubtedly a cost-cutting motivation for these changes, whether outsourcing to private capital or to co-operatives and mutuals. This may not be entirely objectionable. Publicly provided services may be inefficiently managed and lack the entrepreneurial flair necessary to cope with changing environments and challenging circumstances.

But it does not follow that public commissioning will always provide desirable results in terms of cost and quality. The history of private finance initiatives (PFI) provides ample evidence to the contrary, while cost reductions are often achieved through a deterioration of staff terms and conditions.

All this suggests we need to be cautious about – if not oppose outright – the neoliberal approach to service provision.


There is another narrative, however, which leads to more positive conclusions – one about bureaucracy.Sidney Webb

The Fabian view was that the administration of publicly owned services would be handled by enlightened and professional public servants. This reflected Sidney Webb’s experience as the scholarship-boy-supreme who became a First Division Whitehall civil servant (left), a contrast to the often relatively uneducated and public-interest ignoring get-rich capitalist. There was merit in this view, but the expansion of public activities and employees can, and almost inevitably does, create a problem: bureaucracy.

Why is bureaucracy often a bad thing? One characteristic of bureaucracy is rules, and while these are necessary for consistent and equitable treatment of cases, they are inflexible and difficult to change in response to new circumstances. Circumstances alter cases, as the lawyers say, but generally not in the court of bureaucracy. Bureaucracy is usually remote – the decision-makers are not in close contact with those affected by the rules, so it often appears insensitive and unfeeling.

What’s more, bureaucrats are usually drawn from a different class and cultural background from those subjected to the rules and do not necessarily espouse values that the systems they operate are ostensibly committed to. Bureaucracies, in other words, can become self-serving, exploring the labyrinth of their own complexity; they encourage promotion within the hierarchy, rather than the vocation of servicing the public.

This point is best illustrated by reference to care services. Insensitive, even inhumane and criminal treatment in hospitals, elderly care establishments and homes for children are legion. It was long common to dump ‘problem’ individuals in institutions for their ‘care’ or ‘treatment’ without proper understanding or concern for the impact on their lives, whether ‘hysterical women’ in asylums, ‘undeserving poor’ in workhouses, older people in ‘geriatric wards’, or people with learning difficulties in long-stay hospitals.

Fortunately, there was a belated recognition of the deleterious effects of institutionalisation which led to inquiries, reports and legislation, producing new arrangements and solutions to care problems. Public finance and commissioning was maintained, but the public authorities now enabled rather than provided, with demonstrably better outcomes for service users. Mutual and co-operative organisation has played an important part in this good story.

Centralised control

It has to be said that neither Labour nor the Co-operative Party have a clear position on this.

The fundamental problem is local government funding and the relative autonomy of its representatives from central government. This is a separate point, of course, from the introduction of co-operation or mutualism into service delivery, but we should not want that to be driven by austerity. As matters stand, local authorities have little revenue raising power and local representatives are no more than puppets of whoever is in charge at Westminster.

For example, the Conservative wheeze to introduce local mayors was not about devolving power, as presented by central government propaganda, but to centralise control even further. It is significant that the powers of these mayoral offices were not announced before the proposed system, only after the government had a chance to see if the newly elected incumbents were, in Margaret Thatcher’s inimitable phrase, ‘one of us’. What they get from the centre will depend on the extent to which the new mayors are amenable to ‘our’ bidding.

The introduction of a cabinet system into local government was another centralising device, concentrating decisions in the hands of a small cabal of local government members. The local council was never a model of thriving direct or participatory democracy, of course – some members always counted for more than others – but the new system appears increasingly to marginalise the ‘others’ and make more difficult the expression of dissent within a council.

And dissent is what we need. We need councillors more frequently challenging officers; and we need citizens more frequently challenging councillors. We need more community and less city decision-making.

Perhaps co-operative and mutual models of service delivery can produce more community or ‘social’ decision-making, decisions made more in the interests of, and designed with sensitivity to the real needs and changing circumstances of those being served.

If so, the multinationals will have to be cut out of provision; those active in co-operation will have to resolve the interests and ideological disputes within their movement; and regional bodies will need enhanced powers with statutory underpinning. This cannot be delivered outside a federal framework.


This is an edited version of a paper written by John Halstead for discussion at the School of Democratic Socialism started by Sheffield Co-operative Party in 2011.

Read more information about the Co-operative Councils Network here.coop councils book

Towards co-operative councils: Empowering people to change their lives, edited by Steve Reed MP and Kitty Ussher, is available to download from www.councils.coop.

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