What is a public service mutual? Well, what is a public service?

By Stephen Easton

Friday January 8, 2016

When members of the Senate economics references committee decided to inquire into the co-operative and mutual sector, the idea of public service mutuals was not high on the agenda, if at all.

That soon changed, mainly due to submissions from the Community and Public Sector Union that warned against copying some dubious recent examples of public service mutualisation from the United Kingdom. The resulting debate convinced the committee, and South Australian independent Nick Xenophon in particular, that the sub-issue within the inquiry’s broad terms of reference must be examined further.

The Mandarin understands the inquiry’s reporting deadline is likely to be extended so another hearing can be held in late February. This will allow more discussion of the issue and further submissions from the CPSU and the Business Council of Co-operatives and Mutuals, which maintains it shares the union’s concerns but argues that genuinely staff-led mutualisation of public services can be a viable option for governments to consider. BCCM CEO Melina Morrison told the committee in its last hearing:

“We also deeply share the concern with privatising services such that the public interest is diluted. What we are offering is access to information about other business models that may be able to be a bulwark against privatisation, in the sense of providing alternative ways for communities to own, manage and deliver services.”

Melina Morrison and Andrew Crane.
Melina Morrison and Andrew Crane.

For the BCCM, the choice to push work out of the public sector is a matter for the government of the day. It argues that if it’s going to happen, the unique business structures of its constituents make them a good choice to take over services or deliver them in some kind of partnership. Chair Andrew Crane said:

“The co-operative and mutual sector brings economic and social mission together in the same business, which is why we are unique.

“They are resilient, sustainable; they are economically well run but they maintain that social mission. They have the two things together — neither the purely economic motivation of an investor-owned [company] or the not-for-profit social driven one. Our sector brings the two together. They talk about an uneasy symbiosis.”

Morrison said the recent emergence of Clayton’s public service mutuals in the UK had done “brand damage” to the sector. But her organisation does believe it can be beneficial for public services to become staff-owned mutuals — as long as the staff make that choice themselves:

“If they and their unions are coming forward and saying that they think they might be able to get some more efficiency, but also some more consumer connectedness and community connectedness out of this, to be free of some of the barriers to innovation that they might have experienced, then we would contest that that is a valid impetus as well.

“But it has not worked in the UK in the sense of being policy or ideology driven. It has led to some negative impacts, and the CPSU has picked up on that.”

Crane added Australia could learn from the UK experience, pointing to a number of British successes.

Of course, any privatisation of existing government work is anathema to everything a public sector union stands for. And at the heart of the issue is one of the most interesting questions in public policy, to which the two protagonists would give different answers.

What is a public service?

Morrison explained to the senators that her group’s definition of a public service is much wider than the CPSU’s, referring to the whole gamut of services that receive funding from government. The BCCM sees a range of organisations like Co-operative Home Care — which is owned by eight nurses who share profits but also employ others to work for them — as public service mutuals.

Karen Batt
Karen Batt

Home nursing care also provides another example of what the BCCM calls a public service mutual, but one which the NSW branch of the CPSU strongly opposed: the imminent sale of the New South Wales government’s massive home care unit to Australian Unity. While the venerable organisation is a highly regarded care provider and employer — the former NSW public servants it is hiring will not become shareholders — it is hard to see exactly how either relates to its structure as a mutual.

CPSU research director Kristin van Barneveld acknowledged the disconnect between the way the two organisations use the term “public service mutuals”, and asked the committee to “reject this broad, confusing definition” preferred by the BCCM. She contended that:

“… unlike in the UK, the definition proposed here expands the notion of public services into areas where the government has traditionally funded a third sector to deliver. The problem with this definition, in our view, is it really muddies the water. These are not public services as most people think of them; they are community sector services provided by not-for-profit organisations funded by government.”

Nationals senator Bridget McKenzie probed the CPSU’s tactical choice to stick with the narrower UK definition of PSMs and fight hard against it. She suggested the union’s blanket opposition to any work done by public servants being shifted out of government meant its arguments were not about the quality of service delivery.

Van Barneveld claims evidence in support of the UK’s PSMs is flimsy and based on dubious exemplars. Its submission pointed to at least one case study that was offered to the Australian media and dutifully reported as a successful PSM — the Cleveland Fire Brigade — in fact wasn’t one. It never mutualised because staff resoundingly rejected the proposal.

The union relies on a long list of examples to support their contention that the UK’s push for PSMs has largely been a costly failure. Its lead researcher argued:

“If there is a proposal to privatise government services, then let’s say that it is about privatising government services and talk about it that way rather than set up organisations which, the evidence is showing, are failing on the whole where they have been used in the UK.

“They end up either costing the government more by virtue of paying off debt or writing off debt of these organisations and then purchasing them back, or stopping the delivery of a service. We are also genuinely concerned about the decline in the quality of service provided to the public as a result of putting in these models.”

CPSU federal secretary Karen Batt denied McKenzie’s charge that she was more concerned with her members’ jobs than service quality, claiming it often drops after any type of privatisation because accountability mechanisms are much weaker outside of government:

“If you look at the Departments of Health’s and Department of Human Services’ annual reports to Parliament and the extreme detail that they go into for the purposes of providing an analysis of what money has come in and what money has been expended, the programs and the targets, and then you compare that to some of the not-for-profit organisations that also get government money, there is a significant difference in the amount of information that is provided to the general public about the use of government money.”

McKenzie replied “that is something government can change” and continued to imply the union was putting its membership ahead of the community. Batt hit back with an appalling example of a Victorian not-for-profit residential care provider taking over a government service:

“… they were not prepared to put enough staff on. So kids were being pimped at local shopping centres for sex. There is an inquiry currently into that.”

It has also been suggested that the opposition to PSMs from public sector unions could be fuelled by a desire to have as many members as possible. However, Batt told McKenzie the union did recognise the “strong credentials” co-ops and mutuals boast as employers, and that if a group of CPSU members made “a fully informed decision” to mutualise, the union would support it, even though it would no longer represent them.

Xenophon brought the discussion back to the key question of what should or shouldn’t be a public service, deftly pointing out that the answer changes over time:

“Many years ago, in the South Australian Parliament, I opposed the privatisation of electricity assets because I thought that was an essential service. But, in times gone by, the South Australian government used to own a laundry service — which I do not think they own now. A laundry service — washing sheets and towels. Is that a public service? For the record, Dr van Barneveld is laughing!”

The CPSU’s lead researcher quickly regained her composure and went on to offer the union’s attempt at a static definition, which includes some useful and valid points, but could not improve much on her initial reaction:

“That is a really tricky question.”

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