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PC human services report does not go far enough, says co-ops supremo

The co-op is a good operating structure for human services, according to Melina Morrison, chief executive of a peak body for the sector. Having more of them would increase choice and competition for users of these publicly funded services, she argues, if barriers to setting them up were addressed.


When is choice not really choice? When the options available are limited by invisible factors.

There is a lot to like in the report the Productivity Commission has delivered on Introducing Competition and Informed User Choice into Human Services. If the government adopts the recommendations, the range of providers able to tender for human services contracts will be expanded to include smaller providers, as well as co-operatives and mutuals.

The recommendation of time extensions will favour smaller firms by allowing more time for organisations to tender for government work. This will pave the way for organisations without dedicated tendering resources to throw their hats in the ring, as well as paving the way for more innovative multi-party tenders.

The intention is clearly to allow much-needed competition in the human services sector.

But what is not addressed in the report are the many barriers to setting up and operating co-operative and mutual enterprises, which ultimately restrict the competition between business models needed for the effective function of a free market in human services. There is currently no level playing field.

Red tape still bedevils the co-operative and mutual sector. The business model is invisible to key bodies such as ASIC and the ATO, and access to information on co-operatives and mutuals as an alternative model for customers of services, providers of services and commissioners of services, is limited.

The next critical steps the government takes must address these hurdles for the sake of a genuinely competitive market.

The report says that government tenders mustn’t discriminate against organisational type, which opens up procurement and tender bids in areas co-operatives and mutuals are best suited to — health, aged care, disability services, social housing and services to remote and Indigenous communities, to name a few.

We argue that the hybrid, mutual model can deliver services more efficiently than the private sector because shareholder ownership necessarily means profits come first. Co-operatives and mutuals can also avoid the mission capture that besets some traditional not-for-profits, restricting the access to services for people from all walks of life.

Co-operatives and mutuals can also operate in niches where markets are too thin to justify the risk for private companies setting up — the so-called areas of “market failure”.

Australians organically moving towards co-ops

An example of this is the National Health Co-op, an ACT-based member-owned health services co-operative.

The NHC, which provides around 42,000 members with access to bulk-billed health services, came about in response to a dearth of GPs in the West Belconnen region of Canberra, a suburban area home to over 20,000 people.

The increase in bulk-billing rates in the ACT since the entry of the co-operative to the primary health care market shows the pro-competitive effect that co-operatives have on failed markets.

Similarly, the Supporting Independent Living Co-operative has stepped into the gap left between public and private sectors to connect NDIS participants, families and carers and help them establish their own family-governed homes for people with a disability.

The Co-operative Life is a worker-owned business established in 2013 in response to care workers’ desire to have empowered, vocationally rewarding employment in non-residential aged care.

As we can see, Australians are already organically moving toward this model, despite the impediments put in their way.

To illustrate some of the red tape involved in running a co-op, the PC report itself considers the case of Tranby National Indigenous Adult Education. The college wasn’t eligible for grant funding above $500,000 unless it was a corporation under the Corporations (Aboriginal and Torres Strait Islander) Act 2006.

The PC report pointed out the college could appeal to the Minister for Indigenous Affairs for an exemption to incorporate.

As far as starting a co-op goes, presently the only mention of co-operatives on the ASIC website — the starting point for the public, lawyers and accountants to set up a business — is to inform people they can apply to the minister in their relevant state if they want to include “co-op” in their company name.

Surely having no pathway other than a direct appeal to the Crown with no information about how to set up such a business is the ultimate barrier, surrounded by obstruction and wrapped up in red tape.

The Productivity Commission has taken a huge leap in specifically targeting CMEs as a way to deliver these vital services for the most vulnerable in our community — in housing, transport and health.

Arcane rules

The PC has, however, not quite gone far enough. There are still barriers to forming CMEs and arcane rules that surround doing business once you are there. An Aboriginal co-operative should not have to incorporate in self-defence or appeal to one of Her Majesty’s ministers just to keep its doors open.

Meanwhile, many people who are at the coalface of service delivery need to be told that this method of service delivery exists so they can band together in these hybrid organisations.

The South Australian and federal governments have shown the way with their help recently to set up the $47 million Early Childhood Early Intervention mutual.

Under this model, the staff will be the same former public servant carers, giving the children and their families continuity of care and, crucially, retaining the bond of trust between them.

This is clearly the way forward as the juggernaut of the NDIS comes to life and a myriad of programs begin.

The government must now take the next step to both help replicate this model and get out of the way of trailblazers who want to aid our disadvantaged, aged and those at risk.

Once these impediments have been removed the onus will be upon our educators, lawyers and accountants — indeed anyone who advises businesses — to learn all they can about this important operating structure.

Melina Morrison is the CEO of the Business Council of Co-ops and Mutuals.

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