Employee Ownership – Or, Don’t Trust the Government.

08 November 2012

By John Medhurst

Beware of the media-friendly words the Government uses to hide its true aims. “Employee-owned” businesses may soon find their way into the public sector, allowing the Coalition to beginning selling off parts of the state.

The government has announced that it is to provide special support for employees wishing to move to an “employee owned” company, including an off the shelf model for setting up an employee owned business, advice on tax breaks, and work with the John Lewis Partnership to get the initiative going.

The driver of this is a report by Graeme Nuttall that recommended employee ownership be extended, and existing work by the Cabinet Office’s Mutuals Taskforce to roll out public sector “mutuals”. These strands of work overlap – they both make questionable claims about real ownership and control, or seek to package privatisation as something more “progressive”.

BIS says it will now work with John Lewis to examine barriers to taking forward employee owned companies. Labour also often cites John Lewis as a positive example. Yet John Lewis does not recognise trade unions, and its internal structure is as “managerialist” and hierarchical as a conventional business. Its approach to its sub-contractors – and its lack of concern for the pay, terms and conditions of the contractors’ staff – differ little from that of other private sector businesses. In 2012 it took a strike campaign by cleaners at John Lewis’ flagship store in Oxford Street to force the contractor ICM to back off from mass redundancies and a wage cut.

The strikes, led by the London Branch of the Industrial Workers of the World (IWW), succeeded in halting the cuts plan. Although the key demand of the strike, to win a pay increase to the London Living Wage of £8.30 per hour, was not conceded, the cleaners won a 10% pay increase. However, this was just for the one shop, and it did not address the cleaners’ demand to be treated the same way as John Lewis “partners”. Polly Toynbee’s report in the Guardian (13/09/12) found that some of the worker-partners were concerned that taking in another 3,000 partners would dilute the value of the bonuses paid to the existing 70,000 staff, and others felt cleaners did not merit the status of partnership.

Despite these issues, the general principle of employee owned businesses can be a positive one, although much depends on the particular model used and the extent to which employees are genuinely in control of the management and direction of the company. Often, an employee owned business or entity is described as a co-operative, though it need not be one. Unlike conventional firms, the ownership and decision-making power of a worker cooperative is vested solely with the worker-owners, who control the resources of the cooperative and the work process, such as wages or hours of work.

Employee Owned companies can be set up in any part of the economy to deliver a commercial service and if the goods and services are popular, of good quality, and priced realistically, it will probably thrive. But when the model of Employee Owned companies is extended to public services, which are then taken out of the public sector to compete as a profit-driven entity, the context alters radically. Co-operatives, mutuals and social enterprises can add value if used carefully and as additional support to a properly resourced national network of public services delivered by public sector professionals, but they cannot substitute for that network.

Even so, there is an argument to be had about the role of genuine mutuals and co-ops in the economy, and in public services. But not with this government, which merely uses these terms to disguise its desire to transfer as much of the public sector as possible to the private sector. The perversion of the term “mutual” was starkly demonstrated by the manner in which the government forced My Civil Service Pension (MyCSP) out of the public sector.

In 2010, Cabinet Office Minister Francis Maude decided – with no consultation with unions or staff – that MyCSP was to become a Mutual Joint Venture. The vast majority of MyCSP staff did not wish to move to a Mutual Joint Venture, yet had no choice in the matter. Despite this, the government’s July 2011 White Paper “Open Public Services” claimed there was “a strong turnout in elections to the Employee Partnership Council, through which staff will have meaningful say in the running of the business”, neglecting to mention that a) the EPC’s mandate does not extend to management of the business, and b) staff had been given no say at all on whether they wish to become a business.

On May 1st 2012 MYCSP became MyCSP Ltd, in which employees have 25% of shares in the trust with the government retaining some share ownership and 40% owned by the private sector partner, Xafinity Ltd, part of the Equiniti Group. Equiniti’s Chair is Kevin Beeston, ex-Serco. Its CEO is Wayne Story, ex- Capita. MyCSP Ltd’s new Chair is Lord John Hutton of Furness, ex Labour Defence and Business Secretary.

Similarly, the endorsement of the Nuttal Report’s recommendations conceals a far more reactionary agenda, revealed when George Osborne proposed that in exchange for receiving tax free shares worth between £2,000 and £50,000, “employee owners” would give up their right to a redundancy payment, to claim unfair dismissal, to get time off for training, and to flexible working patterns. The fear is that the stepping stones are being laid for employee owner companies, employing employee-owner workers with restricted rights, to “compete” in our market economy to provide essential public services.

Although there are many positive examples of co-operative working, employee ownership etc, the government’s programme is of an entirely different kind. A Victorian vision, it uses the language of equality and democracy to divide workers, to create armies of little Thatcherites competing with each other for shares in place of trade union and employment rights.

We should never forget we are dealing with the Conservative Party – the political arm of big business. It has no desire whatsoever to hand power to ordinary people and empower them at the workplace – an ambition historically shared by the co-operative and trade union movements. If that were so, we would be seeing an extension of workplace democracy in private business, which routinely denies workers greater control over their working lives through its hostility to trade unions.

The Mutuals Taskforce and the Nutall Review are fig-leaves for cuts and privatisation. Trade unions need to scrutinise these proposals and campaign vigorously against them, to ensure the spin does not go unchallenged.

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