2016 Federal Election: Co-operative policy for a more resilient economy

23 May 2016

Going into the election, the Business Council of Co-operatives and Mutuals is commending a few policy changes to all political parties. The concerns addressed here are shared by all parties and the solutions would lead to a stronger, more resilient Australian economy.

In short, they are:

• Wind back red tape to allow start-up businesses, where people are working together informally, to scale the co-operative model and facilitate ongoing co-entrepreneurship
• Free up capital investment in mutuals to unlock billions of dollars of fresh investment; and free up co-operatives to allow them to properly use their capital raising tools in a national market
• Simplify registration of co-operatives which help domestically owned businesses access the global market and take advantage of free trade agreements
• Educate recipients of services including recipients of individualised funding under the NDIS about the co-operative model, which can offer wider choice and a more efficient use of personal budgets
• Further explore the potential of the co-operative model for delivering tailored services by Indigenous communities for Indigenous communities, expanding on the success of existing Indigenous co-operatives
• Expand the co-operatively managed model of social housing, which has proven an effective means of controlling costs and giving disadvantaged individuals the opportunity to make decisions about their own homes

Co-operatives and mutual enterprises (CMEs) are member-based businesses owned by or on behalf of their customers, employees, a group of like-minded producers or a combination of these. Eight in ten Australians are members of at least one mutual. Member owned businesses exist in every state and territory of the Commonwealth. Australia has 2,000 co-operatives and mutuals with a combined membership base of more than 14.8 million.

“In a time of innovation and economic transition, CMEs allow people, communities and small businesses to take control of their own economic future,” said Melina Morrison of the Business Council of Co-operatives and Mutuals (BCCM).

The BCCM commends the CME charter to the attention of government as a pathway to addressing these policy challenges.

In the following pages, the BCCM has identified a number of problems to which small tweaks to policy around CMEs would yield big results.

Resilient enterprise for jobs and economic stability

PROBLEM: Start-up businesses are often informally structured as co-ops as people club together to get an idea off the ground. But the difficulty of registering as a CME prevents this model from being scaled to facilitate ongoing co-entrepreneurship.

SOLUTION: Currently the CME option is missing from government business websites and frontline staff do not know about the business models. It costs more and it can be cumbersome to register a co-operative business. It takes an enormous amount of time and can be costly when specialists are brought in to navigate the system. The BCCM calls on government to cut the red tape and ensure that this legal option is adequately reflected in all relevant forms and understood by government bodies providing business advice.

“Recognising CMEs and ensuring that these structures are as accessible in the business registration process as any other corporate structure is a very simple way to add to resilience and diversity in the economy,” says Ms Morrison.

Control NDIS blow-outs

PROBLEM: As for-profit conglomerates prepare to enter the market to compete for the custom of NDIS recipients with large marketing budgets, individual recipients must be made aware that there are alternatives available to them that will allow them to tailor services to their needs and collaborate to maximise their purchasing power.

SOLUTION: Self-help and democratically owned co-operative structures have allowed some early recipients of individual-tied funding to design services that suit their members’ needs while providing scale benefits on administration. Further awareness-raising is required to ensure that beneficiaries of the NDIS, their guardians and care workers are informed of this option and provided with opportunities to join or establish co-operatives that meet their specific needs.

“At their core, co-ops are based around the principal that their members know best how they would like to spend their money,” says Ms Morrison.

“The co-operative structure provides a resilient and stable model capable of sufficient scale to make these preferences economically viable.”

Empower Indigenous communities

PROBLEM: Top-down and one-size-fits-all solutions often fail in Indigenous communities.

SOLUTION: Co-operative structures allow for local entrepreneurship and grassroots solutions to the idiosyncratic problems of all kinds in Indigenous communities. Indigenous co-operatives have been quietly delivering services to indigenous communities since the 1950s and a number of these are continuing to play an important role in medical services, training and financial services. Raising awareness of this model and reducing the red tape around establishing them would pave the way for innovative solutions for local problems, while simultaneously bringing more Indigenous people into employment.

“Indigenous leaders are among the most enthusiastic champions of the CME model because they recognise how well it fits with the needs and consultative styles of many Indigenous groups,” says Ms Morrison.

“Again, red tape and awareness are the only things in the way of a solution that could greatly improve the experience of this group.”

Social housing – co-ops for tenant management

PROBLEM: Social housing is costly and often entrenches social isolation and welfare dependency.

SOLUTION: Co-operatively owned social housing gives people a management stake which helps control maintenance costs and offers an opportunity for tenants to collectively own their housing. Ownership responsibilities have been shown to have a positive impact on the social and economic participation of disadvantaged groups, creating long-term benefits to the individual and the economy.

Stable, member-focused mutual institutions  

PROBLEM: Mutuals encounter limits in their ability to raise external funds, stymieing growth. A recent Senate inquiry suggested that changing the rules around capital investment could unlock billions of dollars of fresh investment into the Australian economy.

SOLUTION: In other countries, mutuals can raise funds from their members, allowing them to grow without abandoning their structure. The BCCM recommends adopting and if necessary adapting the investment rules which currently apply in Canada and the UK to unlock member investment in mutuals in Australia.

“The ability to raise capital from members has been particularly instrumental to growth in the mutual finance sector overseas. The financial institutions which have raised capital are now among the most stable financial institutions world-wide.”

-Ends-

For more about the election policy platform of the Business Council of Co-operatives and Mutuals:

• BCCM Election Policy 2016
• Blueprint for an Enterprising Nation