Productivity Commission sees role for co-ops in human services

29 March 2018

The Final Report of the Productivity Commission on Introducing Competition and Informed User Choice in Human Services: Reforms to Human Services was released by the Commonwealth Government this week.

The BCCM has responded publicly today on the Report’s findings in The Mandarin.

Why does this matter for CMEs?

This inquiry is about finding ways to put the people who use services at the heart of service provision. It follows recommendations from the Competition Policy Review about the scope for increasing the productivity of human services in Australia.

The Commission makes special mention about the reforms underway in aged care and the NDIS, which underscores the importance of these reforms to improving quality for service users.

Many of the service areas ear-marked by the Productivity Commission for early reform represent business opportunities for BCCM members and the CME sector more broadly:

• End-of-life-care services
• Social housing
• Family and community services
• Services in remote Indigenous communities
• Public hospitals for elective care following referral from a general practitioner; and
• Public dental services

While the inquiry was taking place, the involvement of the BCCM in providing subject matter expertise and advice to the National Disability Insurance Agency and the South Australian Government helped to achieve the bi-partisan announcement at the end of last year that Australia’s first employee mutual would form.

South Australian public servants from the Department of Communities and Social Inclusion will be supported to ‘spin out’ from government and establish an employee mutual to deliver early childhood early intervention services in the National Disability Insurance Scheme (NDIS). The BCCM commented on the project in Pro Bono News.

What did the BCCM argue?

The BCCM’s submission to this inquiry argued that the role of government stewardship in introducing competition and informed user choice to human services should include doing what was necessary to increase diversity of providers in the market. Part of this role includes doing what has to be done to remove the barriers and red-tape faced by co-operatives and mutuals so they can compete on a level playing field with other providers. International and Australian case studies of co-operatives and mutuals with evidence about their competitive benefits was also part of the BCCM submission.

Professor Sir Julian Le Grand, who chaired the UK Mutuals Task Force, was an expert advisor to the BCCM’s submission to the inquiry. Based on UK experience, Sir Julian provided evidence to demonstrate that in ‘contestable markets for human services, where the aim is for higher quality, greater user and worker well-being, more community involvement, greater accountability at an efficient price, that the best kind of organisations are mutuals of some kind’. (BCCM Submission July 2016, page 17)

Over the last decade, successive UK governments have developed policy and funding programs to lift the productivity of public services. This has mostly been in health, social care and education. A particular type of mutual where the employees are the members has been particularly successful. Recent research  surveying public servants who successfully ‘spun out’ of government to form employee mutuals, shows that when the change involves high levels of staff leadership and engagement, that around three-quarters of respondents believe that since spinning out and forming as a mutual:

• They provide more innovative (82%), more responsive (78%) and better quality (76%) services
• Their workforce is more engaged, happier (78%) and more productive (76%); and
• The services they deliver are value for money (73%)

The participants in this research indicated that these benefits primarily stem from the reduced bureaucracy (87%) and faster and easier decision-making (91%) compared to being in the public sector and having more mechanisms for staff to influence staff delivery (87%). This early evidence suggests that the employee mutual model can improve quality, impact and value for public services. As further evidence of this, the UK Government has recently announced a second mutual support program to enable new mutuals to form and existing ones to further refine their business plans for sustainability.

How effective was our advocacy to the Productivity Commission Inquiry?

This report contains some good news for our sector because it counts co-operatives and mutuals in as important providers in some key areas. Specific reference is made to the suitability of CMEs in housing, community services, remote and regional communities and Indigenous services.

We still have some work ahead to convince the Commission that organisation form actually makes a difference in some areas of human service delivery.
In the Commission’s view, when selecting providers of human services, the role of government stewards is to focus on assessing the operational capabilities of organisations and the effect this has on users’ outcomes, rather than applying blanket rules about organisational form. The Commission rejects the view that some organisation forms such as for profit or not-for-profit, deliver better outcomes in human services.

In its follow-up advocacy to the inquiry, the BCCM will continue to argue that government’s stewardship role should extend to making sure the right policy and regulatory frameworks are in place to foster innovation and cultural change among service providers and in gathering more evidence about what sorts of systems and organisations are best suited to delivering quality human services.
Competition and choice are reduced if there is not a diversity of providers in the human services market. This goes beyond binary views of classifying providers as being either for profit or not for profit.

We are disappointed that the final report did not reference the important work happening in the UK where new forms of employee ownership in human services are clearly increasing productivity of human services.

The emergence of over 100 mostly employee owned mutuals in the UK is showing positive results in terms of increasing the productivity of human services in a number of the priority areas identified for early reform.

The BCCM looks forward to working with Government to develop a stronger evidence base about what sorts of systems and organisations can genuinely provide a higher quality of care. If the aim is for higher quality, greater user and worker wellbeing, more community involvement, enhanced accountability at an efficient price, then often the most effective providers are neither government nor private organisations. They are a hybrid of both.

The example being set by the UK Government in extending its stewardship role to providing policy and regulatory settings to more closely examine how to foster innovation and to support the emergence of new forms of hybrid organisations, of which co-operatives and mutuals are one example, is the missing piece from the Final Report.