How Will Labour’s Public Service Co-ops Operate in Practice?

Both the Labour leader, Jeremy Corbyn and shadow chancellor, John McDonnell, made speeches last week about how Labour would go about bringing public services back into public ownership. In particular they referred to the energy, rail, water and mail industries, with Corbyn saying that Labour intended to reverse the “neoliberal ideology that drove the privatisation frenzy.” McDonnell said they would put services “irreversibly” in the hands of workers, and that it would be unlike the nationalised industries of the past. Instead, Labour will promote the use of co-operatives.

We have heard this sentiment from Labour before, going back as far Labour’s 10 point plan released in the summer of 2016, but in pretty vague terms, and the latest announcements don’t put much more flesh on the bones. McDonnell said that the Co-operative Party, which is affiliated to the Labour party, would be setting up an implementation group. All of which suggests that these new co-op’s would be large, and worker owned, but it is not clear to me what exact community involvement there would be.

Let us not forgot that former Tory prime minister, David Cameron, championed, at least rhetorically, co-op’s and ‘social enterprises’ as part of his ‘red Tory’ re-positioning of his party. The John Lewis partnership was often held up as a great example of a co-operative venture, and indeed a former CEO of the company recently became the West Midlands Tory mayor. Is this the kind of thing Labour has in mind?

Paul Mason, economic journalist, Labour member and Corbyn supporter has attempted to flesh the thing out a bit, although I’m unsure whether is this just his interpretation, or has been sanctioned by the Labour leadership, as part of the official plan.

Mason traces the thinking back to the Keynesian period (1945-1979), when the left in the Labour party advocated workers co-operatives rather the huge state corporations that were the model for publicly owned industries. The new plan involves rail passengers, water users etc, the workers who provide the service and bond holders, who would receive a share of any profits. All would be stakeholders in these industries. McDonnell has confirmed that this would be the case.

This has the added advantage, if it works out, of getting control of privatised utilities at no extra cost to the tax payer. Mason says that it could be funded by government borrowing in this way, but it seems to me to be perfectly possible to do it by a form of ‘quantitive easing.’ Hundreds of billions of pounds has been basically created by the government to re-capitalise the banks, so that they can lend it back us, with interest. Why not use this money to buy back public utilities?

It is an interesting idea, and for industries like water and rail, which are monopolies, probably the most sensible idea. I would though like to suggest that in energy production the communities that are customers of the co-ops should also be directly involved in the co-op and be locally structured.

Much of the electricity that is generated at the moment is lost in transmission from source to end user. This is because the greater the distance between the two, the more energy is lost. From a conservation point of view, and so cutting carbon emissions, this is an important factor. Local generation of energy is far more efficient, and co-op members could pool locally generated thermal heat, solar and wind power. Corbyn has acknowledged that tackling climate change needs to be part of this equation.

This would eventually take away the customers from the ‘big six’ private generators in the UK, and they would just whither away. It would also likely improve clean production of energy as well as pushing these corporations out of our lives.

It makes sense with national industries like rail, that some kind of national body will have to run it, but the model being suggested has lots of potential for being better than the old nationalised British Rail, and better than having different private operators running it for profit, which incidentally costs the tax payers more in subsidies than when it was publicly owned.

Ken Livingstone when he was Mayor of London tried to fund investment of the publicly owned tube transport network, but the courts ruled that he didn’t have the power to do it. The government would have no such problem, and they might facilitate local government to make use of bond schemes for local transport and energy provision, too.

As I say, this is interesting thinking, and certainly the privatisation model has not worked out successfully, with the construction company Carillion’s corporate collapse and Stagecoach east coast rail line going bust, just recently, are but the latest examples of this failure.