Post Office scandal provides a chance to review the benefits of cooperatives

The scandal at the Post Office means the spotlight has now fallen on the societal value of businesses – and cooperatives provide a great alternative business model, write Rose Marley and Andrew Whyte

The Post Office Horizon Scandal dominated public consciousness in the wake of the popular ITV drama series and the ongoing public inquiry – and with good reason. The wrongful convictions of hundreds of sub-postmasters and postmistresses of theft and fraud based on flaws in the Horizon IT system illustrates the painful consequences of a breakdown in trust in business and the costs of technological failure on the human condition.

The spotlight has fallen on the societal value of businesses and how they can be run in ways that profit the wider community, including their own staff, as well as profit the company balance sheet. Turn that spotlight and the solution is already here; a solution that provides resilient businesses with huge potential to fix broken systems (and maybe even the Post Office). This is a reminder of how mutuals are, in many ways, best-suited to deliver products and services that most effectively meet the needs of their users.

The Association of Financial Mutuals, Building Societies Association, Cooperatives UK and the Association of British Credit Unions have just published a joint prospectus reinforcing the value and contributions of mutual organisations to the public. The research outlines how, in an era of prolonged challenging economic conditions and political uncertainty, the model of a business owned by its members, where profits get shared among them and reinvested into the organisation, is well-suited to thrive in today’s world.

Earlier this month the High Pay Centre published research revealing that the salaries of CEOs of FTSE 100 companies overtake the median annual salary of full-time workers in under four days. At a time when standards of corporate governance are rightly under the microscope, our new prospectus reminds us of the contribution and importance of mutuals, cooperatives and social enterprises to the UK economy. Together they contribute nearly £90bn, equivalent to 3.5 per cent GDP and over 400,000 jobs.

Through a clearly defined structural ownership model, mutuals and cooperatives are able to escape the whim of stock market movements, or shareholders prioritising short-term thinking. Trust, entrepreneurship and growth are encouraged. This unique spirit of prosperity and freedom among members is in some respects unquantifiable, but the model’s success is not just fuzzy perception. The survival rates of mutuals and cooperatives significantly exceed other ownership models.

However, the mutual model has come under unprecedented pressure, epitomised most recently by the protracted bid by Bain Capital to buy the insurer LV. While that particular battle was not successful, it highlighted the need for the government to firm up its support for the mutual movement. Recognising the troubles that have engulfed so many prominent investor-controlled companies in recent years, the government should take the lead in creating the right policy environment for member-owned organisations, reviewing and amending existing regulatory framework and making it easier for mutuals to raise capital where necessary. Government policy can and must unleash co-operative and mutual potential.

Increased government support for mutuals is a key step towards restoring trust between business and society in the UK. Unlike recent scandals, we should not need a TV drama to remind us of the substantial societal benefit both to communities and capitalism provided by mutuals, cooperatives and social enterprises.

Rose Marley is CEO of Co-Operatives UK and Andrew Whyte is CEO at the Association of Financial Mutuals