MyCSP Is More Like Circle Than John Lewis

The government is making a big fuss over their latest privatisation: the  Civil Service Pension Scheme (CSPS) . They claim that it has been "mutualised" and that it is "like John Lewis" and our compliant media (led by the unenquiring BBC) merely parrot whatever the government's Press Release tell them to say.

Before examining whether MyCSP is a mutual, or if it has any similarities at all to the John Lewis Partnership, let's first examine what those terms mean.

Mutual Organisations

The problem with the term "mutual" is that it is used to describe two different concepts. The government use the term to describe employee-owned, profit-share organisations, which are more accurately described as co-operatives.

However, most of us are used to the term mutual being used to describe organisations that give mutual benefits to its customers and the best example of this is building societies. With a building society the people who save money and the people who borrow money, are owners of the business. The staff run the business for those owners, and all profits go back into the business. There used to be hundreds of building societies, and many of these amalgamated in the 20th century.

The big blow to building societies was the Building Society Act 1986. This act of vandalism stated that if 75% of members of a building society (that is, savers and borrowers) chose, the society could be demutualised and their mutual rights would be exchanged for shares in the new public limited company. This led to a concept known as "carpetbaggers". These were people who joined a building society (for example, by saving the minimum amount of money the society allowed) explicitly so that they could benefit from demutualisation. For carpetbaggers, demutualisation was a goldmine because for as little as £1 they could gain hundreds of pounds of shares in the new company, which inevitably they sold as soon as the company's shares were listed.

Demutualisation meant that building societies could become banks. Building societies were founded to help people in a community to save money to own their own homes, this was their core business, and mutualism meant that being responsible to their "shareholders" means being responsible to their customers. Banks, however, treats shareholders and customers separately. Company law says that companies must be run for the benefit of their shareholders, and with a bank, this means that their customers are second place. It is no co-incidence that building societies were largely immune to the 2008 banking collapse: they stuck to their core business of lending to homeowners and did not take part in risky casino banking practised by the banks.

We would never know for sure, but if all banks were mutuals - run for the benefits of the savers and borrowers rather than shareholders - then perhaps the banking collapse would not have happened. The key message is that a mutual has no shareholders. The organisation is owned by the customers and any profits go back into the organisation for the benefit of the customers.

The most notorious bank in the 2008 banking collapse saga is Northern Rock: a former building society that demutualised into a bank. The last government nationalised Northern Rock to prevent it collapsing; the intention was always to de-nationalise it once the bank was restructured. The current government keeps stressing how much in favour it is with the mutual concept, so when it came to de-nationalise Northern Rock, it could have returned it as a mutual building society. It did not. In a huge show of rank hypocrisy the current government sold the profitable part of Northern Rock to Virgin at a knock down price. This is Virgin, the company who is now at the forefront of the privatisation of the NHS.

Co-operatives

A co-operative is an organisation where the employees own the company and typically they practice profit-share, so that the employees benefit from any profits the company makes. This is very different from mutual societies where the customer effectively owns the company. When this government talks about mutuals they mean employee-owned and profit-share, so they really mean a co-operative.

Politicians like the concept of a co-operative because it allows them to abrogate their responsibilities of providing public services while appearing to look good. (Inevitably, as we will see below, the Tories manage to create co-operatives and still look bad.) If a public service is turned into an employee-owned, profit-share company, it means that the government no longer has responsibility for running that service. Indeed, since the government will merely be commissioning the service (using public money) they can choose to commission someone else having no responsibility for the fate of the employees of the company they reject. If there is one thing that politicians love, it is not having any responsibility! (Labour is just as guilty in this regard. In his speech to the National Policy Forum in 2010, Ed Miliband said "I am interested in mutual solutions to some of the issues we face in our public services", without mentioning what these issues are, and how mutualisation can "solve" them.)

Profit-share is seen as some kind of magic bullet to solve the issue of productivity and motivation of staff. Inevitably it is the opposite. The problem with profit share is how do you share the profit? If there is an egalitarian policy of dividing the profit equally between all employees, then there will be complaints that some people who are more critical to the business, and contribute more to creating the profit, should get a bigger share. To address this, profit-share is often based on the salary of the employee - this is the model used by the John Lewis Partnership. The profits are expressed in terms of a percentage of the company's salary bill: so if the salaries for last year cost the company £10m and the company makes a profit of £1.5m the profit share is expressed as 15% (£1.5m is 15% of £10m). This means that every employee is then paid 15% of their salary as their share of the profit. The higher your salary, the more cash you get.

Profit share on these terms can be seen as equitable, but only if there is a relatively flat pay scale. The problem we have at the moment is income inequality: executives of companies earn many times more than the lowest paid employees. The High Pay Commission say that in 2011 the ratio of the pay of the chief executive of Barclays to the average (ie, not even the lowest paid) employee was 75 and that this has risen from a value of 14 in 1979. Thus, if Barclay's had a profit share scheme, the chief executive (already earning a huge amount of money) would get 75 times more cash than the average employee. A factor of 75 makes a big difference: for example, if £100 was paid to the average employee, then this would be less than Job Seekers Allowance for a week, yet the equivalent for the chief executive ,£7,500, would buy a small car. Indeed, if the low paid worker were to get a profit share big enough to buy that low-price car, the executive would be paid over half a million pounds, enough to buy two Bentley Mulsannes.

What About John Lewis?

The history of the John Lewis Partnership is interesting. It was created in the 19th century as a private, profit-making company. In 1929 its last owner, John Spedan Lewis, decided to share profits with his employees, and in 1950 he handed over control of the company to the employees. John Lewis is still a private company, but all its shares are held in trust. This was spelled out in 1999 by the then chairman Sir Stuart Hampson:

Responding to pressure from John Lewis staff, who are referred to as "partners" in the department store and Waitrose supermarket group, Sir Stuart said that such a sale was impossible under the partnership's constitution. "The fact is that the partnership cannot just be cashed in at the whim of one generation of partners," he says. He said it was a myth that the company is a mutual organisation that belongs to its members in the same way as a building society. "We talk about the business belonging to partners, but in fact the Partnership is owned in trust by John Lewis Trust Limited."

There was some hysteria in 1999 when it was suggested that the company could be "demutualised" with each employee receiving £100,000. A figure like that would make the most ardent supporter of employee-ownership think again. But as Sir Stuart pointed out, John Lewis is not a mutual, and so the company could not be demutualised. This fact is important because it prevents the carpetbagging that occurred in building societies.

John Lewis practices profit-share, where employees get a share (called the Annual Bonus) based on their salary. In 2011/12 John Lewis Partnership made a profit of £354m on a turnover of £8.7bn. The Annual Bonus that year was £165m or 14% of salary. This is great for Executive Chairman, Charlie Mayfield, who is reputed to earn £950,000 (so his bonus would be £133k, enough to buy him the lower cost Bentley Continental), but it would mean very little to a shop floor "partner" reputed to earn £7 per hour. Indeed, with the London Living Wage set at £7.85, the shop floor Partner is getting a raw deal, and the Annual Bonus only just pushes the hourly rate over what is considered the minimum wage for the capital (14% added to £7 comes to £7.98). There is a good argument that John Lewis Partnership should be paying their employees more salary so that they do not have to rely on the bonus to bring them up to the minimum necessary to live in London.

Unfortunately, there does not appear to be an official note of what the median pay is for a John Lewis employee. (The Evening Standard report linked above suggests that the chief executive earns 60 times the average employee income, so that suggests an average income of £15,800.) The only figure that can be deduced is the average (mean) salary taken from the 2011 annual report. The annual salary bill is £1,021.7m for 74,800 employees which gives an average salary of £13,650. This is very low and most likely results from the majority of employees being part-time.

Although this suggests that there is some controversy over how John Lewis pays its employees, it still remains that John Lewis has an interesting company structure. Every store has a branch forum with members elected from the branch. Each branch also elects a representative to sit on the Divisional Council. Further, each employee elects a member for the Partnership Council for the constituency that they are a member of (Trustees determine what these constituencies are). The Partnership Council holds management to account, influences policy and makes key governance decisions. It also elects 5 directors of the board and can sack the chairman, and it elects three trustees to the John Lewis Partnership Trust who own the company.

This level of employee democracy is unusual, but note that it does not happen through employee ownership of any kind - since the company is owned by a trust. If this government wanted to modernise Britain it could look at how John Lewis has democratised company governance. This model could be the solution to industrial strife and to corporate corruption.

What About Circle Healthcare?

Just for comparison, what about that other mutual/social enterprise/saviour of the NHS that the government keeps dishing out accolades to? I am talking about Circle Healthcare, of course. The following was taken from the Circle website in 2010:

Circle is structured as a partnership of clinicians and other professionals. Being a partner means you share in the ownership of Circle, with shareholder voting rights to help direct the company.

• 49.9% of Circle is owned by Circle Partnership Ltd, which is owned by everyone who works in clinical services, directly or indirectly and at every level.
• 50.1% is owned by Circle International plc. This is the investment vehicle that blue chip City institutional investors have subscribed to for shares by providing the capital for Circle. They ensure that any refinancing is achieved without diluting partners' 49.9% ownership.
• The investment needed to buy land and build hospitals, clinics and invest in infrastructure is raised by Health Properties Ltd, a separate business.

So, the company is majority owned by the private sector, less than half is profit-share, employee-owned. Since less than half of Circle is a mutual, and the majority of the company is private, it is fair to say that the company is not a mutual, it is a private company. A social enterprise is an organisation that has a social purpose (one could argue that healthcare is a social purpose) and that all profits are invested back into the business. It is clear that a profit-share mutual cannot be described as being a social enterprise, and since half of Circle is owned by the private sector and half by employees who profit-share, it is clear that Circle cannot be described as being a social enterprise. (As to saviour of the NHS, well we all know that Circle is part of the problem, not the solution.) Bear these facts in mind when you read the next section.

MyCSP

Now to the government's new organisation, the bizarrely named MyCSP Ltd (CSP standing for Civil Service Pension). This new company will have 500 staff who will own 25% of the business. The government will own a further 35% and the remaining 40% will be owned by Equiniti Group, a private sector "business service provider". Yet again, the mutual part is a minority, so this is not a mutual. The government calls it a Mutual Joint Venture, but the Co-operative Party, recognising that the largest part of the company is private sector, calls it a "quasi mutual private enterprise".

One interesting point, that the BBC and most of the media seem to have ignored, is that MyCSP has been given a seven-year contract to deliver the administration services of the Civil Service Pension Scheme. That means the contract will be up for renewal in 2019, one year before the end of the next Parliament. It is possible that an enlightened government elected in 2015 could ensure that the CSPS is administered by a public sector organisation (inevitably the cheapest option) or if Ed Miliband is still insists that he is "interested in mutual solutions" he could ensure that the scheme goes to a totally mutual company.

Francis Maude the Cabinet Office Minister responsible for this new privatisation says: "As a mutual, MyCSP will deliver better services for its pension scheme members, millions of pounds of savings for the taxpayer and a real sense of ownership for employees over what they do" which is the usual guff that "mutuals are better than the public sector". Further, Maude claims that there will be "annual savings of 50% over current administration costs by 2022". It is very easy for Maude to say this because his target is a decade away, and it is extremely unlikely that he will be the Minister in a decades time, so this is an aspiration to which he will never be held to account.

MyCSP is not like the John Lewis Partnership because only 25% of profits of MyCSP is shared between its employees. Since only 25% of the shares are held by employees, it is not a mutual; the largest shareholder is a private company, so it is more accurate to call it a private company. This combination of part private sector, part mutual is just like Circle.

The evidence is clear, MyCSP is more like the private healthcare company, Circle, than the John Lewis Partnership.

Lords Reform

The Parliament Act 1911 asserted the supremacy of the House of Commons over the House of Lords. Of course, at the time, since half of the population was excluded from voting in elections for the House of Commons, this is not quite the case of democracy winning over the hereditary principle and patronage, but it was almost there. Since then, there has long been a campaign to abolish or further reform the House of Lords, and these are my thoughts on the subject.

As a result of the Parliament Act (and subsequent acts) the primary aim of the Lords is as a revising chamber: the members scrutinise laws and suggest amendments. The Commons often accepts the Lords amendments, but they don't have to, at the end of a bill's passage there is a process of "ping-pong" where the Commons amend the amendments made by the Lords before passing the bill back to the upper chamber. The Lords cannot amend clauses, or whole bills, that have been designated "money bills" by the Speaker of the Commons. In addition, the Salisbury Convention is that the Lords should not block government bills that were mentioned in the government party's manifesto, although its not clear what happens in the event of a coalition: does the convention apply to the coalition parties' manifestos or the Coalition Agreement? The scrutinising of bills is very important and helps to prevent bad laws being made.

Lords reform has a long history, and there are many issue that people cite when demanding reform. Some people point to the "privilege" aspect of the Lords, saying that in a modern democracy we should not allow people to be part of our legislature merely because an ancient ancestor pleased the monarch enough to be made a Lord. The House of Lords Act 1999 partially fixed this by removing the right of all but 92 hereditary peers. The problem is that there are still 92 people in that chamber who are there because of who their father was, rather than on their own abilities. The current law says that when one of these Lords dies there is an election between the members of the Lords to determine which hereditary peer will take up the place. This partially breaks the hereditary principle on the membership of the Lords, but it is hardly democracy since the hereditary principle is used to determine the "candidates" for the vacant post.

Other people cite patronage as an issue of the Lords. The majority of members of the House of Lords are appointed life peers, and most are recommended by the political parties. The political parties naturally choose their own supporters, or (most controversially, during the time of the Liberal Prime Minister, Lloyd George) those people who gain the patronage of a political party through party donations: cash for peerages. Political party nominations are vetted by the Independent Appointments Commission and the Commission also recommends non-party political members ("peoples' peers"). Some politically appointed peers are hard-working and contribute to the revising process, but too many regard the appointment as entry into the most exclusive club in London and are never seen in debates.

The usual argument is that if the House of Lords is wholly elected then these issues of privilege and patronage will disappear. The problem with this approach is that modern politics is all about privilege and patronage. While there are some MPs who have been elected through their own hard work, there are many who were selected as a candidate in a safe seat through patronage. And there are several MPs who are the children, siblings or even spouses of MPs, and one could argue that they received their nominations as much through their family connections as their abilities: there is some hereditary principle in the Commons too!

Some single-minded ideologues argue against the House of Lords with a foghorn argument of "democracy". The argument is that in a modern country the entire legislature must be elected "by the people". This argument is enticing, but when we have a monarch, and we have a Prime Minister that is not directly elected (and can be changed without a General Election), why focus on the relatively powerless House of Lords when there are more pressing violations of the democratic principle that could be changed?

My main concern is what we will miss if we make the Lords wholly elected. The House of Lords has eight hundred members. Ninety two are hereditary and their are 21 Church of England bishops. Almost a third of peers are Crossbenchers, and have no political affiliation. This is a concept that is alien to the highly political House of Commons, because Crossbench peers amend laws without party doctrine or ideology. These are Lords who have been appointed because of what they have achieved: scientists, musicians, artists, doctors, people who have run charities. They bring to the House of Lords an expertise that a politician can never obtain.

There is a wealth of experience and knowledge in this collection of people and the expert nature of the chamber is ideal for an organisation whose main purpose is to scrutinise and amend legislation. If the upper chamber is elected it is unlikely that such people will wish to stand for election, for the simple reason that they are not politicians. The result of elections to the upper chamber is that we will merely get a mirror image of the House of Commons: politicians voting according to the party whip. Indeed, this is one of the main reasons why the political parties want Lords reform because too often the House of Lords will not conform to what the politicians tell us is best for us. If we are to revise the House of Lords we need to make it less like the House of Commons, not more like it. Some people have suggested that a different election process could be used to avoid the issue of replication. The problem is that this could mean that the upper chamber claims it has more legitimacy than the Commons because of its "fairer" election process.

I propose that the House of Lords should remain wholly appointed, but that the nomination process and the term of office should be reformed. You may think that this is against my democratic instincts, but it is not, in fact, I think that it will be more democratic because it will exclude political patronage.

First, there must be some tidying up. The new chamber should be revising only and so after reform legislation should only originate in the Commons. There should also be rules about how long bills can be delayed (currently it is one year). The new chamber should also have no hereditary Lords (or rather, none there merely because of their title).

Members of the new chamber will be by appointment, but without political patronage. The important point is that the people nominated for appointment to the House will be elected by membership organisations. The Independent Appointments Commission will determine which membership organisations will provide nominations, and these organisations will elect one of their members to the House. The appointments should be fixed term and at the end of the term, the member can stand to be re-elected (I am not in favour of term limits). There could also be a right of recall to take into account situations when a member has proven to be unsuitable, the members of the membership organisation will have to vote to enact the recall.

If the Commons has fixed term parliaments then appointments to the new chamber should be of a different cycle (so if the Commons is 5 years, the Lords appointments could be for 3 or 7 years). To keep some continuity, rather than appointing the House all in one go, the appointments should be staggered (say, a third at a time).

So what sort of membership organisations would nominate members of the new chamber? I suggest it should be a wide range, but the important point is that there is a membership. This will mean that trades unions, churches, charities and professional organisations can nominate members. The Royal Colleges of medicine will have a member each, as will the Chartered Institute of Accountants, the Institute of Physics, RSPCA and the National Trust. The Inns of Court and other lawyers organisations will ensure that there are some legal experts in the chamber. Special care would be taken to make sure that most religions have a member. In addition, organisations like the AA and RAC and sports organisations like the Amateur Athletics Association will have members. The whole point is to ensure that as wide a range of experts as possible are in the chamber.

Each organisation must hold a ballot of their members, in effect, they will do this to nominate their most expert member who will provide their knowledge of their area of expertise to make our laws better. While there will be canvassing of members, this will not be the same as politicians canvassing for votes, for the simple reason that politicians are elected for one reason only: that they are good at getting elected, whereas the members of the new chamber will be elected for their ability and expertise in a specific area.

This proposal will make sure that political patronage is removed almost entirely from the process, while maintaining a chamber of experts elected by their peers. If the range of membership organisations who provide nominations is kept as wide as possible, then it means that everyone in the country will have at least one opportunity to vote for a nomination, and this will give a democratic legitimacy to the appointment.

Official data

This is a response to a post by Anne-Marie Cunningham. I typed this as a comment on her site, but only after I finished did I realise that her blog post was two years old and so I could not add the comment. Anne-Marie's post is called Liberating information from PDFs and addresses the issue of official data presented in PDFs, and how to make it more useful.

It is remarkably easy to code Google maps to show data, the issue - as you mention - is extracting the data in a format that can be used in the Google API. (Tip: use a Google spreadsheet. If the data has geographical data you can get Google to produce the map from the spreadsheet.)  

If you search the internet you'll find that there are tools to extract tables from PDFs (for example, search for "convert PDF to Excel"). And since PDFs are actually text files you can open one with Notepad and copy the data. However, with large datasets this is a big pain and you cannot guarantee that the data in the PDF is formatted in a way to make extracting the data simple. PDF is, of course, just a markup language, its purpose is to present information, not to share data. (And yes, I have often had to copy data out of a PDF and found it a real pain to do.)

What is needed is for report writers to have an ingrained requirement that all the data they present in a report (be it a table, or a graphic) should be available online in a common format (for example, as a comma separated value file, or XML). We have data.gov.uk as a central data repository, so why not make part of that site available to civil servants as a kind of dropbox? Each dataset can be given a unique code so that the dataset will be available through a short url (eg data.gov.uk/data?id=1234567), which should then be quoted either next to the data in the report, or in a reference table later in the report. The use of a unique code like this will not make a graph look cumbersome.

If the data is made available through a (self describing) XML file then this would enable web developers to produce mashups with other data, which can provider innovative and interesting ways to view the data.

Stop! Stop! STOP!

Do you remember before the 2010 election when no one was talking about what the Tories were going to do with our NHS? Remember that? Do you remember what people were obsessed with at the time? The storm-in-a-teacup that was MP expenses. (What has happened about MP expenses? That's right, sod-all, but it served its purpose to stop us knowing before the election what the Tories really wanted to do after the election.)

Now what is happening? People are starting to get obsessed with MP's personal tax. This is yet another storm-in-a-teacup. I do not care how much tax politicians are paying. I don't. I do care whether HMRC is effective, I do care whether they have enough resources, and enough skilled staff to ensure that people are paying the tax they owe, but I frankly couldn't care less the absolute amount of tax a politician is paying. If the HMRC are effective, they will make sure that people - even politicians - are paying tax.

But the media are obsessed with this storm-in-a-teacup. It means, of course, that we will have months of the media distracted from looking at government policy. And this means that the government will get off the hook and can do whatever they like without proper scrutiny.

I have only one thing to say to anyone who thinks this new obsession is a good idea:


Stop! STOP! STOP!

NHS Stone Soup

Two things that have been very clear from the last 18 months of campaigning against the government's changes to the NHS: there are a lot of people opposed to the changes, and there are a lot of different groups campaigning. It is reassuring that so many people are against the government's policy. It is also powerful that there are so many groups, because each group has a different skill and can fight the changes in their own way. The problem comes when several groups decide to do the same thing: they duplicate effort (wasting their own scarce resources) and it can mean that the impact of their efforts is diluted. As we move into the next phase of opposition to the Act, we need to make sure that many different groups can be involved, independent of each other, but through mutual respect and sharing, they can be stronger than as a single organisation.

From now until the next election (at the latest, May 2015) everything that is wrong with NHS treatment in any part of England will be blamed on the Health and Social Care Act. In some cases this may be unfair because it may be an issue not effected by the Act, but the government has taken an attitude that everything that is good in the NHS is due to their policy, so the opposition to the H&SC Act are merely playing by the same rules: this is politics. Various organisations, big and small, are now looking into collecting information about the NHS with a view to using this information to attack the policy. So groups intend to collect information about contracts with the private sector under AQP (Any Qualified Provider), out-and-out privatisation of services, cuts in services and cases when patients received a poor, or even dangerous, service. Each of these different groups have a different focus, and each one has a "membership" with the skills to provide the information needed. On its own, each of these projects can have an impact. However, together they become really powerful.

When one group makes an effort to collect information they are understandably reluctant to allow others, who have not put in the effort, to use the information. I understand this reticence. However, when done correctly data sharing is powerful because other groups will look at the data from a different angle: some may look at the financial aspect on the taxpayer, others may scrutinise the corporate governance, others may look from a clinical perspective and others may look from the patient's point of view. All are valid, all are useful, and all need access to data.

Sharing of data does not have to involve a central organisation. Indeed, it is important that there is not a central organisation, not least because that represents a central point of failure: if the central server goes off line, no data is available. Instead, we need there to be many databases of information. However, the significant point is to ensure that data is shareable. That is, there is a machine readable description of the data, and the dataset can be read, in part or as a whole. Whenever a group decides to build an online database one of the key questions they should ask is "how can we share the data?". The single central organisation that is required is a list of the data available. Such a website would be simple: for each entry there would have to be a link to the description of the data, a link to an acknowledgements page (the user of the data must indicate whose data they have used) and a link to access the data. The data could be a web service, a raw csv (comma separated value) or XML file, or even through a Google documents spreadsheet. The data access could be to all of the data, or there could be features to allow it to be filtered. But what is most important is that the data access must be open and the data must be documented.

The power of such an approach is that it enables mashups. A mashup is where a web developer takes data from different sources and combines them. So information from a geolocation source (for example openlylocal.com) can provide constituency or electoral ward data; a database of local election votes (for example, from a local authority website) can give the majorities of the local politicians; and Hospital Episode Statistics can show the use of an NHS service in a region. All of this data could be mashedup with custom data showing, say, the volume of complaints collated from various sources (local press, NHS Choices, voluntary organisations) since a service has been privatised. The result would be a warning for local politicians about how vulnerable they are to candidates who stand on a platform to restore the NHS. The organisation who collected the complaints would still be able to use their data to make the point they want to their audience: that complaints increased after privatisation, but the mashup with other data gives another message, to a different audience.

The open source aspect of such data does not weaken the message of the organisation collecting the data. Instead it realises the potential within the data, and makes it more powerful. This is a stone soup approach: everyone contributes what they can and we all benefit from the result. In our case, each organisation collecting information make it available so that others can use the data in their own way, and ultimately, we will all benefit from our efforts by restoring our NHS to a collaborative and public system.