The Conservatives have relaunched their commitment to allowing public-sector staff to opt out of their current employment and sell their services back to the taxpayer through John Lewis-style co-operatives or social enterprises.

George Osborne, the shadow chancellor, said on Monday this would be “as big a transfer of power to working people since the sale of council house homes in the 1980s”.

He added: “We are saying to public sector workers: ‘If you want to, and only if you want to, you can create employee-led co-operatives and you can run state services, paid for by the taxpayer.’”

The move left Labour – which already offers NHS staff a “right to request” to form social enterprises, with 20 pilots pushing towards that status – floundering for a response.

Ed Balls, the schools secretary, said: “The Tories don’t get co-ops.”

He claimed that co-ops were about the whole community, not just workers, and the latest “smokescreen” did not hide the fact that “the Tories would cut frontline services”.

The Conservatives’ renewed commitment – first announced in 2007 – was welcomed by the Social Enterprise Coalition, the body the government helped set up as long ago as 2002 to promote social enterprises across the board, including the provision of public services.

While the sector remains small, social enterprise and co-ops have made an expanding impact in social care, social housing and offender management, while some council leisure services are run by co-ops.

But one of the biggest prizes for social enterprise – the NHS, where some £10bn worth of community services are part of a potential market for co-operatives and the private sector – has seen much slower progress.

To date, the only big opt-out by NHS staff has been Central Surrey Health, where 700 district nurses and therapists formed a social enterprise three years ago. A small number of GP and dental practices operate as social enterprises. Their role as a vehicle for staff to opt out was thrown into doubt when Andy Burnham, the health secretary, declared that NHS-run organisations were the “preferred provider” of NHS care.

With the Conservatives wanting to open up staff co-ops to job centres, schools and other areas of the public sector, Ceri Jones, head of policy at the SEC, said political uncertainty and issues with terms and conditions have been barriers to progress. The fact that recruits will not be guaranteed public sector terms also “leaves those thinking of doing this concerned that their ability to recruit may be limited in future”.

Unison and Unite, the two big public sector unions – although they have substantial memberships in the voluntary sector – have argued that social enterprises will lose out to for-profit operators when contracts are retendered. In the NHS in particular their opposition “has had an undoubted impact on staff, and some have withdrawn their right to request”, Ms Jones said.

The Tories claimed that allowing co-ops to enter joint ventures with the private sector would give the idea momentum and help provide access to capital. But there is currently little or nothing to prevent social enterprises working with the private sector.

Most Labour cabinet members support a broad co-operative ideal. But there are differences over how to apply it across the public sector, and how far staff can share any surplus.

Q & A

What has been announced?

The Conservatives have entered – or more accurately re-entered – a crowded political field by advocating co-operatives, or social enterprises, to run public services. The Liberal Democrats have long favoured social enterprise and for the better part of a decade Labour has been encouraging the idea, but with patchy results.

What are the Tories proposing?

Allowing public sector staff, whether community nurses, teachers or those in job centres or social work, to quit public sector employment while contracting their services back as a not-for-profit social enterprise or John Lewis-style co-operative.

Staff would, at least initially, be barred from taking assets with them and they would have to comply with national standards. The move is intended to unleash creativity among staff, who could set their own pay rates, with co-ownership producing more commitment and willingness to tackle poor practice. Joint ventures with private sector partners would be permitted.

What do critics say?

Some will argue this is no different from Labour’s policy of allowing NHS staff a “right to request” to form a social enterprise – an approach that, 18 months in, has seen only some 20 groups of workers reach that stage of the process.

Social enterprises have been successfully spun out of some parts of local government – including social care and social housing – with about 30 per cent of leisure services run by social enterprises. But despite the existence of a £100m fund and a social enterprise unit in the health department for more than three years, progress with spin-outs – as opposed to the creation of small health and social care enterprises, which then contract to provide taxpayer-funded services – has been snail-like.

Access to capital is a recurring problem. And in the NHS, only recently has it finally been agreed that staff who transfer – though not new recruits – can stay in the NHS pension scheme, which is worth about 25 per cent of pay. The public sector unions such as Unison and Unite are actively opposing social enterprises running public services, arguing it will lead to privatisation by the back door as social enterprises lose the service when it is retendered.

FT verdict

Like motherhood and apple pie, it is easy to be in favour of social enterprise. Its role has been slowly growing. But Labour has found it hard to find top-down levers to support the bottom-up initiative that staff need to get a business going. It is not clear the Conservatives have any new ones to offer.

Copyright The Financial Times Limited 2018. All rights reserved.

Comments have not been enabled for this article.