Co-operating for job creation

Our EU partners are backing social enterprises as a solution to public-sector problems. Paul Gosling looks at Britain's stance

Co-operatives and other social enterprises can create many thousands of new jobs while providing welfare services that governments cannot afford, according to a senior Spanish government minister.

The comments of Jose Martinez, the Minister for Work and Social Security, at a European Union conference last month were widely interpreted as a veiled attack on the British and German governments, which have blocked greater EU support for social enterprises.

Mr Martinez, who opened the conference in Seville on the social economy, said: "We are looking for a solution for public-sector problems and for job creation. The social economy is a major sector for solving problems of this kind, to provide care and social services, righting wrongs and fighting crime. We are looking for new mines, new seams for employment."

He added that the Spanish government was giving practical support for social enterprises and changing legislation to promote them. "They should be able to operate transnationally on an equal basis with other businesses," he said.

The European Commission established a Social Economy Unit in 1989 within the small and medium-sized business directorate specifically to lift barriers that prevented co-operatives and other member-owned businesses operating across EU states.

Toby Johnson is employed within the unit on secondment from the Industrial Common Ownership movement, the British body representing workers' co-operatives. He said that while smaller businesses faced disadvantages in trading across Europe this was even more true for social businesses.

"They have particular problems because of the legal structures," he added. "If you want to form a transnational co-operative, there is no structure to do that. In Denmark, for example, there is no co-op structure in law. That issue is still not resolved because of the position of some member governments."

Britain and Germany have been the leading opponents of moves to develop the social economy across Europe. In Britain the sector faces imminent decline with the conversion of member-owned building societies into public companies. Elsewhere in Europe, according to a European Commission survey, social enterprises are of increasing economic importance. There are 370,000 mutually owned enterprises across the EU employing 6.4 million people, with the largest 500 societies increasing their employee numbers by 7 per cent between 1988 and 1992 at a time when the recession was causing conventional businesses to lay off staff.

There is a long tradition of co-operatives in Italy and Spain, partly because of more favourable legal and fiscal treatment in return for which, on dissolution, all assets are handed over to the government to disperse. Co-operatives tend to be labour intensive and are therefore seen as a low-cost means of job creation.

Northern European countries with strong social democratic political traditions are also promoting co-operatives. In Sweden social enterprises, mostly financial co-operatives, are responsible for 20 per cent of economic activity and child-care co-ops have grown in number from 150 to 1,400 in 10 years. The Swedish government recently launched an inquiry into what barriers could be lifted to encourage the development of co-operatives. The sector is also expanding in Japan and in the United States where many hospitals are member-owned.

Labour MEPs have been strongly supportive of the work of the EC's Social Economy Unit and should the Labour Party form the next government it is likely to draw on the experiences of member states as diverse as Italy and Sweden to promote the sector in Britain.