Liz Kendall’s policies could lead to back-door privatisation, warns Co-operatives UK chair

The leadership contender is keen to turn public services into mutuals

Liz Kendall, one of the candidates for the Labour leadership election (PA)

Liz Kendall’s ideas about reforming the economy by promoting co-operatives are vague and could lead to back-door privatisation, the head of the UK’s co-operatives federation has warned.

Nick Matthews, the chair of Co-operatives UK, praised Ms Kendall for consistently raising the issue of more economic democracy but warned that a badly designed policy could lead to public services being sold off.

“To be fair, Liz Kendall, a Co-op Party member, has talked about co-ops from first being elected,” he told the Morning Star newspaper, praising a chapter of a book she had written on the subject.

“However these ideas are rather vague. Getting venture capital out of services like adult social care is a key objective, but the devil is in the how.

“There are co-op options but they require legal definition and changes to procurement rules to stop them being a staging post to privatisation. In order to work her ideas need much firmer foundations.”

Labour leadership hopefuls: Andy Burnham, Yvette Cooper, Jeremy Corbyn and Liz Kendall (PA; Getty Images)

The leadership candidate says she would hand power to people by promoting cooperative working practices in public services. She has also called for employee representation on the boards of companies.

Ms Kendall has written about her ideas for co-operatives in public services in a chapter for a book published by the think-tank Policy Network in 2014.

She wrote an article for the Morning Star newspaper today arguing that her economic policies would change the basis of power in the UK.

"Only by radically changing where power lies will we make Britain a more equal place in which to live," she wrote.

"I want to revive the Labour tradition of people power, taking us back to our party’s roots in trade unions, co-operatives and mutuals. I want to give voice to millions of people who see the changes they want to make in the world but feel powerless to do so. And I want to see workers having a far greater say over and stake in the companies they work for."

Under the Coalition similar policies of public sector mutuals were promoted by the Government, most notably health minister Norman Lamb.

Co-operatives come in two broad flavours: workers’ co-operatives and consumer co-operatives.

In workers’ co-operatives employees own and run the firm on an equal basis rather than shareholders; in consumer co-operatives people who use the service provided by the firm have some stake in its running and own it collectively.

Co-operatives UK is the main national member organisation for co-operatives and is entirely separate from the well-known Co-operative Group chain of grocery stores and other services.

Ms Kendall is one of four candidates for the Labour leadership election. The others are Jeremy Corbyn, Andy Burnham, and Yvette Cooper.