It is now five years since Francis Maude, Minister for the Cabinet Office, expressed an intention to move a million public sector workers into new employee mutuals. Since that time the number has been 35,000 in about 100 new organisations covering £1 billion in public spending.
So is it correct, as some in local government are, to write off public services mutuals (PSMs) as ‘one of those glamorous ideas that comes along now and again’ as APSE’s Paul O’Brien said in MJ (16/4/15)?
I would say no for three important reasons. Firstly, many of the new mutuals are coming from local government. Libraries in York and Suffolk. Social care services in Warrington, Leeds and Salford. Museums in Wrexham. Park Rangers in Wycombe. School Support Services in Hammersmith and Fulham. Youth Services in Kensington and Chelsea. Examples abound in every area of council activity. Mutuals may be few in overall number but they are often proving the business model of choice because the traditional alternative delivery vehicle, Local Authority Trading Company (LATCO) cannot make the numbers.
Take Suffolk Libraries which were formerly inside the County Council on which I served as a Member. A LATCO was considered but the numbers just didn’t add up. Now a mutual, with a far better business model and far greater community engagement it has been able to absorb dramatic cuts while not closing a single library.
The local government sector is now replete with PSMs that can tell similar stories. It is wrong to say that the evidence isn’t there. It is just often that people, for their own reasons, don’t want to see it. Leading Lives, another Suffolk success-story, has saved hundreds of thousands of pounds for the Council since its inception three years ago. Operating learning disability services of £6m, Leading Lives has taken out costs, over-achieved on the targets set for it by commissioners and grown new business. Again, its new freedoms and operating culture are cited as reasons. Not being controlled by the Council appears to be a big factor in its success. Colin Noble, Conservative Leader of Suffolk County Council, calls the four big public service mutuals set up on his watch as ‘a massive success’.
The second reason not to write mutuals off is that some of the barriers to formation are being swiftly dismantled. New procurement regulations now make it possible for Councils to set up mutuals without competition when total contract value is less than £650,000. And where contracts are larger it is now possible, in many areas of Council services, to limit competition to social enterprises and non-profits. The red tape which entangled the first generation of councils setting up mutuals is rapidly being cut away.
The third and final reason to believe that more and bigger mutuals are to come is that are growing numbers of mutuals with the ambition and financial backing available to incubate new PSM companies that can operate as joint-venture partners with Councils. The best known example is GLL (formerly Greenwich Leisure) which started running leisure centres in South East London a couple of decades ago and is now a £120m business operating leisure and library services across the UK under the brand name ‘Better’.
So what about after the General Election? Future government policy is likely to be about enabling GLL and others like them to bring new investment and opportunity to Town Halls across England and Wales. Children’s Services, which remain mostly in-house are an early target for some ambitious PSMs like the Albion Group of Companies (CIC) which is keen to introduce new approaches, fresh investment, better governance and a more empowered culture. Government policy is gearing up to enable big-ticket services to move to a mutual model and to offer support to Councils seeking to make this happen.
While Francis Maude may not have achieved his dream of a million public sector workers in mutuals, what he certainly did was set up a bunch of businesses that are available to meet the challenges arising from the forthcoming years of austerity in local government. This difficult period will, I believe, test the limits of the LATCO model (which often struggles to bring about real change). It will also create a new requirement for big public service operators who can deliver at scale while also sharing a public service value base. Councils I speak to do not trust the global outsourcers when it comes to front-line services. But neither can they carry on as they are or with in-house quasi-commercialism. They are looking for something else.
Those who write off the mutual model may well, for all of these reasons, be speaking too soon.
Back to stepping out now