New government, more mutuals?
Following the offical opening of the new UK parliament with the Queen's Speech yesterday, Kris Scholfield and Rebecca Hazeldine from the Public Services Team at Geldards law firm consider the prospects for mutuals over the next five years.
The mutualising of public services played a key role in the Conservative-Liberal Democrat coalition’s reform of the public sector over the last five years. But what can we expect to happen over the next 5 years?
Re-cap: what is a mutual?
The Government’s own definition is probably a good starting point. And it is worth flagging here that we are looking at a mutual in a public services sense only; the term can be used more widely to cover many different types of organisation from building societies to mutual insurers.
So, a public service mutual is essentially an organisation which has left the public sector (also known as ‘spinning-out’) but continues to deliver public services and where employee control plays a significant role in their operation.
The story so far
Backed-up by a £10 million pot of public money through the Mutuals Support Programme (MSP), the previous government once talked of a vision for one million public servants to be working in mutuals by 2015.
This proved to be an overly ambitious target and there is still some way to go. However, some good progress has been made, and by July 2014 there were 100 mutuals across England (up from the 9 in 2010) employing 35,000 people and delivering over £1.5bn of public services.
These have been established in a range of service areas including healthcare, education, children services, social care, housing and youth services, and this number has continued to grow since then with a steady stream of projects being put through the MSP and other Cabinet Office programmes.
In the run up to the last general election, all the major parties referenced the voluntary and social enterprise sectors in their manifestos to varying degrees, signalling a continued role for social sector organisations, including mutuals, in the delivery of public services.
While the Labour manifesto included some positive statements of intent, it was the current Conservative government that appeared to go further in pushing the mutuals agenda.
The Conservatives have pledged to “give more people the power and support to run a school, start their own social enterprise, and take over their own local parks, landmarks and pubs”. In supporting the role of public service mutuals in delivering better public services, they say they want to see more of them and will guarantee a “right to mutualise”.
There is little detail as to what this will look like in practice but it is likely to build upon the Right to Provide and the Community Right to Challenge by further enhancing the ability of service teams to trigger an employee-led spin-out. For this to really take hold, the government will need to make sure adequate resources are made available to deal with the likely interest from service teams and to ensure that projects move through the system quickly.
We know that there are few things as important to the public as the quality – and survival – of our public services. With cuts and tight budgets set to be prominent characteristics of the new parliament, the age of austerity lingers. It will therefore prove vital to continue to find new ways of doing things, of delivering differently. Public services need new solutions and a new wider right to mutualise might just give the sector the turbo-boost it needs. As the Minister for Cabinet Office reflected before the election “…this is just the start – there is so much more to come.”
Though not universally accepted, the apparent benefits of mutualising public services are hard to ignore. We have helped launch numerous fledgling organisations which are now seeing some of the benefits commonly associated with spinning-out: improvements in staff morale and employee engagement; better outcomes for service users; a more flexible and innovative service; leaner structures and less waste; and, last but not least, more cost-effective delivery.
Faced with game-changing budget reductions, entrepreneurial staff are increasingly attracted by greater freedoms to innovate and to design user-focused services less reliant on central block contracts.
However, the path to mutualisation is not an easy one and often has to overcome a number of technical and cultural barriers in order to see success. Issues around parent body/staff/community opposition, commissioning inequalities, access to adequate funding, negative attitudes to risk/failure/change, sustainability and job security in difficult market conditions, and potential tax consequences often require consideration in these transformation projects.
There is still some way to go until we see mutuals securing larger contracts and tackling some major service challenges. This requires large-scale resources and large investments of working capital. In order to secure larger balance sheets and economies of scale, we may see a future trend emerging whereby mutuals seek to combine their operations in group structures, much like the early housing providers did.
Despite these challenges, it seems inevitable that mutuals will continue to play an important role in public service delivery over the next five years; it has become a genuine option for redesigning public services.
This article was co-written by Kristian Scholfield and Rebecca Hazeldine at Geldards LLP. Kristian is a senior commercial property lawyer, providing guidance to clients across a number of sectors including local government, education, health and social care and the third sector. Rebecca is a solicitor in the public services team advising on corporate formations, governance and commercial contracts for a range of public sector clients in a number of areas including local government, education, health and social care and mutualisation.
Photo credit: Son of Groucho