Council services targeted for mutuals
By Richard Johnstone | 25 June 2012
Many local authority services are ‘obvious candidates’ for being taken over by employee-owned firms, the government taskforce on public service mutuals said today.
Its report recommended a series of changes to increase the number of companies spinning out from the public sector. Chair Professor Julian Le Grand said mutuals should be ‘a mainstream option for public service delivery’.
He recommended that five government departments, including the Department for Communities and Local Government, produce a plan by December to increase the numbers.
The Cabinet Office has defined a mutual provider as one that is at least 25% owned by the staff. The next steps report found that the number had increased six-fold since the government set up a Mutual Support Programme when it came to power in 2010. Le Grand said there were now 58, with another 40 in the pipeline, showing this was ‘no Utopian fantasy’.
These firms were improving services, primarily in health and social care, Le Grand said, but further reforms were needed.
The Mutuals Taskforce wants an independent arbiter to decide the feasibility of any business plans for proposed spin-outs that have been turned down.
Le Grand said that the ‘right to challenge’ in the Localism Act, which is intended to let council workers run services where they believe they can improve them, provided the ‘beginnings’ of mutualisation policy.
‘The DLCG was the obvious candidate [for further action] because many of the services they are concerned with are local authority run or controlled – adult social care, youth services and so on. The DCLG was a very obvious one to concentrate on.’
The report also called for new mutuals to be free from European Union procurement regulations, requiring competitive tendering, for at least five years.
Le Grand said: ‘Mutuals deliver higher quality services at lower cost to taxpayers. But we simply cannot rely on there being enough exceptional leaders to make this a mainstream delivery option. The path to mutualisation must be made easier.
‘We are calling for change inside the public sector. The will to develop mutuals and improve public services is there at the very top of government and on the frontline. But too often there is a gulf in the middle where risk-averse managers, ignorant of the benefits, impede progress.’
Cabinet Office minister Francis Maude said the taskforce made ‘good recommendations’ that the government accepted. He added that there was a lot of scope for mutuals, in both Whitehall departments and the ‘wider public sector’.
He added that as local authorities commission a greater number of services, mutuals could play ‘a very strong part’ in local provision.
‘Certainly in the local government sector there’s a lot of scope and a lot of interest from councils that see this as the way of squaring the circle of restricted funds and demand for better services,’ he said.
‘The public sector workers decide themselves to spin out on a contractual basis, and that’s a very attractive option. If a decision has been made by a council to commission from outside, then mutuals get a leg-up.’
Maude also backed the idea of a temporary exemption from EU procurement rules, saying they were often used as ‘an alibi’ not to back mutuals. He added that EU commissioners were ‘engaged with the idea of creating a temporary exemption’ for new mutuals.
‘You can take a mutual out and negotiate a contract rather than it being immediately open to competition, as long as there’s competition down the track,’ he said.