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News analysis: Getting into the spin-out of things

By Vivienne Russell | 30 September 2013

Public service mutual spin-outs appear to offer staff a greater say in the way their organisation runs, which in turn increases motivation. But not everyone is persuaded.

The National Audit Office recently delivered an early verdict on one of the government’s flagship projects: the MyCSP mutual. Auditors concluded that despite some early teething problems, the organisation, which administers the civil service pension scheme, was on track to deliver projected savings of 25%. 

The Cabinet Office, which has taken on the role of Whitehall’s public service mutuals’ champion, was quick to hail the NAO’s findings as a testament to the success of the employee ownership model. Giving staff a greater say over the running of their organisation leads to better quality and better-value services, it says. 

‘Public service mutuals are appearing all over the country because nurses, social workers, probation officers and other frontline staff want the freedom to do their jobs in the way they know is best,’ says a Cabinet Office spokesman. 

‘With over 70 mutuals now delivering more than £1bn of public services, we are witnessing a quiet revolution in our public services.’ 

It’s a view echoed by Iain Hasdell, chief executive of the Employee Ownership Association and a member of the Cabinet Office’s Mutuals Taskforce, which has issued recommendations on ways to boost the size and scope of public service mutuals. He says there is consistent evidence that each time a public service spins out into a mutual, service quality, productivity and staff fulfilment all increase. ‘The advantages are compelling, clear and, to those who have insights, incontestable,’ he tells Public Finance. 

Hasdell makes the striking observation that the current climate of cuts and insecurity in the public sector has helped to sharpen interest in employee-ownership models. ‘It’s precisely because people think that they can take some control of their own destiny and build a business that does protect their jobs, as opposed to waiting to be a victim of circumstance,’ he says. ‘The demand has risen almost because of austerity, which is quite an interesting trend.’ 

Talk to those working on the front line in public service mutuals, and the attraction of wresting some control of your own fate comes through strongly. 

Sam Boulton is marketing and sales manager at Aspire Sussex, an adult education provider that ‘spun out’ of West Sussex County Council in September last year. Asked what the impetus behind mutualisation was, he offers the observation that: ‘We wanted to be at the forefront of choosing our own destiny. 

‘Staff have a much greater opportunity to support the strategic direction of Aspire. It’s very different to a department within a county council because there, you’re a small cog in a big organisation, and staff tend not to see the top level of how things are running. 

‘Now that we have a staff representative group, everyone has an opportunity to put their ideas forward.’ 

At the other end of the country, operating from a base in Hull, is City Health Care Partnership, which spun out of the local NHS and into a mutual in June 2010. It employs around 1,500 people who provide a range of primary and community care services in Hull and beyond. Since spinning out, it has seen annual growth of 10% through acquisition of other services, diversification and service efficiencies. 

Chief executive Andrew Burnell, who led the spin-out process, says employee ownership offered a good way to preserve public sector values in an organisation that needs to behave like a business.

‘It’s about creating a psychological and emotional construct with the organisation,’ he tells PF. 

‘I firmly believe that our success is down to that view.’ 

Both Boulton and Burnell emphasise the greater freedom mutual status has brought to their respective organisations. Boulton points out that Aspire Sussex can now draw up and define its own procedures and guidelines, and apply for extra funding it was not able to access when it was part of the county council. 

Geographical barriers have also been torn down, and both Aspire and City Health Care Partnership have expanded operations beyond their old public sector boundaries. City Health Care, for example, recently won a contract to provide services in Knowsley, Merseyside. 

‘We have the freedom to be different and do things differently,’ says Burnell. ‘One of the beauties of this is it takes the best of the public sector and splices it to the best of the private sector. If you get the leadership right, you unlock great potential in your workforce.’ 

But other voices sound a far more sceptical note. Heather Wakefield, head of local government at the public sector trade union Unison, tells PF there is ‘very little happening’ on the mutual front in councils. 

‘Mutuals and co-ops are hugely time-intensive; they require technical resources, they require money, and most of all, they require motivation by the people involved,’ she says. 

‘There is very little evidence that our members are interested. And why would they be? They’ve seen what happens to people who have been outsourced to the voluntary and private sectors. 

‘To be honest, we’ve got the longest working hours in Europe in this country, and it requires people to put in a huge amount of their own time.’ 

Wakefield acknowledges that mutuals might have a role to play in a particularly niche service area, but she adds: ‘I can think of no reason why it should happen otherwise, or why services should be spun out.’ 

The Trades Union Congress recently joined with Cooperatives UK to warn that staff should not be strong-armed into going down the mutual path. It put forward a set of best-practice guidelines that should be followed if public sector mutuals are to offer genuine employee ownership and representation. 

But at the Employee Ownership Association, Hasdell says there is ‘no evidence’ that public service spin-outs are being forced through against the will of the employees concerned. ‘The evidence is that these are entrepreneurial employees who wish to break free and set up a business,’ he says. 

Trade union opposition can make public sectors commissioners reluctant to encourage and pursue mutual options, Hasdell notes. He stresses that for mutuals to take hold and become a mainstream part of public sector provision, it will take a radical shift in commissioning attitudes. 

‘The real key to this is changing the skill and will of commissioners,’ he tells PF. 

‘But it needs to be done at a relentless pace if it’s going to make any difference. This isn’t some minor tweaking of behaviour. It’s really fundamental.’

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