Whitehall urged to boost mutuals programme

29 Oct 12
A member of the government’s Mutuals Taskforce has said some Whitehall departments need to do more to back employee-owned firms that could provide public services.
By Richard Johnstone | 29 October 2012

A member of the government’s Mutuals Taskforce has said some Whitehall departments need to do more to back employee-owned firms that could provide public services.

Iain Hasdell, chief executive of the Employee Ownership Association, told Public Finance that some departments were ‘doing a wonderful job’ promoting employee-owned firms. But he singled out the departments of transport, education and defence as lagging behind some of their Whitehall counterparts on mutuals creation.

The government has launched a ‘pipeline’ to help develop employee-owned mutual companies, and Hasdell said both the departments of health and local government have ‘a strong pipeline of mutuals already under way’.

Among the recent spinout proposals is a plan for Cleveland Fire Brigade to become employee-owned.

However, a report by the Mutuals Taskforce published in June urged all government departments to ‘set out a clear plan and vision for developing and implementing a mutualisation policy’ by December this year.

Ahead of this deadline, Hasdell said there was still a need to ensure ‘all departments of state are getting to the same stage in having the same pipeline’ of mutuals.

He added: ‘There’s not so much of a pipeline in education, transport or defence, and [the recommendation] is about supporting the momentum right across government, building on what’s already there in local government and health.’

Hasdell also urged the Department for Communities and Local Government to provide extra financial support for spinouts from councils as it develops its plan.

Stressing he was ‘very supportive of what the government is doing’, Hasdell added: ‘One additional ingredient I would be particularly keen to encourage is more seed funding to pump prime mutuals.'
 
This would help ensure that emerging employee-owned companies have ‘better balance sheets’ that could protect them from the risks of bidding for new work.

‘One of the dangers [to mutuals] is their lack of working capital – they can be so dependent on one contract that some additional help on balance sheets would help them early on.’

He also revealed that the public sector ‘knowledge’ of how to set up mutuals within European Union procurement rules was growing, which could provide greater security to new firms.

The June Taskforce report raised concerns that a lack of ‘clarity’ around EU public procurement rules made it difficult to support newly formed public service mutuals.

However, Hasdell told PF: ‘More and more people [launching mutuals] are getting longer contracts, clear of competition, than a few years ago, as the knowledge has grown on how to do it.’

This story was first published in the November issue of
Public Finance magazine
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