Headlines: March 24th, 2011

Public service employees are being encouraged to form mutuals to deliver services to fulfil the Government’s aim of creating innovative alternatives to public service delivery and promoting the Big Society by supporting people to stand up and do something about the problems they see. Measures to widen the appeal of mutuals to employees and to encourage their development are likely to feature in the forthcoming Open Public Services White Paper.

Widening the range of providers to deliver public services is a key feature of the Government’s blue print for reform. While most of this widening will come from greater involvement of the private and voluntary and community sectors, it is expected that there will be a significant role for mutuals. See Public Service White Paper Delayed – So What Does The Future Hold.

Mutual organisations do not have external shareholders and they are controlled by their members. Members may be users of the mutual, employees, other stakeholders or a combination of these. Mutual organisations are either owned by and run in the interests of existing members, as is the case in building societies, cooperatives and friendly societies, or – as in many public services – owned on behalf of the wider community.

Mutuals differ in ambition and in the type of services they provide. They range from NHS staff wanting to launch an employee-owned social enterprise to help homeless patients, to employees from local authorities getting together to form a mutual to deliver children’s services, and further education colleges coming together to see if they can set up a new awarding body.

The Government has made the creation of public sector mutuals a cornerstone of its public services reform programme. In November 2010 the Cabinet Office announced the creation of eight new Pathfinder Mutual organisations in addition to the existing twelve launched in August. At the same time the Mutuals Information Service was launched to provide a signposting service for staff in the public sector interested in setting up a social or mutual enterprise. The service is operated by Local Partnerships, Co-operatives UK and the Employee Ownership Association.

Employees now have right to form employee-owned mutuals to help them deliver better services in partnership with the communities in which they work. Cabinet Office Minister Francis Maude has predicted that by 2015 up to one million current public sector workers, 15 per cent of the existing workforce, will be employee owners and partners in mutuals delivery public services.

The arguments in favour of mutuals are that smaller organisations are usually better at preserving creativity and innovation while larger organisations get bogged down with processes put in place to control a larger staff group. A small team can keep hold of the reins by simply shouting over the desk to one another, making decisions very quickly and then acting rapidly. Services tend to be more personalised and bespoke which brings with it an increased ability to manage demand i.e. spotting when a service user doesn’t actually need what they think they need. This type of creative and responsive way of working can deliver both better services and increased savings that go far beyond any overhead economies of scale delivered by a large organisation.

But there are also concerns about mutuals. Serious questions have been raised about whether they have the culture, expertise and resources necessary to make a real difference to public services. There are doubts about whether these organisations will be truly different to the ones they are replacing and whether the public service reform framework is constructed in the right way to deliver maximum value. The mutualisation of a service is not merely about changing the name plate above the door.

There is also uncertainty about the form of employee ownership these new structures will take, and whether they will be governed by existing or new management teams. There are also serious question marks about whether the frameworks they require are yet in place.