Towards a new era of mutualism

Both the Conservatives and Labour have suggested that they will introduce mutual models for delivering public services if they win the general election. Mark Johnson assesses the options.

David Cameron held out the prospect of "unleash[ing] a new culture of public sector enterprise", when he announced Conservative Party plans to give public sector workers the right to form co-operatives to run public services. Staff of services, such as primary school teachers and nurses, would decide how they were run – operating to minimum national standards.

Labour politicians were quick to accuse the Tories of stealing their clothes; earlier this year they said they were looking at ways to transpose the John Lewis partnership model to public services. The Co-op and John Lewis are lauded as good examples of how worker engagement can boost profits, slow staff turnover and build customer loyalty. This skirmish is the latest in the key battleground of public service reform in the run-up to the election.

Under Tory plans, we are told, employee-owned co-operatives would be able to decide on management structures, innovate to cut costs and improve the standard of service, and share any financial surpluses among the staff. “I know that there are millions of public sector workers, that work in our public services and who frankly today feel demoralised, disrespected, feel a lack of recognition,” said Cameron. “We will not only get rid of those targets and that bureaucracy that drives you so mad, we will give you the power in a way that is as radical as the right to buy your council home."

Emerging new models

It is clear that the twin objectives of reducing the public sector deficit and reconnecting with citizens increasingly disillusioned by current power structures are going to spawn some interesting new service models. Already, one of our clients Lambeth Council has announced plans to become a "co-operative" Council – where residents who help run services would get council tax rebates.

Lambeth hopes the scheme, based on the John Lewis Partnership business model, will save it about £30m. Under the proposals, residents could vote to turn services, such as primary schools and housing estates over to citizen-led groups. Lambeth residents would also be allowed to set up small-scale mutuals to use their personalised budgets for social care services.

Steve Reed, Lambeth Council Leader, said: “We are proposing an alternative [to Barnet’s EasyCouncil] where we can give people the tools to do the job or mutualising where we can set up something and then hand it over to the people who will use it, to run it."

However, skeptics fear the plans are really motivated by a desire to cut costs and shift difficult decisions about rationing resources down to community level. Ray Jones, professor of social work at Kingston University, said the co-operative model could provide social workers with a positive space to work autonomously. But he added: "It's sad to see a potentially good idea put at risk at a time when money is going to be reduced. This could be a way of passing on the responsibility for money when budgets are being cut.”

How would it work?

Mutual models could take a variety of legal forms. They could be true co-operatives, established as companies limited by guarantee or industrial and provident societies, where the members derive benefit from the economic success of the venture. Alternatively, they could be wholly non-profit distributing vehicles established in the public interest, such as community interest companies or even charitable companies.

It is understood that civil servants are very attracted to models where citizens would become “co-producers” of services, to reduce costs and improve outcomes. This model eschews the patrician trustee board, in favour of turning beneficiaries into co-producers. For example, a sufferer of a long-term health condition would be encouraged to partner with a community nurse and a group of peers to manage their symptoms, possibly using remote monitoring technology; similarly, harnessing parent power in new school models is said to be a way to raising attainment.

For me there are some real questions about the appetite for service users to become co-producers in this way. How do you equip often vulnerable service users to run their own show? How would you guarantee quality of provision? Do citizens not have the right to expect that public authorities will employ experts to deliver or commission these services rather than hand them an instruction manual on how to do it themselves?

Growing interest in social enterprise

My firm has seen a steady increase in enquiries from public sector managers about the options for setting up not for profits and social enterprises over the past 12 months. Much of the work we have undertaken has been in health and social care, where the right to request introduced by Lord Darzi last year has provided a clear basis for spinning out community services. There is also growing interest now from local government services as well, such as education support services, leisure, cultural services and libraries.

The attraction for many of these managers is that they can have more control over their own destiny and shape the direction of their services. Often these may be seen as “non-core” to the public sector host and by gaining a degree of independence, access to new funding streams and selling their services into a wider market, they are able to achieve a more sustainable future.

However, no one should underestimate the hard slog the innovators endure to launch the new model. It really is a rollercoaster for some – navigating the bureaucracy to gain approval to spin out – when senior managers have a vested interest in keeping the service in-house; persuading the staff to make the jump – in the face of union opposition on pension rights, which is often spun unfavourably. It requires nerves of steel and a strong determination to succeed. These pioneers are a rare breed indeed.

Mark Johnson is the managing director of specialist public services law firm TPP Law. The firm is running a free seminar on ‘Using Social Enterprise for Public Service Delivery’ in April. For more info visit tpplaw.co.uk/training.