Going Mutual?

Mutualisation in the public sector, the process by which services are “spun off” and converted into independent mutuals, has received rather a lot of attention of late. Beginning with Department of Health work on encouraging the establishment of mutuals in community health under New Labour (Le Grand, 2012), the potential of ‘new mutualism’ (Birchall, 2001, p.6), and the current government’s desire to promote it, seems ever increasing. This drive to see more local and central government services become mutuals has so far spawned a dedicated Mutuals Taskforce (Gov.UK, 2013) and numerous well documented case studies (Cabinet Office, 2013a). But what are public service mutuals? And why are they suddenly so in demand?

What is a mutual?

Mutuals can take a variety of forms. They can be social enterprises or co-operatives, entirely staff owned or joint ventures with private or third sector organisations or the wider community. What all mutuals have in common is the absence of external shareholders (Needleman and Westall, 1991, p.323) and a high degree of employee control over management of the organisation (Le Grand, 2012).

In the UK, employees of public sector owned services have the right to request permission to become a mutual from their commissioners or local authority (Cabinet Office, 2013b). Provided that they have a strong enough business plan and support from key stakeholders, an agreement may be reached whereby they become an entirely separate entity, devoid of public sector control. In this position they are required to operate like any other independent business; competing for contracts and funding streams and developing and delivering services for which there is demand (Cabinet Office, 2013c)

Why Mutuals?

The theory behind this sudden demand for mutuals is simple; staff delivering services know best when it comes to creating improving the efficiency, effectiveness and outcomes of services (Gov.UK, 2013). Releasing them from unnecessary interference from the public sector will allow them to harness this potential. Furthermore, due to the fact that they are employee led, mutuals are perceived as more likely to be concerned with staff well-being and thus provide better employment conditions than their corporate or public sector counterparts (Bach, 2012, p.405). In short mutuals theoretically represent significant benefits for service users (through improved outcomes), for commissioners (by offering greater value for money) and employees (through improved work-place conditions) (Mutuals Taskforce, 2012, p.11). Consequently, as illustrated by Bach (2012) mutuals fit nicely into both the Coalition Government’s Big Society agenda (aimed at rolling back the state and empowering communities) and push for value for money in the face of austerity measures.

The websites of the Local Government Association (2013) and Mutuals Taskforce (Cabinet Office, 2013a) abound with case studies illustrating the success of public service mutuals and handy guidelines to aid employees establishing their own. But, if mutuals are so uncomplicatedly, well, brilliant, why are there still so few of them?

The Downsides                                                          

Like any policy that seems too good to be true, there are of course numerous potential downsides. First and foremost is uncertainty (Bach, 2012, p.407). Becoming a mutual leaves a public service open to market forces it may have been shielded from as part of the public sector. In this environment it’s compete and win contracts and funding, or fail and fold. Mutuals may find themselves subject to intense competition from existing, more established providers and takeover attempts from larger companies (Whitfield, 2012).  Voluntarily moving from a position of relative security to one so open to external threats is not necessarily the most attractive of job prospects.

Employees also require very different skill sets when working in the public sector to running their own enterprise. An obvious element is managerial capacity, particularly when negotiating and implementing complex contractual arrangements such as payment by results frameworks (Bach, 2012, p.401). Another is Human Resources expertise. When operating in house, services have access to specialist HR services, when going it alone, however, they will have to acquire/develop this knowledge themselves (Michie, 2012, p.9). Where they choose to pay for such services, potentially from local authorities themselves, the complete employee-ownership so valued in the theory surrounding mutuals, is undermined (ibid).

The complexity and size of the service in question also presents challenges. As of the 30th April 2013, there were approximately 70 public service mutuals in the UK, the majority of which were derived from niche, specialist or small scale services (Farrow-Smith, 2013). The bigger the service, the harder it is to get a significant number of staff members to sign up to the idea of forming a mutual and then actually deliver the service when detached from the public sector. Consequently attempts to charm larger services into the mutualisation process have largely been unsuccessful.

Finally there are fears in parts of the public sector that the mutualisation agenda will lead to little more than further privatisation of services (Bach 2012, p.407), (Civil Service World, 2012). Where mutuals fail it’s a pretty safe bet that the private sector will step in to take over. Additionally, the few large scale mutualisation projects to date under this government have been marked by high private sector involvement. The MyCSP (administrators of civil service pensions) journey to mutual status saw 500 public sector staff being transferred to the private sector Equiniti Group, something which caused concern amongst public servants (Bach, 2012, p.408).

These issues may well explain why only 16% of civil servants in a recent Civil Service World survey expressed an interest in launching a mutual (Civil Service World, 2012).

Conclusions

Mutuals may well represent a more efficient and effective means of outsourcing public services. There are certainly many case studies to date that illustrate the successes that can be achieved by these organisations. However, it is far too soon to tell whether this push for mutualisation of public services will lead to the widespread efficiency savings, improved outcomes and working environments envisaged by government, or widespread failure and continued privatisation. What is clear is that those in public services considering going it alone need to take a good long look at the skills and capacities needed to run a stand-alone service, the nature of the market they are entering, their competitors and whether they and their service would, in practice, be any more efficient outside the public sector than in.

Bibliography

 

Birchall, J (2008) The ‘Mutualisation’ of Public Services in Britain: a critical commentary, Journal of Co-operative Studies, 41(2):5-16

Cabinet Office (2013a) Public Service Mutuals in Action, [Online] Available from: http://mutuals.cabinetoffice.gov.uk/public-service-mutuals-action [Accessed 02 May 2013]

Cabinet Office (2013b), Testing Your Ideas and Getting the Agreement of Stakeholders [Online] Available from: http://mutuals.cabinetoffice.gov.uk/how/testing-your-ideas-and-getting-agreement-stakeholders [Accessed 02 May 2013]

Cabinet Office (2013c), Securing the Future – Making it Mutual! [Online] Available from: http://mutuals.cabinetoffice.gov.uk/how/securing-future-making-it-mutual [Accessed 02 May 2013]

Civil Service World, (2012) Exclusive: Mutualisation Appeals to 16% of Officials – but 69% Opposed, [Online] Available from: http://www.civilserviceworld.com/exclusive-mutualisation-appeals-to-16-of-officials-but-69-opposed-2/ [Accessed 02 May 2013]

Farrow-Smith, D (2013) One Year on: Five Lessons for Public Service Mutuals, The Guardian, Tuesday 30 April 2013 [Online] Available form: http://www.guardian.co.uk/public-leaders-network/2013/apr/30/public-sector-mutuals-five-lessons [Accessed 02 May 2013]

Gov.UK (2013) Start a Public Service Mutual, [Online] Available from: https://www.gov.uk/government/get-involved/take-part/start-a-public-service-mutual [Accessed 02 May 2013]

Le Grand, J. (2012)’ The Public Service Mutual: A Revolution in the Making?’ in Making it Mutual: The Ownership Revolution that Britain Needs, Julian, C. (ed) [Online]: Respublica, Available from: http://issuu.com/respublicatrust/docs/making_it_mutual_the_ownership_revolution_that_bri [Accessed 02 May 2013]

Local Government Association (2013) New Modes of Delivery: Including Mutual Spinouts [Online]

Available from: http://www.local.gov.uk/web/guest/home/-/journal_content/56/10171/3649476/ARTICLE-TEMPLATE [Accessed 02 May 2013]

Michie, J. (2012), Mutual Advantage? The Future Implications of Mutualism for Employment

Relations, London, ACAS, [Online] Available from: http://www.acas.org.uk/media/pdf/p/t/Mutual_Advantage_The_future-implications_of_mutualism_for_employment_relations.pdf [Accessed 02 May 2013]

Mutuals Taskforce (2012), Public Service Mutuals: The Next Steps, London, The Cabinet

Office, [Online] Available from: .http://mutuals.cabinetoffice.gov.uk/sites/default/files/documents/Public%20Service%20Mutuals%20next%20steps.pdf [Accessed 02 May 2013]

Needleman, P. and Westall, G. (1991) Demutualisation of a United Kingdom Mutual Life Insurance Company, Journal of the Institute of Actuaries, 118(3): 321-399: P.323

Whitfield, D. (2012) ‘Chapter 9: Contracting the Big Society’, in In Place of Austerity: Reconstructing the Economy, State and Public Services, [Online] Available from: http://books.google.co.uk/books?hl=en&lr=&id=T6CNTJIXqeIC&oi=fnd&pg=PT1&dq=In+Place+of+Austerity:+Reconstructing+the+Economy,+State+and+Public+Services&ots=FcDbDWJJaf&sig=ZLUAhQTKYifDMVl-0hlRI6kutfU#v=onepage&q=mutuals&f=false [Accessed 02 May 2013]

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