Will Tanner: Mutuals require clarity and guidance if they are to change the public service landscape

Will Tanner is a Researcher at Reform.

The Government has made the creation of public sector mutuals a cornerstone of its public services reform programme. Last month the Cabinet Office announced the creation of eight new Pathfinder Mutual organisations in addition to the existing twelve launched in August. 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.

Yet this ambitious attempt to open up public service delivery and give public sector employees a stake in the ownership and governance of service providers faces significant barriers to success. A recent Reform roundtable seminar explored the opportunities and challenges presented by these new models for public service delivery. It was Chatham House, so contributions are anonymised. But what came out of this was a complex of worries – 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.

Of course, there is a good deal of evidence about how well employee-owned companies can perform. The employee-owned organisations and service providers represented around the table advocated the significant improvements to productivity, efficiency, and both user and employee satisfaction made possible through employee ownership. A significant body of academic evidence supports this view, with some studies suggesting that giving staff a stake can boost productivity and lower staff turnover.

Firstly, the mutualisation of a service cannot be about merely changing the name plate above the door. What form of employee ownership these new structures will take, and whether they will be governed by existing or new management teams, is crucial. The emphasis on employee culture, engagement and commitment is integral to the mutual model, and current lack of awareness of the many distinct types of employee ownership There are serious question marks around whether the new generation of mutuals will have the culture, expertise and resources necessary to make a real difference to public services and whether the frameworks they require are yet in place. In this respect, the pace of change will be tricky.

Secondly, the role of competition was seen to be axiomatic, yet subject to mixed messages from Whitehall. The “John Lewis model”, often lauded by proponents of employee ownership, exists in a fiercely competitive consumer retail market on which much of its success is built. Competition for government contracts is clearly a different proposition. More to the point, a spin-out or privatisation is not automatically the same thing as competitively tendering for service delivery from a range of independent entities. What we certainly don’t want to do is create a new generation of mutual monopolies would fundamentally undermine the message of public service plurality presented by David Cameron. As the Prime Minister wrote last month “public services should be open to a range of providers competing to offer a better service”.

For mutuals to be able to compete effectively for government business a better commissioning framework will be needed – especially in terms of commissioning that is blind to everything but value. The Government must therefore halt its policy of skewing delivery in favour of charities, mutuals and cooperatives to allow such organisations, and the services they provide, to benefit from real competition. As Reform argued in its February report, Reform 2011 Scorecard, the Government must stand by its commitment, set out in the Cabinet Office draft structural reform plan to “creating a level playing field”.

The development of new vehicles for public service delivery and the proliferation of employee ownership models of organisation promise a step-change in the productivity, efficiency and user satisfaction of public services. But for mutuals to revolutionise the way in which services are delivered there needs to be direction and support around the frameworks, culture and expertise needed for their success and clarity over commissioning and competition in the public service landscape.