Mutuals bring relief after the public sector moratorium

The public sector landscape is likely to be dominated by mutuals in the future.  In this guest blog, John Pendlebury-Green and John Jones of Landseer Partners discuss the outlook for service providers in this mutualised world and argue that their approach must be both innovative and flexible.

Last year was a difficult one for service providers to the public sector given the moratorium and general economic slow-down.  Despite a relatively slow start 2011 is looking significantly brighter for existing and new entrant market players.  The Government’s plans to achieve cost savings, develop mutual organisations, and use SMEs and the third sector to develop new ways of delivering services, are moving rapidly from theory to reality.  So, with the white paper on Open Public Services due out in July, now is the right time for both large and SME service providers to look at themselves and work out how they should be playing in this new world.

We wrote about the concept of mutualisation in early 2010. It has taken the Government longer to get to this point than we expected but the number and variety of public sector organisations looking at mutualisation in one form or another is impressive. The opportunities are starting to appear: from Camden Council looking at how all of its services can be delivered to Cleveland Fire Service receiving approval to finalise a business plan and a structure to establish an employee-owned mutual.   In central government the announcement that My Civil Service Pension is going to be placed into a mutual joint venture is the first major “spin out” of a central government service giving employees the opportunity to take a stake in their business.

So with Francis Maude now talking about an expectation of up to a million public sector workers being in mutual organisations by 2015, the scale of the government’s ambition for mutualisation is clear.  With these types of numbers being talked about it makes it obvious that a one-size-fits-all approach by service providers is doomed to fail.

Our view is that service providers, including possible new entrants, will need to invest time and money now by discussing with existing and new clients the art of the possible: what can be achieved in setting up mutual organisations in order to deliver jointly and successfully services that will provide the right outcomes to the customers of the mutual.

This is most likely to be in the form of working with the public sector organisation to help define the vision and outline structure, and identify the stakeholders – from users to the Cabinet Office – who need to agree the idea.  Then the service provider is ideally positioned, given its private sector experience, to help develop the business plan.  The plan needs to cover the services to be provided, the market opportunity to provide additional services and the resourcing and finances needed to make the new business work.

How this works in practice will be closely examined and no doubt later mutuals will learn from any mistakes in setting up the initial ones.  So the success of the pathfinder mutuals and high-profile examples such as My Civil Service Pension will examined very carefully.   It is clear that how the successful private sector service provider and any third sector organisations become part of these new entities, and how the governance, structure and profit share will work, will set the tone for subsequent mutuals.

Now at mid-year in 2011 it is still early days for new ways of working with the public sector.  If events to date have not spurred service providers to action the July white paper should certainly do this. Either this, or the significant number of re-tenders now coming onto the market, should provide some welcome relief compared to the slow down in 2010.

For more details, read the white paper or visit Landseer Partners’ website

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