By David Bicknell
One of the Government’s flagship employee-led mutual Pathfinder pilots is now expected to be launched in January 2012 and be up and running by Spring next year.
The mutual, which is being led by the London Borough of Hammersmith & Fulham, but is part of a tri-borough business model with Kensington and Chelsea and Westminster, will have ‘social enterprise status’ and will deliver existing education support services to schools and some services back to the Local Authority.
A recent report on the mutual plan published by Hammersmith & Fulham proposes a pilot scheme to set up an employee-led mutual to deliver services to schools and the council (with the council commissioning some services from the mutual for a four year period). These services are currently delivered by schools resources division within the Children’s Services Department. The pilot proposal follows the council’s five stages of transition for staff wishing to develop so-called “New Ways of Working.”
The guiding principles of the proposed scheme are that:
• Staff and financial risk are transferred out of Hammersmith & Fulham
• The pilot will have the opportunity to develop its market share not only within the three boroughs, but much wider, such as with Independent Schools and Free Schools. The council says this will enable a more robust delivery model and further financial benefits through economies of scale
• A form of Mutual (John Lewis Partnership) model of staff ownership encourages business focus. It is intended that all staff will become shareholders, with shares allocated proportionally to responsibility/commercial value
• The mutual offers more than just delivery of the council’s medium term financial strategy plans, but presents opportunities for the Council to further benefit from the outset and again if the venture proves highly successful
• The mutual is part of the tri-borough merger and follows the principle of removing the direct delivery of discretionary services
One of the key drivers for the mutual is the council’s desire to drive a more “commercial” approach to service delivery whilst delivering efficiencies in line with its medium term financial strategy. It has proposed that the Schools Resources Division which currently offers support to the Council as well as trading directly with Schools, offers a unique opportunity to pilot these ‘new ways of working’ whilst further driving efficiencies in Children’s Services.
To put the drivers into context, Hammersmith’s Schools Resources Division must deliver annual reductions totalling £475k of savings over the next three years; a 34% reduction in its baseline spending. It says, “Maintaining the confidence of schools through effective service delivery efficiencies requires creative solutions. This proposal provides an opportunity for piloting a ‘New way of Working,’ whilst exceeding the proposed medium term financial targets. It offers a broad package of services that by externally trading provide opportunities for expansion to deliver savings, whilst taking advantage of additional opportunities available through the tri-borough merger.”
It adds, “As part of the development of the business model, tri-borough partners in Westminster (WCC) and Kensington and Chelsea (RBKC) have identified opportunities to expand the scope of the mutual to provide IT services to schools in RBKC and WCC. Any tri-borough partnership will be subject to all the respective Cabinets’ approval, although the opportunity supports the joint strategy of progression for the three directly managed services.”
Although it is possible numbers might change, the report indicates that the proposed mutual “will be comprised of 21 Hammersmith & Fulham staff from the onset, with the additional inclusion of 12 ICT staff from Kensington and Chelsea (subject to RBKC Cabinet), and a further 7.8 ICT staff from Westminster (subject to Westminster Cabinet and further due diligence). Both Councils are expected to join the proposal between January 2012 and April 2012, depending upon the most appropriate timings for their respective Councils.”
The anticipated launch date of the proposed mutual is 9 January 2012. Hammersmith & Fulham says this date is a realistic one and is confident of an April 2012 start although further work is being undertaken to establish if the timescale can be accelerated. Hammersmith & Fulham says the inclusion of the other two boroughs will significantly develop the schools market and provide the business with a larger base to manage its operations from.
Some other points are covered in the report:
- “The Council envisages that all staff will transfer from the Council(s) to the new company under TUPE (The Transfer of Undertakings (Protection of Employment)) Regulations with the possible indemnity for the first twelve months redundancy in line with other outsourced contracts”
- “In addition, the mutual will reinvest a percentage of its net profit back to the local authorities(where the business is receiving income) for the enhancement of learning for young people, as identified by the Councils. This will be enshrined within the contractual relationship between Hammersmith & Fulham (and other Councils) and the mutual for the four years of the pilot phase where the Council(s) is also commissioning services.”
- “For the first four years of the mutual the other 50% net profit will be retained by the business to provide a profit for any partners and develop a growth fund and develop the business on a secure footing. Given the national circumstances it is envisaged that there is unlikely to be any pay awards or dividends to the mutual staff in the first few years of the business, although this will be determined by the business and its partner in line with the business progress.”
- “At the end of the four year period the Council will be tendering the strategic contract and the mutual would be able to compete with other providers and may or may not win the contract. By allowing the mutual four years it can effectively build its client base and develop its offer to schools, such that it should have sufficient capacity to re-direct resources should it be unsuccessful in the Hammersmith &Fulham contract.”
Andy Rennison, Hammersmith &Fulham’s assistant director for schools’ funding and the future director of the mutual, said: “What we do makes a big difference for schools and while we have solid systems, a solid approach and strong brands as boroughs, the status quo is no longer an option for us. We are working against a backdrop of massive financial pressures and that, along with changes in government policy around academies and free schools, means we must fundamentally change the way we deliver our business if we are to survive and grow. Becoming an employee-led mutual gives us a real opportunity to take control of the agenda and further develop a strong and sustainable service going forward.”
Questions and Answers
Q. Who is the lead council on this?
A. Hammersmith & Fulham Council
Q.Do staff from all councils get the opportunity to go into the mutual to work?
A. Staff from the three boroughs who are engaged in this specific area of work will get the opportunity to go in to the mutual
Q. Are the timings in the report up to date – i.e. when it is planned to be set up (September 2011) and begin (April 2012)?
Yes, we aim to have it running by April 2012.The mutual social enterprise is currently in the process of being set up and the council plans to go to market in September to procure a private sector partner to assist with its establishment. The tri-borough mutual social enterprise plans to go live from the start of April.
Q. Has this been approved by all three councils and what are the next steps?
A. The proposal to set up a mutual social enterprise was part of the tri-borough implementation plans in education services for all three boroughs. H&F council has approved the option appraisal and initial business plan, which includes authority to go to market to procure a private sector partner. Discussions are still taking place in the Kensington and Chelsea and Westminster boroughs about the final arrangements and staff affected. A tri-borough staff consultation is planned to take place in October.