Mutuals Briefing

What is Mutualisation?

The government recently announced plans to transform My Civil Service Pension (MyCSP), which administers the delivery of Civil Service Pension schemes, into a mutual joint venture.

It is the first major “spin out” of a central government service giving employees the opportunity to take a stake in their business.

The joint venture is a particular mutual model in which employees have a stake along with one or more partner organisation. This can combine the improved productivity associated with employee ownership with additional expertise and capital investment. Plans for MyCSP envisage that the Government, MyCSP employees, and a private sector partner would all have a strong material interest in the service.

Minister for the Cabinet Office, Francis Maude, put the case for mutualisation like this:

“Too often there’s been a binary choice between the Government providing a service itself, or outsourcing it to the private sector. These choices have historically been driven by a belief that services have to be controlled centrally – with a one size fits all approach that has left little room for innovation.

“We are looking for more innovative ways to structure services. We know that employees who have a stake in their business, or take ownership of it completely, have more power and motivation to improve the service they run. They can also benefit from partnerships with private or voluntary sector organisations which can bring in capital and expertise.

“For the private sector, which can no longer expect the generous margins of the past, tapping the talent of frontline staff to improve efficiency will be a priority. The state too can keep a stake so that taxpayers benefit from the rising value of an improved service.

The Mutual Pathfinder Programme

In driving the mutual concept, the Government has been developing mutual models through the Mutual Pathfinder Programme which was set up to support 21 existing and potential mutuals with mentoring and advice from experts in employee ownership. In addition, every department will put in place ‘rights to provide’ giving staff  new rights and support to form mutuals.

Maude announced the launch of the first wave of pilot/best practice mutuals – so called Pathfinders – to be run by entrepreneurial public sector staff who wanted to take control of the services they run.

As part of the Government’s commitment to support the innovation and entrepreneurialism of front line staff, twelve public service spin-offs were chosen to be Pathfinders for the mutuals initiative. These Pathfinders were set up to be ‘trailblazers’ for the rest of the public sector – helping Government establish, by learning from the front line, what type of support and structures will best enable the development of employee-led mutuals on an ongoing basis.

The Pathfinders are supported by mentors from some of the country’s most successful businesses and leaders in employee ownership models. These included staff from the John Lewis Partnership, probably the country’s best-known co-owned business, as well as from PWC, KPMG, Tribal, Baxi Partnership, Care and Share Associates, Sunderland Home Care Associates, Central Surrey Health, Local Partnerships, Godrevy, GLL (Greenwich Leisure), and The Office for Public Management.

In December 2011, the Cabinet Office published a report summarising the mutuals’ progress:

• Seven Pathfinders have gone live – these Pathfinders are delivering on their contracts and have established themselves as separate legal entities.
• Eight are progressing well to go live within the next twelve months – these groups are, for example, in the process of negotiating contracts, finalising arrangements for their staff and establishing corporate governance structures.  
•  Three are still in early stages of development – for example, considering the viability and sustainability of a mutual for certain services
•  Four Pathfinders have at this stage been unable to, or have decided not to, apply a mutual model for their services. This is for a range of reasons, including uncertainty over future service needs and the impact of restructuring on the funding and delivery of the service.

The Pathfinders are:

• An awarding body setting up as a mutual by a consortium of FE colleges
• The London Partnership – creating a ‘Reducing Multiple Disadvantage’ Community Interest Company from a group of DH, LA, PCT and NHS staff
• The Department of Health’s London and SE Learning Disability Team forming a regional Community Interest Company
• Hammersmith and Fulham Children’s Services exploring new models of delivery with staff, possible commercial partners and neighbouring local authorities
• North East Essex PCT spinning out into a Community Interest Company
• The creation of a social enterprise for delivery of housing support services to vulnerable people in Mansfield, bringing together a range of public sector workers
• The Lambeth Resource Centre exploring options for coproducing services with employees, service users and third sector organisations to provide rehabilitation support for people with physical and sensory impairment
• NHS employees forming a social enterprise to provide joined up services for homeless people in Leicester
• Teaching and administrative staff planning to set up a Trust to run Newton Rigg Agricultural College in Cumbria
• The Royal Borough of Kensington and Chelsea working with employees to examine the potential for different models of employee led youth support services
• Integration of Community Health and Adult Social Services in Swindon into a cooperative
• Westminster City Council working with employees in Children’s Services and neighbouring local authorities to move towards creating an arms-length mutual organisation.

The Cabinet Office has also set up a Mutuals Information Service

The Open Public Services White Paper

Earlier in 2011, the Government has issued a White Paper which set out the landscape for mutuals and open public services. You can access the White Paper here

Other announcements on mutualisation included the appointment of Professor Julian Le Grand to head the Mutuals Taskforce  which will champion staff interested in mutualising their service, and the choice of Stephen Kelly, the former boss of Micro Focus, to be the Crown Commercial Representative to head up the creation of the mutuals from existing teams within central government departments.

However, not every government department is considering adopting a mutual model. The Ministry of Defence has ruled out a mutual option  as part of a  reorganisation of its Defence Equipment and Support (DE&S) arm.

How to become an employee-owned mutual (guide)

Mutuals Information Service Blog

How the Budget affects mutuals
Useful Links

Mutual Pathfinder Progress Report

Mutuals Taskforce Evidence Paper

Open Public Services website

Employee Ownership Association

Social Enterprise Investment Fund