Tag Archives: London Borough of Hammersmith & Fulham

Cabinet Office tells mutuals future is bright despite Central Surrey Health struggles over NHS deal

By David Bicknell

The Cabinet Office has encouraged would-be mutual and social enterprises to see the government’s plans to open up public services as a positive move that yields new opportunities despite a flagship mutual reportedly losing out on a major contract to a commercial organisation for NHS services.

The Financial Times reported yesterday that Assura Medical has been named as preferred bidder for a five- year contract worth about £90m a year for community health services in Surrey, beating a bid by Central Surrey Health, the flagship social enterprise that runs services in the neighbouring area.

A Cabinet Office spokesman was quoted as saying: “This is not the end for Central Surrey Health; they continue to provide critical services for the people of Surrey. Across the public sector we have started to see the emergence of a new wave of mutuals.

“The government has ambitious plans to support front-line staff who want to form mutual organisations and take control of the services they provide. We are working to ensure that all organisations bid for contracts on a level playing field. We are currently conducting a listening exercise on the Open Public Services white paper, it’s vital that mutual organisations contribute to the discussion.”

The government wants to see the fledgling mutual and social enterprise sector grow to encourage a million staff to leave the public sector and sell services back to local government and the NHS.

In a press release issued by Social Enterprise UK, Peter Holbrook, the organisation’s chief executive encouraged the government to create a financial level playing field and give mutual and social enterprises the chance to gain a foothold in the commercial world:

“If Central Surrey Health, the government’s flagship mutual social enterprise, which has demonstrated considerable success in transforming health services and increasing productivity can’t win, what does this say for the future of the mutuals agenda?

“Central Surrey Health reinvests all the profits it makes locally. It is difficult to imagine how Assura, with shareholders expecting a financial return, could do more to benefit people in Surrey.

“It is not enough for government to open up markets; it needs to create fair markets that benefit society. Some of the financial criteria used in contracts create an unequal playing field in which social enterprises are unable to compete because they may not have the same financial backing as private sector providers.  Unless swift action is taken to address this we will see social enterprises and mutuals lose out to the private sector.

“Public sector workers will be understandably anxious about spinning out from the NHS and setting up a social enterprise on the back of this news. The government needs to take action to reassure them that they will not be operating in markets weighted against them.

It has been argued by unions that mutualisation hides a privatisation agenda with mutuals at risk of losing out to commercial operators as contracts come up for renewal. Central Surrey’s own contract is reported to be up for renewal next year.

Central Surrey Health was the UK’s first social enterprise to leave the NHS and set up as an employee-owned business four years ago. Central Surrey Health is contracted to deliver community nursing and therapy services on behalf of the NHS and other organisations (e.g. Surrey County Council) to the 280,000 population of central Surrey. It is owned by the nurses and therapists it employs, who each own a 1p, not-for-dividend share.

It has been selected by the Cabinet Office to help mentor employee-owned organisations coming out of the public sector. Twelve fledgling public service spin-offs have been chosen by the Cabinet Office to be ‘Pathfinders’ for the rest of the public sector. As mentors, Central Surrey Health will work with and support staff on Pathfinder projects to help them develop sustainable, efficient and pioneering employee-led services. Last November it was also named as the Prime Minister’s first Big Society Award winner.

Hammersmith& Fulham Pathfinder to launch in 2012

Could mutuals provide an innovative model for public sector IT delivery?

By David Bicknell

What are the implications for IT delivery of creating public service mutuals and what part might they play in the public sector?

One public sector IT director I spoke with recently suggested that there are areas where mutuals will work exceptionally well. And some  are already beginning to do so. Some may get private sector sponsorship, while others will get charitable status.

These, however, are smaller scale mutuals or social enterprises, and a distinction must be made between those and large scale organisations where, for example, you could set up a mutual company for the whole of IT in a county or region.

There is a belief that the oft-quoted ‘John Lewis co-operative model’ could be an effective one.  One possibility is a shared services model along those lines  as an alternative to outsourcing or a private sector partnership.

That offers the prospect of developing a public service partnership of different organisations, effectively a sort of mutual or co-operative, where everyone who joins the co-operative has a slice of the cake irrespective of their size. The co-operative shares common infrastructure and services, but operates on a semi-commercial basis, possibly working with a private sector partner. Although the model doesn’t yet exist in IT, it is said to work well in agriculture.

Arguably the model overcomes a number of the issues raised by outsourcing and big public-private sector partnerships where there has been financial pain when things go wrong.  The mutual model offers the prospect of a better way, though there is a large difference between this scale of model and smaller mutuals in terms of risk outlook and management.

The IT director said he believe there is an opportunity for mutuals to insist, ‘We’re better than the private sector. We are very responsible about the risks, and we have a public service ethos.  For us ,  it’s not just about making money. We have the discipline of commercial business rigour and the safety net that protects vulnerable adults, for example, in the case of care homes.’

Some local authorities are already considering using mutuals to provide some ICT services. For example, the London Borough of Hammersmith & Fulham has become a Mutuals Pathfinder and proposed a pilot scheme with partners Kensington and Chelsea and Westminster to set up an employee-led mutual to deliver IT services to schools and the council, with the council planning to commission some services from the mutual for a four year period.  The scheme is due to get underway early next year.

Councils consider mutuals and social enterprises among new funding models for youth services

By David Bicknell

The London Borough of Hammersmith & Fulham has  proposed 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.  But what are other councils doing in the area of children and youth services?

This article about youth services on the Children & Young People Now site suggests that according to a recent study, when questioned about alternative funding models for funding youth services, 34 per cent of local authorities say they are considering social enterprises, 20 per cent are looking into youth mutuals and 15 per cent say they are currently considering outsourcing their entire youth service to another provider. Overall, only 37 per cent are considering any alternative models of funding.

The article quotes Sue Payne, chair of the Confederation of Heads of Young People’s Services, which brings together council youth chiefs, saying that CYP Now’s study highlighted that councils are “increasing the number of services they are commissioning.”

Payne said the study showed encouraging signs that authorities are seeking new funding avenues. “There are quite a lot of moves towards social enterprises and youth mutuals,” she said, adding that only a year ago very few youth services would have considered these options.

She added the point that that “You can’t just create good delivery systems overnight”. Although external providers had a strong track record in delivering information, advice and guidance, she said, this was not the case in areas such as targeted youth support.

Hammersmith & Fulham provides strategic rationale and thinking behind the creation of a mutual

By David Bicknell

In yesterday’s article on the London Borough of Hammersmith & Fulham’s plans to create a mutual Pathfinder, I referred to the  recent report on the mutual plan published by the Council.

In that report are some useful thoughts on the rationale for developing a mutual as well as an insight to what needs to be discussed around procurement.

The strategic rationale for launching the mutual includes: 

• Confidence of the services that they could deliver more effectively as a private company

• Commitment at a political level to explore new ways of working

• As an alternative approach to deliver the challenging financial targets required and maintain/ further commercialise existing services

Hammersmith & Fulham insists that it “will not simply be outsourcing the services currently delivered, but will be piloting an innovative way of the future delivery of in scope services, at a costreduction (and possible profit making) to the Council in headcount and overheads. The delivery of these services via the pilot scheme will have no negative impacton the service as they  will continue to be undertaken by the existing staff who have extensive knowledge and expertise in these areas. All clients will benefit from a reduced cost of service, whilst maintaining continuity of staff and services.”

Benefits to the Council

• A significant reduction in costs through the development and extension of the business

• Reduction in headcount for the Council

• Piloting a new unique approach on the delivery of existing council services

• Front Line services to schools being developed

• Staff commitment to the venture and commercialisation seen as an opportunity

• Seen by the school community as an opportunity, not a threat (as identified in the informal consultation).

• Demonstrates LBHF commitment to the schools

• 50% of net profits shared by the local authorities to allow more freedom to the Councils to target new priorities

The Council admits there are many challenges to overcome for the final business case of the potential pilot scheme, including:

Finalisation of the scope

Capacity issues of staff members in the transition

TUPE issues

Pension issues

Independent Legal advice

Independent Financial advice

Procurement

Legalities on novation of contracts and risk of OJEU

Venue for the additional staff from RBKC and Westminster

Corporate recharges

Support, marketing, sales and communications

On procurement, Hammerwmith & Fulham says it was initially envisaged that the Council would have the option of entering into a time limited relationship with the Mutual as part of the National Pathfinder. However, current Pilots have all been either NHS related(different legal framework) or where the services involved are classified under OJEU as “Part B” and as such the risks to the Council’s involved are minimal. It adds:

“The proposal in this report contains some “Part A” services and as such a full OJEU procurement exercise is likely to be required by law. In order to comply with the regulations and mitigate potential risks, it is proposed that the Council carries out an EU compliant procurement exercise to secure an external partnering organisation. Such an exercise should remove potential risks for future challenges based upon the relationship between the Council and the mutual.

“The first stage would be to place a compliant OJEU Contract Notice seeking expressions of interest from the market to assist in the establishment of a mutualised company. The controlling shares in the company would be on a ratio to be determined as part of the tendering process.

“Depending upon the nature of the mutualised company, the trading arrangement may not only be about service delivery, but consideration may e given to the supply of goods that would otherwise need to procured in accordance with the Public Contracts Regulations. In this case the mutualised company becomes both a supplier and service provider.”

Hammersmith & Fulham mutual Pathfinder expected to launch in January 2012

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.

Hammersmith & Fulham Mutual Proposal Report

Tri-borough Proposals Report