Wednesday, March 23, 2011

Guest Blog by Dan Gregory on the future for Mutuals

As the battle to command the future of our forests, our NHS, our libraries and our banks is being fought, we can map some territorial advances against the predictable axis of left and right. The conventional options open to those in power are either to retain assets and public services within the boundaries of the state - the traditional preference of the left - or throw things open to the market - much preferred by the right.

Frontline implementation of these choices falls to the likes of public sector asset managers, budget-holders in local councils and HR professionals. For asset managers, the practical levers which reflect the strategic political choice can be summarised as ‘keep it or flog it’. For budget-holders or commissioners of public services, it’s in-house provision versus cuts or going out to tender. And for HR professionals, it’s who to keep and who to make redundant or transfer elsewhere.

But since the global financial crisis, increased pressure on public finances and the election, we have witnessed increasing interest, if not consensus, around the idea of mutuals. Whether this means social enterprises, employee-owned businesses, or a commitment to the Rochdale co-operative principles (or all the above), Government Ministers and opposition MPs, think-tanks and council members have been calling for the mutualisation of our banks, public services, post offices, port authorities, forests and other assets and services - which until now have been ideologically tugged back and forth between public and private.

Meanwhile, out in the mundane world of local public sector administration, there is little real excitement, consensus, discussion or even understanding of mutuals. Many don’t recognise what it means. So in the longer term, perhaps this rhetoric may help open up awareness of a further enticing option for those who have lost faith in the failures of an unresponsive state and the unfettered market.

But a handful of our local public servants and administrators are interested. So what does this mutual ambition mean in practice for these asset managers, budget-holders and HR managers? Which button do you press to get yourself a mutual? The unspoken truth here - which is beginning to crystallise as the test of this government’s ambitions for mutual solutions - is that the standard levers available to those responsible for delivery probably won’t lead to the creation of mutuals. Keeping services or assets in house certainly won’t and going out to the market, well, unsurprisingly, means the market will decide. So how do you 'do' the mutual option? Where’s the lever?

Giving or transferring an asset or a contract to a mutual, social enterprise or charity isn’t straightforward. There are rules which guard against the sale of assets at below market price, protecting the financial opportunity cost to the taxpayer (at least in the short-term) of giving something away. Giving a contract to your preferred mutual provider would often simply be illegal, under competition law.

Yet there are ways which it can be done. Imaginative and pioneering public officials are experimenting with asset transfer, framework agreements, competitions for a mutual joint venture partner, exploiting the possibilities of individual budgets and looking to transfer publicly held shares to groups of staff and other individuals over time.

But each of these require imagination, trust and – while very few doubt the new found appetite in Whitehall for letting power flow away from the centre - an awareness that the centre still has a role to play in loosening the reins. This means understanding what really goes on at the frontlines and that good old fashioned practical policy interventions can be absolutely essential to turn a strategic ambition into something real.

‘Nudging’ may have a lot to offer. But what will it take to get Steve from Wiltshire County Council Social Services Management Unit to reach for something other than his conventional levers? If a group of passionate, committed and entrepreneurial staff knock on the door of the Deputy Resources Manager in the Lewisham Borough Council Strategic Commissioning Directorate and say “We want to mutualise!” isn’t the response still most likely to be “I’m sorry there doesn’t seem to be any reference to that in the HR handbook. Your notice of redundancy letters are in the post”?

The cuts, redundancies and new ideas, such as shared back office services, are already overwhelming enough for local public sector staff. Mutuals are simply not on the menu for public sector leaders confronted with need to make changes. There are few precedents and culture can be hugely risk averse. In practice, what are the incentives for HR managers to blaze a trail without a map? Where are the tools, guidance and maps for public sector budget-holders and managers to enable mutualised services to develop?

Yet speed is essential. Some opportunities have been lost already. Budgets for the next few years have largely been agreed - and they tend not to include a contingency reserve for staff coming forward with an idea for enabling new ways of delivering services through a mutual. If the Forest of Fangorn, for example, goes up for sale in the autumn, then United Land Inc. will probably submit their bid before the local community have agreed who is chairing the meetings. So delivery on commitments from the Government, such as the Mutuals Support Programme to launch in April, and the Right to Provide enshrined in a meaningful way in the Localism Bill, are much needed, and fast.

There are already 132,000 fewer public sectors workers in December 2010 than the preceding year and, on 31st March 2011, many thousands more will be made redundant. The Right to Request, which provided a relatively clear path to PCT staff to set up a mutual (as well as the financial support, pensions deal and uncontested contract which looks unlikely under the Right to Provide) is set to move 25,000 into mutuals. Compare this to Francis Maude’s ambition for 1,000,000 public sector workers to mutualise.

So to meet this ambition, and with time, opportunities and some of the best talent already jettisoned, the Budget will be an opportunity to judge the Government's understanding of, and appetite for, bridging the gap between ambition and action, rhetoric and reality, policy and practice.

We should look out for any promising words around the public stake in the banks, the future of the remaining arms-length bodies, the future of some of our valued national assets, and keep an eye on public service reforms. But far more importantly, we should welcome any practical steps that will truly enable the HR professionals, asset managers and budget-holders to look beyond the options they currently have at their disposal and set the warm words alight.

Dan Gregory is an independent advisor, who has worked for a number of years to support investment in mutual and social enterprises, developing policy at the Treasury and Cabinet Office and delivering in practice at the grassroots.

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