Mutual and co-operative approaches to delivering local services - Communities and Local Government Committee Contents

3  The evidence for co-operative and mutual approaches

The benefits of mutuals and co-operatives

31. The Mutuals Taskforce pointed to a number of benefits from mutuals:

  • greater customer satisfaction;
  • greater ability to innovate;
  • lower production costs and generally higher productivity;
  • increase resilience; and
  • job creation.[47]

The Taskforce described these as "intrinsic benefits" to the employees and "instrumental benefits" to the delivery of services and that most importantly the "higher morale and greater commitment of employees leads to improvements in the quality of service and the efficiency with which it is delivered".[48] The Minster, Francis Maude, took the same view: "by going down the mutual path you get a better outcome".[49] We undertook an assessment of the evidence for these and similar claims, especially from local authorities.


32. The submission from Winckworth Sherwood, an organisation that provides legal services to not for profit organisations, identified similar benefits that can be achieved from "non-profit distributing organisations" (NPDOs), which includes mutuals and co-operatives, delivering local services as follows.

  • Single focused body able to concentrate upon delivery of its core business. Such focus and freedom provides an exciting opportunity for the management team to use their innovative skills.
  • The NPDO could, without changing its community and social obligations, become a business-led organisation able to make quick decisions freed from the sometimes lengthy local government decision-making mechanics.
  • Opportunity on transfer for one-off cultural change with clear goals to develop the NPDO and its services.
  • Increased probity and better governance.
  • Community involvement and service user engagement in the management of the NPDO through membership as well as creating user groups for individual services or facilities.
  • Staff involvement in the direction and administration of a focused NPDO.
  • An NPDO running the existing facilities could contribute towards the local authority's social and economic agenda and, most significantly, contribute towards the economic regeneration of the local area.
  • An NPDO could access private finance for improving and enhancing any of the facilities or services, such finance not generally being available to a local authority.
  • The local authority could still maintain involvement with the NPDO through grant funding and, possibly, membership of the NPDO's board.
  • If the NPDO was charitable, a status not available to co-operatives generally, it would be able to obtain mandatory relief for national non-domestic rates at 80% and apply for discretionary relief for the remaining 20%. In addition, charitable NPDOs have other fiscal advantages, including exemption from corporation tax and gift aid on donations.
  • Opportunities to maximise efficiencies and cost savings with adoption of better business practices.[50]

To supports these claims they cited research undertaken by the Employee Ownership Association which showed that companies owned by their employees were more resilient than conventionally structured companies, outperforming the market during the downturn and demonstrating a lower risk of business failure. Winckworth Sherwood also referred to research from the Innovation Unit (a not-for-profit social enterprise that aims to support innovation in public services), which showed how employees taking ownership of public services would yield exactly the same benefits as those seen in business, by creating the "engagement ethic" which was currently missing from local authority run public services.[51]

33. We asked Simon Randall, a consultant at Winckworth Sherwood and Chair of the Conservative Co-operative Movement, about the relevance of applying evidence of the benefits of mutuals operating in the private sector to the public sector. While the evidence was mostly based on employee-owned organisations—that is those not involved in delivering public services—he said that he had surveyed a number of charitable leisure trusts with substantial staff involvement in the service and noted there was some evidence that employee-owned bodies were more resilient and created more jobs.[52] Ed Mayo, Secretary General, Co-operatives UK, added that:

the majority of evidence came from the private sector. [...] The spin-outs that we have seen that are high performers, as may have been mentioned before, are those that have emerged and survived. They have a good story to tell, but they are relatively small in number and therefore the evidence may be relatively anecdotal.[53]

34. In contrast, Mark Bramah from the APSE, which had recently undertaken a review of the role of co-operatives and mutuals in local public service provision, recognised that, although there are theoretical benefits of adopting mutual approaches, they had found "very little evidence in practice of successful public sector mutuals".[54]

35. We received submissions from a number of local authorities on the benefits of their mutual or co-operative approaches. Councillor Butler from Shropshire Council, told us that the Council's People 2 People project had resulted in "greater community and customer satisfaction" and that there was a real prospect of reducing demand on the public sector because of greater involvement from the voluntary and community sector.[55] Donna Fallows, the practice leader at Evolve YP, told us that the University of Central Lancashire had been monitoring the performance of the practice and that it was performing better than local authority services. She pointed out that within the practice staff were happier:

the morale of the team has been absolutely massive. It was ownership; it was ours. Because it is ours, we work that little bit harder. There is the dedication of the staff, and morale is absolutely fantastic. We have lost no staff since we have been operational. We have been more creative and accountable and, I suppose, more conscious of spending. When have you ever known a local authority be out of the red? We are operating in the black because we have been more creative. It has really worked for us.[56]

36. We heard of similar qualitative improvements in other local authorities. Lambeth set out what it saw as the benefits of its 'co-operative council' model. It expected that, over the medium-term this would include improved service design, enhanced commissioning practice, better collaboration with partners, and a "clearer focus on citizen priorities".[57] When asked for evidence of these benefits Councillor Reed, the Leader of Lambeth Council, was unable to provide any quantitative evidence but explained that this approach was responsible for improvements on the Blenheim Gardens Estate, which was now being run by a 'co-operative' residents' management association. He said that on the estate:

the Mall that was a drug-dealing corridor has now been turned into a pleasant green space that the entire community uses, including young people. They have community growing schemes on there. The level of rent collection has gone from below the average in Lambeth to close to 100% per annum. The quality of the repairs service is so high that I no longer get any complaints about it. I have not had a complaint for years in my casework bag, and I get many from estates that are still directly run by the council.[58]

37. The Ministers, Francis Maude and Don Foster, accepted that it was early days and that there was little evidence for successful co-operatives and mutuals delivering local authority services. However, Francis Maude drew parallels with benefits in health services.[59] The Mutuals Taskforce's final report detailed some:

  • Central Essex Community Services has significantly reduced staff sickness rates. The number of days lost due to sickness absence per Full Time Equivalent (FTE) employee has decreased by approximately two days per employee since they spun-out in April 2011.
  • Also in Central Essex Community Services, a staff survey conducted in October/November 2011 showed that 90% of staff looked forward to going to work, compared with 86% in 2010.
  • NAViGO, a community interest company running mental health and associated services in North East Lincolnshire, has experienced reduced absenteeism and saved £80,000 as a result.
  • Central Surrey Health provides therapy and community nursing services to central Surrey's population. Staff motivation and satisfaction improved with 98% of co-owners say they are willing to go beyond what is normally required. The industry norm is 84%.[60]

38. The evidence for the benefits of mutuals and co-operatives operating in a local government is limited. However, the benefits that have been observed from mutuals operating in the public sector and the health sector suggest that these approaches have the potential to offer improvements in delivering local authority services. In particular, the motivational benefits provided by employee ownership, the response to users' needs provided by enhanced user engagement and the success of established organisations such as Greenwich Leisure persuade us that more local authorities should be considering these options.

47   Ev 103 Back

48   Mutuals Taskforce, Our Mutual Friends, December 2011 Back

49   Q 316 Back

50   Ev 125, para 3.2 Back

51   Ev 127, paras 5.5-5.6 Back

52   Q 222 Back

53   Q 222 Back

54   Q 104 Back

55   Q 254 Back

56   Q 280 Back

57   Ev 79, para 2.2 Back

58   Q 14 Back

59   Qq 314-16 Back

60   Mutuals Taskforce, Public Service Mutuals: The Next Steps, June 2012, p 14 Back

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© Parliamentary copyright 2012
Prepared 6 December 2012