Communities and Local Government Committee - Mutual and cooperative approaches to delivering local servicesWritten evidence from Staffordshire County Council

Staffordshire County Council’s operating model is certainly reflective of the co-operative council principles of co-operation and mutuality. The operating model is based around nine priority outcomes for People and Place and an approach in which customer insight and customer service drive policy and strategy development.

This drive for Staffordshire focuses on working together with its customers to design and deliver public services which meet locally identified needs, whilst encouraging people to take personal responsibility through enabling them to play a more active role in their local community and by ensuring they have greater accessibility to a wider range of service providers, be they social enterprises, employee-owned mutuals, businesses, faith organisations and other Voluntary and Community Sector (VCS) organisations. Therefore, the concept of the co-operative council positively fits with our one council approach to prosperity and the localism agenda.

In transforming the authority from a provider of services to a commissioner of services we will clearly identify in our commissioning plans those budgets to be delegated to a community level. Recognising that some decisions will still need to be made at a county level we will work locally wherever appropriate, with our customers and partners to co-design solutions to local need, whilst encouraging the growth of personal budgets so that individuals can take control, exercise choice and remain independent.

We will also support local organisations to take on the role of service providers. We will undertake asset transfers where this appropriately adds value to service provision and will aid the establishment of social enterprises. Our procurement processes will be simplified wherever possible and we will ensure compliance with the Staffordshire Compact in alignment with Best Value Statutory Guidance. Our support to infrastructure organisations will remain, despite the recent financial challenges, so that the VCS in Staffordshire remains vibrant and sustainable.

Staffordshire County Council supports the principle of the co-operative council and looks forward to working with DCLG to maximise its potential across Staffordshire’s communities.

Responses to specific questions posed by the Committee:

1. What is the difference between a co-operative council where services are supplied via not-for-profit businesses and other local authorities?

A co-operative council is an authority that shifts away from being a provider of services towards a more commissioning orientated organisation. In this it will base its commissioning priorities around customer insight, enable service users to shape the design of services whilst ensuring it’s commissioning and procurement processes promote rather than prohibit the involvement of not-for-profit businesses.

2. What arrangements need to be put in place to deliver services by not-for-profit businesses such as employee-owned mutuals? (a) More specifically, what are the barriers to establishing not-for-profit businesses to supply services; (b) What role does the local authority have in promoting and incubating a not-for-profit business; and (c) Where does accountability lie?

Arrangements

If local authorities are to play a role in encouraging the set up of employee-owned mutuals it is necessary to put in place a coherent framework of support that will assist interested employees through the process. This will amongst other aspects include enabling employees to understand and manage the logistics and practicalities of becoming a mutual, developing a robust business case and being clear about the key legal considerations implicit in this kind of arrangement, for example:

TUPE—Terms and conditions of staff will continue until the newly formed mutual can review and agree these. Subsequently this exercise can be extremely resource intensive particularly if the expertise to undertake these negotiations isn’t readily available.

Procurement Law and regulations—once established mutuals are not exempt from having to compete for contracts as any other provider in the market would be expected to. However, there can often be the misconception that once a mutual is established it can directly access funding from the local authority that supported its inception.

Property—Where included in any arrangement this can be an issue as legally local authorities are not supposed to dispose of property for less than the best possible price. Therefore, locking down property and other assets is something authorities need to deal with legally if they are planning to transfer any assets or property in their entirety as part of any arrangement. Furthermore, where property is involved and the new mutual entity with community interest purposes wants to change its objectives sometime in the future this could have implications if the local authority owned this property with restrictive covenants attached. So it is important that both parties are clear on the conditions of transfer and do not assume that property can simply be transferred to someone else.

(a)What are the barriers to establishing not-for-profit businesses to supply services?

There are a number of significant barriers including the following:

The necessary business skills to create, run and operate as a stand alone business are often not present.

There is significant time, effort and resource needed to establish a not-for-profit business where one does not currently exist.

The enthusiasm/drive for the establishment of the business as a stand alone not for profit organisation often comes from one person within the organisation. This can be problematic for two reasons; firstly there isn’t wider ownership of the project from within the business and secondly the business is often subsequently unable to cope when the driving founder is no longer present in the business.

Employee mutuals are often created in those service areas where there is a vibrant market already. This could be seen as a threat by others and once established they may prove to be commercially unviable anyway.

Where the local authority is seen to be supporting the establishment of employee mutuals this may be perceived as unfair by the wider VCS.

(b)What role does the local authority have in promoting and incubating a not-for-profit business?

The local authority has a key role in nurturing these new arrangements, which could be realised through:

Raising awareness and understanding amongst staff of the benefits and freedoms of setting up their own not-for-profit business. This might include signposting to other good practice examples for further advice and guidance.

Timely identification of forthcoming opportunities to establish a mutual so that staff can prepare and have the confidence to respond.

Investing in the infrastructure to support the fruition of not-for-profit businesses locally. This could be through joint investment with other public sector stakeholders where mutually beneficial to do so.

Ensuring our commissioning and procurement processes are accessible, transparent and exploit opportunities to commission and purchase for social value across all appropriate public services contracts.

In supporting the co-operative council approach a local authority has a mandate to communicate the added value that has been realised as a result.

Examples of the types of support that local authorities could provide include:

Some kind of business in a box toolkit, so that those interested have ready access to all the tools they need to develop their proposals and to reduce the cost of each project.

Some kind of wrap around service from the local authority which enables the business to be able to work with the local authority. This might involve creating an insurance framework so that business can buy in rather than having to sort out their own insurance arrangements. This might involve giving them easy access to legal, financial, procurement and business advice services rather than having to fend immediately for themselves.

(c)Where does accountability lie?

Accountability for services ultimately lies with the local authority. Responsibility and accountability for the delivery of the services, however, lies with the provider. It is really important that the provider organisations whether they are social enterprises, not-for-profit organisations, employee-owned mutuals or commercial organisations are held to account for delivering what has been agreed and no allowance (except perhaps in the initial establishment phase) should be given for the nature of the organisation. The service user is entitled to expect nothing less.

3. What are the advantages of and drawbacks to providing services via not-for-profit businesses?

Advantages

Not for profit organisations are often closer to the communities and users they serve and are trusted by the people they work with meaning they are often best placed to listen and understand people’s needs.

They can often leverage in other sources of funding traditionally not accessible to local authorities (eg Lottery).

They often have the added value of being able to secure and deploy a range of skilled and dedicated volunteers.

They can sometimes offer better value for money and a greater quality in service provision.

Often they are found to be more approachable and accessible to users as they do not come with the local authority label.

Drawbacks

A potential loss of control as commissioners place a greater emphasis on managing the performance of providers.

Need for a greater investment in commissioning support as local authorities may not have the staff with the appropriate skills, mindset and expertise to deliver this agenda.

There could be difficulties if/when such businesses fail and there is the expectation that the local authority can intervene and assist. However, in reality it might be that it no longer has the staff resource or expertise to help deal with the problems.

Not-for-profit organisations may be pushed out of the market by more highly skilled and experienced tender/bid writers within larger private sector organisations.

4. Where services are delivered by not-for-profit businesses what difference will the local resident and local taxpayer see?

Local people should experience a more personalised approach, tailored to their specific needs and/or the needs of their local community.

Greater diversity of services available in the marketplace which should ultimately allow individuals to exercise preference and control over the services they receive.

Services can be delivered without the sometimes negative associations that come with the local authority badge eg greater bureaucracy.

May 2012