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

In line with the Government’s encouragement to look at the potential of staff led/owned “spin outs” of local government services, we have been developing a managed pathway over the past few months, which is intended to provide support and guidance to staff who are considering this as an option for their service area. Within the terms of that pathway, a number of staff groups have initiated early discussions about developing social enterprises, and these have usually been led by senior managers within a service. However, even at this preliminary stage, some key lessons have emerged which we feel are worth sharing with your inquiry:

1.Approaches to such developments have to be genuinely staff led—although it is acceptable for more senior staff to initiate an enquiry, it is critical to involve the wider staff group in understanding the implications of a potential spin out at an early stage. We have learned that attempting to impose this approach on a staff team as a future direction for their service is likely to result in failure of the service.

2.Staff interest in being part of a staff led and owned enterprise tends to be in direct proportion to the size of their salary, ie staff who are part time and low paid tend to be ambivalent about the potential benefits, whereas some managers are more enthusiastic. Very few staff are prepared to consider the prospect of investing their own cash into initial share capital.

3.The central motivation for creating a new staff led and owned enterprise has to be about service excellence for the customer and not just about benefits/security for staff. Local Councillors are unlikely to respond positively to the prospect of spinning out high value services (such as care services) to a staff led enterprise where a dividend or other tangible financial benefit would be paid from the contract income to staff.

4.Most staff don’t know the true costs of their service and have a poor understanding of them. Very few have the necessary commercial skills to make a success of their service. When it is pitched into the open market (this is something we are attempting to address through a core skills programme for staff and which is also addressed in an experiential way through the structured support within our spin out pathway).

5.Staff also have a poor understanding of the local market within which they will be operating and tend to have a somewhat idealised idea of the value to customers of their service and of who their competition might be.

6.Staff have little or no awareness of the contract and procurement restrictions which may prevent the council from “gifting” their service to them. There are undoubtedly tensions in this area between the intentions of the Localism Act which triggers a competitive procurement exercise, and Government initiatives such as the Right to Provide which advocate for a closed procurement approach to staff led spin outs of services. We have commissioned advice from the Office of Public Management to help us to navigate this emerging and complex area, but it is undoubtedly a potential block to government aspirations in terms of encouraging staff led and owned delivery of local services.

7.Here in Shropshire, there is also clear tension between our aim to develop the role of the voluntary and community sector and the potential for staff spinning services out of the council. The voluntary sector has been vocal in insisting that all services being considered for a staff led or owned enterprise should be opened up to a competitive procurement process. This reflects the tensions outlined at 6. above, and also present us with the difficulty of explaining to the voluntary and community sector locally that it is not possible for them to both insist on a strengthened role within the commissioning process at the same time as insisting that they are effectively treated as “preferred” local providers.

Nevertheless, despite these considerations we are continuing to work actively towards new models of working to drive through public sector reform.

We believe that staff led and owned not for profit organisations have a role to play in delivering sustainable and affordable services to the public more effectively than these can be provided within the council. We are particularly looking to create a culture of added public value in our commissioning arrangements, and it is our belief that a diverse economy of high quality provision is our best way of ensuring that this happens.

May 2012

Prepared 6th December 2012