Communities and Local Government Committee - Mutual and cooperative approaches to delivering local servicesWritten evidence from the Office for Public Management Ltd

OPM (Office for Public Management Ltd) is an employee-owned public interest company with a long-term commitment to helping public services to improve people’s lives. This submission draws on our knowledge of the current challenges facing local Government, commissioned systems, new ways of working with communities and approaches to staff-led spin-outs in local Government and other sectors. We have published research into the potential contribution of mutuals in public services and into unlocking local capacity.1

We respond to the first two of the Committee’s questions.

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

The current financial reality is that councils cannot afford to go on delivering all the services they typically have in the way that they have. Most councils are therefore taking forward strategies which re-position their relationships with communities, with service users and with providers from all sectors. These strategies should be seeking to create a new settlement around public services,2 and typically are designed to move to:

local people doing more for themselves and influencing the design of services that they do receive;

service users co-producing better outcomes and their voices being heard at all stages in the commissioning cycle;3

more transparency about sources and uses of funding; and

providers from all sectors being involved in discussions about future service requirements, contributing to innovation in service design and understanding the council’s future commissioning intentions.

For councils themselves, these strategic approaches are involving a range of responses:

structural, for example how directorates are aligned and where commissioning skills are located;

procedural, such as publishing market position statements as part of the strategic approach to commissioning, defining how periods for expressions of interest under Right to Challenge fit with the council’s strategic planning, and designing pathways for consideration of staff-led spin outs; and

cultural, including fostering new types of behaviour amongst staff and elected members so that local people and providers are involved earlier and more openly in shaping solutions to challenges (distributed leadership).

Exactly how this is progressed will naturally reflect the values and priorities of individual councils, and where they sit on a spectrum which crudely runs from all in-house, through co-operative council, to largely out-sourced to private sector. Co-operative councils are particularly focussing on strategic commissioning, developing provider markets and engaging communities in solutions.

However, in all cases we suggest that councils will be taking a phased approach and looking at services on a case by case basis—to prioritise services that need early decisions about service redesign or re-commissioning and to do so in the context of the current provider market and ambitions for its longer term development.

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

The Government has focussed its mutuals policy on staff-led mutuals, and we support the potential of this model in appropriate circumstances. The Committee is focussing on co-operative councils and not-for-profit businesses. We have argued4 for more clarity about the spectrum of options, for example: staff-led mutuals can be not-for-profit or for-profit, and mutuals can have different stakeholders involved (involving say staff and users or as user-led organisations).

The barriers that are usually cited for employee-led spin-outs from local Government are well known (eg procurement, pensions, VAT, accessing investment finance). As critical, often, are the skill and capacity to undertake a strategic appraisal of the services and their markets, the process for engaging (and continuing to engage) staff and stakeholders, and the support for leaders of services (who also have a day job to do).

Now that the Right to Challenge under the Localism Act is about to go live, and the draft statutory instrument about grounds for rejection of expressions of interest under right to challenge has been published, councils are clarifying their arrangements. From our network of clients and contacts in local authorities, we are seeing the establishment of policy and procedural frameworks which set out how employees can come forward for staff led mutuals, what support will be available, and what the decision-making points are. Typically, once an outline business case has been made and accepted, councils will have clear separation between the client/procurement side and advice or support to the potential spin-out. Local frameworks will be consistent with the council’s approach to commissioning and market facilitation and to handling community expressions of interest.

There is growing experience of managing these transition procedures, but—as councillors have commented in evidence—generally there is still a thirst for more sharing of knowledge and experience across and within councils.

The potential benefits of staff-led mutuals are about innovation and productivity, relationships with services users or community stakeholders, and social responsibility. Employees have to feel that they can influence the direction of the organisation and its services. As such, the new mutuals need to be able to build their independence and their own business development capability. The Council’s accountability should be for careful assessment of business cases for potential mutuals, appropriate procurement processes, and good decisions about award of contracts with a view to improved outcomes and sustainability. We should all be in this for the long term.

June 2012

1 OPM, Shared Ownership in Practice: findings from case studies of employee and community ownership of public services, December 2010. OPM, Unlocking Local Capacity, February 2012.

2 2020 Public Services Trust, From Social Security to Social productivity—A Vision for 2020 Public Services, September 2010.

3 We define a commissioning cycle to be (1) understand needs and outcomes of existing services (2) plan the pattern of services required (3) do the changes in services through procurement or re-design or both (4) review service performance and impact.

4 OPM, New models of public service ownership: a guide to commissioning, policy and practice, August 2010.

Prepared 6th December 2012