Tuesday, 23 November 2010

Public service reform: Silk purse or sow's ear?

At last week’s launch of the Mutuals Information Service, a sign poster for staff in the public sector interested in setting up staff-owned mutuals, or co-ops, Secretary of State for the Cabinet Office, Francis Maude said some interesting and alarming things.

I wasn’t there, but at the launch of this great service, put together in partnership between the Cabinet Office, Local Partnerships, Employee Ownership Association and Co-operatives UK, some participants came away with a growing sense of disquiet. Listening to the SEL Board, made up of 17 of some of the country’s leading social entrepreneurs, as they recalled the speech and debated its contents, I was struck by how seminal his words were. Out of my board’s animated discussion 3 key concerns have emerged, these deal breakers are pensions, OJEU requirements (Official Journal of the European Union) and contract length.

I understand the general theme of the address was to call for more independent providers in the delivery of public services that embrace the values of the mutual and social enterprise movement, so anyone listening would have been forgiven for thinking our fortunes would go up in the world and we have the support of Government in creating a growing social enterprise sector across public services. However in the content eyebrows were raised as obstacles were thrown into the paths of those that we hope choose to follow the footsteps of GLL and recent No 10 Big Society award winner, Central Surrey Health.

In the matter of pensions the Secretary of State said that this was an ongoing issue so he felt that little could be resolved around it just yet. Pensions and the legalities and financial implications of their transference are a mine field. Public sector pensions vary from local to central government, and the models used by the services that have already spun out of the public sector vary in terms as well. The one thing all successful spin outs share is their ability to continue to offer a state pension to all existing employees, and in some instances even new recruits. Without this reassurance staff will quite rightly question the extent of their vulnerability in any proposed new management model. We need clarity on this and something more attractive to offer staff putting their future on the line and we need it fast.

Secondly the Secretary of State talked about OJEU extension for a limited time mentioning the three year term in vogue for health contracts at the moment. There are 2 issues here, firstly the OJEU exemption. For those of you not immersed in procurement, OJEU is the Official Journal of the European Union where all contracts that are deemed eligible for Europe-wide procurement are advertised. This means that after the initial contract length any and all comers, Europe-wide, will be pitched against you. Not a prospect most public sector workers developing their business model and experimenting with the idea of entrepreneurialism will relish. You cannot sidestep OJEU but you can extend the initial contract length to give newbie’s time to get their act together. Otherwise its social enterprise for three years and the private sector thereafter.

Which brings me to the final killer issue, that of short contracts. As Mark Sesnan, Managing Director of one of the UK’s largest social enterprises and SEL co Chair said “The private sector wouldn’t cross the road for a 3 year contract”. In order to capitalise your business and give the new entity time to innovate, consolidate, and grow, Mark and other leaders like him are calling for minimum contracts of 5 to 7 years. These are the lengths of contract that should be encouraged. Not such a big ask if you consider that 15 to 25 year contracts are still common for the private sector delivering public services. Who can forget the school meals debacle when social entrepreneur Jamie Oliver exposed unhealthy school meal providers only to find out that with their 25 year contracts, nothing could be done about them for a very, very long time.

We were encouraged to hear the Minister talking of the “Right to provide,” as he did at the recent Guardian Social Enterprise Conference. This seems to resemble the right to request which was exclusive to health, and extend the offer throughout the rest of Government.

The broadening of the principle that encourages staff who want to set up as standalone providers under the mutual and social enterprise principles, and support for initiatives like the Mutuals Information Service and SEL’s Transitions document that gives prospective entrepreneurs advice and guidance, is all very welcome. But you can’t make a silk purse out of a sow’s ear, and you can’t expect public sector workers to invest their personal capital into new service models without even a cash-strapped Government meeting them half way.


  1. Alison, the news as of late yesterday is that a group of banks have been in talks with our PM about a pledge to invest £1 billion in Big Society Bank. There was a suggestion that the vehicle would be CDFIs. 6 years ago, SEL staff helped me by reading a business plan and suggesting who I might approach for funding. It was a "community interest" business model, investing surplus in CDFIs to seed social enterprise startups in rural communities.

    It seems to have taken a recession to see the sense in doing it.

  2. Hi Allison. Would it be possible to talk to you about this article. I am looking to do the Mutuals thing but I can get no real advice from anyone. Edwardhoulton@me,com

    Best wishes


  3. Dear Edward, I am happy to talk to you about this I will email you and hopefully I can be helpful. Jeff, thanks for the kind comments and I am delighted that your foresight has been recognised and that we were able to be helpful. Allison