Start a public service mutual: guidance for commissioners
Resources for local authority public service commissioners and senior officers.
As a public service commissioner - or senior officer - you can play a major role in supporting the development, spin out and sustainability of new public service mutuals.
The case for mutuals
Mutuals can offer parent bodies and commissioners flexible and dynamic solutions to deliver more efficient and effective public services. There are already around 100 public service mutuals in England.
Mutuals can deliver more for less
Mutuals can provide a number of benefits which improve outcomes for staff, for commissioners, and for citizens. Giving staff the freedom over how they run their services means:
- Reduced staff absenteeism and turnover;
- Savings and efficiencies, which leads to;
- High growth and service improvements
Mutuals can promote innovation
Once outside the public sector, employees report greater professional freedom and flexibility to provide user-focused services that are responsive to local needs. Over the longer term, mutuals will forefront the next generation of public services.
Mutuals can create and transform local markets
Many public services are shifting to a market-based commissioning model. For service areas where there isn’t an existing market, spinning out existing staff and management into a new mutual can help open new markets and foster new business opportunities. These new entrants will have a greater focus on delivering aspects of wider social value, like local community and workforce engagement, than their competitors.
Mutuals can support local growth and economic strategies
- to anchor employment in the local area as services are commissioned to external providers
- to re-balance the local economy away from the public sector and encourage growth of small and medium enterprises
- local authorities looking to develop commercial revenue streams, especially through joint venture models
The Chief Executive at Buckinghamshire County Council gave a presentation on The case for mutuals in local government: a strategic perspective (PDF, 381KB, 14 pages) at the Cabinet Office’s second public service mutuals roadshow.
Stage 1: Exploring the mutual model and taking the first steps
Many local authorities and parent bodies are exploring mutuals for the first time and you will need to develop a clear approach, policy or framework that is right for your organisation to work in. Councils typically need to consider:
- How mutuals fit with existing corporate priorities and objectives? For example, is your organisation shifting to a commissioning or co-operative model?
- Do you want to develop a top-down or bottom-up approach? Or a mix?
- Are there existing policies or processes that might provide a framework for development of new mutuals? For example, is there a service transformation or divestment programme already underway?
- How does the parent body plan to manage and support requests from employees under right to challenge.
Oldham Council’s ambition is for a co-operative borough, empowering the local community and residents. The approach includes the exploration of a mutual model for service delivery in Adult Social Care. Co-operative Innovation: the Oldham Approach (PDF, 407KB, 7 pages) explains the approach, looking at Oldham Council as a business, its partnership working and its wider work with the local community.
Commissioners (and employees) have 2 important sets of options to identify and assess:
- Which services or functions are most suited to become Public Service Mutuals.
- What legal form and governance structure should the new mutual take.
It’s important to consider these issues in this order - the organisation’s legal form should be shaped by its function.
Mutual business detector: how to decide which public services could be mutuals (PDF, 687KB, 16 pages) provides a useful diagnostic tool for local authorities to use at an early stage to identify promising areas for creating sustainable new mutuals.
Building on your business idea (PDF, 609KB, 23 pages) is overview guidance on legal forms and organisations structures from Suffolk County Council.
Leading Lives structure (PDF, 148KB, 6 pages) is an example of the board structure and governance of a public service spin out.
Stage 2: Develop your business case
A strong business case is essential to a successful mutual spin out. The business case is typically worked up by employees but commissioners need to be able to support its development and assess it effectively. These skills are often new to commissioners but there is a range of support available.
Remodelling youth service to create a mutual (PDF, 1.62MB, 29 pages) and Pilot scheme for new ways of working (PDF, 295KB, 37 pages) are examples of how 2 London boroughs have made their business cases for mutuals.
What to look for in a mutual business plan (PDF, 141KB, 14 pages) is a presentation on business planning and development, by Mutual Ventures.
The London Borough of Lewisham has produced Criteria for assessing employee proposals for setting up a mutual (PDF, 33KB, 4 pages) .
Stage 3: Spin out
The process of spinning out of the public sector presents a number of issues that commissioners need to understand and manage. Existing spin out mutuals demonstrate these challenges can be overcome with early awareness and planning from the outset, for example:
- workforce - what terms and conditions will the staff transfer to the new mutual on?
- procurement - how can the parent body procure a service from the fledgling mutual?
- tax and finance - what new tax and financial liabilities (eg pensions) does the new mutual carry?
Spinning out: challenges and solutions (PDF, 505KB, 25 pages) is a presentation that explains the challenges and solutions to spinning out, by Stepping Out and Hepsons.
Stage 4: Post spin-out
Post spin out, commissioners and parent bodies can continue to play a role in relation to:
- growth and sustainability
- managing risks, including provider failure or where there are statutory responsibilities
- commissioning from established mutuals
Liverpool City Council’s Procurement improvement plan (PDF, 173KB, 23 pages) outlines how it plans to support social enterprises through its response to the Social Value Act and improving procurement.
The mutuals ambassadors provide free support and advice for both fledgling and developed mutuals. You’ll find more information about them in our Start a public service mutual: training and support guide.
Additional resources for commissioners
Research into the Public Service Mutuals Sector (PDF, 953KB, 45 pages) is a report on the experiences of existing public service mutuals produced by CIPFA Business Ltd. in February 2017.
Research into the Public Service Mutuals Sector: Case Studies (PDF, 656KB, 17 pages) is a set of public service mutual case studies produced by CIPFA Business Ltd. in February 2017.
Creation of an employee-led mutual and selection of the business partner (PDF, 138KB, 19 pages) is a Cabinet decision paper regarding the decision to create 3BM and the selection of the joint venture partner.
The future of schools traded services: business case (PDF, 123KB, 14 pages) sets out the business case for the transfer of Schools Traded Services to the co-operative education trust, Newham Partnership Working.
Published: 31 July 2014