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Society: State of emergency: Will employee-owned co-operatives be equipped to provide efficient public services?(Guardian (UK) Via Acquire Media NewsEdge) When Cleveland's fire brigade discovered it faced an pounds 8.9m funding gap over the next four years, its options looked bleak. Back-room efficiencies would save some cash. But successful services, such as the smoke alarm campaign that has helped to reduce house fires by 60% in the area in the last five years, or its safe driving campaign for young drivers, faced the axe. Some of its full-time firefighters might have had to be replaced with part-timers. That was until it considered a radical solution. What if the service could opt out of the public sector as one of the new wave of John Lewis-style employee-owned mutuals? That, says chief fire officer Ian Hayton, would allow the service to get new work from the private sector and so become financially self-sufficient. "We wanted to protect the services we deliver and to safeguard the communities we protect, but we also wanted to safeguard employment in the north-east, which is not exactly an employment hotbed," he says. "There's been doom and gloom for 12 months about the cuts that are coming but what we have been trying to do with this was stop that victim culture of "oh, woe is me", roll our sleeves up and do something about it. The organisation has a real buzz about it now." Cleveland got the go-ahead this month from the government to work up its proposals, including finalising a business plan and a structure. If all goes to plan, it will transfer out of the public sector before the next general election. In advance of the switch, it has already set up a trading arm, and is about to announce a "very large" contract to deliver risk management services to a local industry. As the first fire service to go down this route, Cleveland is, according to Hayton, regarded as a "barrier buster" for a government that wants to see a big wave of new employee mutuals or co-operatives delivering public services. Cabinet Office minister Francis Maude has predicted that as many as 1 million public sector workers - or up to one in six of the workforce - could transfer to mutuals by 2015. Becoming your own boss, as the government promotes the move to mutual status, will pave the way, it claims, for more innovative and efficient delivery of public services. It is in the health service that the biggest moves have been seen so far, with around 25,000 NHS staff across England either already transferred or soon due to go it alone in a range of big and small mutual social enterprises under the government's "right to request" programme. But, after the government extended the programme to the whole of the public sector last year - and with spending cuts hitting services hard - many other public sector employees are now considering making the leap. The Mutuals Information Service, the government-backed advice service for public sector workers looking to go for employee ownership, has already received inquiries from some 230 potential mutuals - ranging from two or three-person teams to services with pounds 50m turnovers. Rochdale's plan Fittingly, it was in the home of Britain's co-operative movement, Rochdale, that some of the latest crop of organisations considering the mutual route came together. Society Guardian was given exclusive access to a conference where employees from Rochdale and other councils in the north-west working in everything from children's services to revenue and benefits and from regeneration to communications, explored the options. Rochdale has put in place business planning training for staff teams that want to set up mutuals. According to Rochdale's chief executive Roger Ellis, co-ops could provide one answer to the "immense challenges" facing local government. "We are just pausing for breath after taking pounds 64m out of our budget for the current year before we start in earnest finding another pounds 80m to take out by 2015," he says. "We are inevitably taking out large numbers of employees and reducing public services for people at a time when those people themselves are facing economic and social problems. We are looking at as many creative ways as possible of enabling public services in new ways, and in particular we are keen to explore the opportunities in social enterprise and co-operatives." But will the switch really unlock better public services for less money? Unison, the union that represents health and local government workers, has questioned whether the drive towards more mutuals in local government will simply mean lower wages and less accountable services. "The coalition's resort to mutuals as an alternative to directly provided public services is largely an attempt to save money on reduced pay, conditions and pensions," says Heather Wakefield, head of local government for Unison. "While local government workers are struggling to cover posts left vacant by redundancies, the government should ask itself where employees will find the large amount of time needed to establish and maintain a mutual." Those who hope that becoming a mutual could automatically stave off cuts in services, risk being disappointed. Even the advocates of employee-owned organisations warn that they cannot be seen as a panacea in this tough spending environment. "This isn't an easy option - it's not fairy dust that's suddenly going to save a whole pile of jobs and services," says Campbell McDonald, a director of the employee-owned trust Baxi Partnership, which is working with some of the public sector organisations now setting up mutuals. "If you are going to do it, there has got to be a set of things that are in place." Strong leaders will be needed to steer the new organisations, as well as support from government and from those commissioning services at a local level. But mutuals could transform services, he believes. "The prize is that you see big gains in productivity and huge rises in employee motivation," he argues. "That tends to trigger innovation and will free up the organisation to make things happen more quickly." It's that ability to "take control of your own destiny" that will prove to be the big advantage in the mutual model, according to Scott Darraugh, project director of Social Adventures, a Salford-based social enterprise that transferred out of the NHS at the beginning of April. On the day of the switch, one moment he was receiving his P45 from the health service - and the next signing a pounds 2.5m five-year contract to deliver healthy living services back to the NHS. His organisation has already bought a garden centre, which will bring in money to plough back into services, such as healthy cooking classes and psychological services and is planning for 10% growth a year. The five employees are working towards a 6% cut in operating costs - which will mean a 2% staff bonus for them. "This isn't about cutting back services, it's about doing things in a different way," Darraugh claims. Equal partnership Social Adventures is a small outfit: only five staff transferred over. But some planned mutuals are on a much bigger scale. In Rochdale, tenants of the town's 14,000 council homes may soon form part of the UK's biggest housing co-op alongside the 600-plus employees who manage their homes. The proposal still needs government support, in the form of a multimillion pound write-off of existing housing debt, as well as a yes vote from tenants. But Gareth Swarbrick, chief executive of Rochdale Boroughwide Housing, the arm's-length management organisation that currently manages the council's housing, said a mutual would allow tenants and employees to work together "as equals". "Our vision is to have employees and tenants working collaboratively at all different levels of the organisation and we see membership [of a co-op] as a way of engendering that," he says. "There's a lot of power and partnership that will follow from that change of culture." A mutual structure would also provide practical opportunities to offer such services as a credit union or energy supplies, he says. For Danielle Procter it's not so much the size of a mutual that matters, as the ability to evolve to take on the new opportunities it offers. Procter is director of transformation, efficiency and capability development at Local Partnerships, the organisation jointly owned by the Treasury and the Local Government Association, and she has been working with would-be mutuals including Cleveland fire brigade. She concedes that "spinning out" of the public sector is not for everyone, citing IT departments, for example, which could struggle with private sector competition. "It is right for some services and not others, and equally it is right for some people and not others. Part of the challenge for local authorities is to marry the right people up with the right services." A long-awaited white paper on public services, now delayed until May, is expected to set out more details of how the government intends to support the mutual model. For McDonald, it cannot come too soon. "If any of this is going to succeed on scale, we cannot allow new organisations to be set up to fail," he says. "The mutual option is not a silver bullet, and without a decent number of success stories to point to in two years' time this movement will struggle to really get off the ground. The most worrying factor right now is that with so many groups of employees considering a mutual way forward, a huge number are still struggling to get the right support and advice at the right time to give them the best chance of survival." Captions: Cleveland firefighters are part of the first fire service that plans to become a mutual organisation. It hopes to transfer out of the public sector by the next election (c) 2011 Guardian Newspapers Limited. |