Interview: Julian Le Grand

The man tasked with making the mutuals work believes labour-intensive services will be most suited to control by staff

Julian Le Grand
Julian Le Grand

As things stand, there are more questions than answers about how mutuals will work, according to Julian Le Grand, the man leading the government's Mutuals Taskforce. In a year or so, he hopes, the balance will have swung the other way.

Le Grand, who is professor of social policy at the London School of Economics, says the job of the taskforce is to "identify areas of the public sector with the greatest potential to develop social enterprises, find the barriers to creating them and work out how these can be removed".

The areas he believes are most fertile for mutuals are health, education, children's services and social care.

"It's labour-intensive services where this will work best," he says. "Cooperatives aren't particularly good at technological advancement, nor are they good at raising capital. But they are excellent at developing people's skills."

Le Grand says he is meeting civil servants from all departments, but he considers the Communities and Local Government department to be most important, followed by the Department of Health.

"They are very enthusiastic," he says. "But there is a lot still to do."

Le Grand's involvement stems from one of his previous projects to improve the effectiveness of social workers. "Morale among social workers was very low," he says.

"They were depressed, frankly. I did some work with GP practices, which are small, independent businesses contracted with the NHS, and I wondered if this model could be used by social workers.

"We developed five pilot projects with the Labour government, which involved social workers spinning out into independent practices, and we discovered that they had more flexibility and were able to make better decisions. It has worked well so far.

"Because that work is similar to the mutuals agenda, I was asked to chair this taskforce."

FIVE ISSUES FACING THE TASKFORCE

1. Business planning

"Business planning sends a shiver down the spines of many public sector workers," Le Grand says. "When we worked with social work practices, they had their hands held through this process by consultancy firms - they did a terrific job.

"We'd like to do the same with new mutuals. We would also like to use people who have done it to mentor those coming through."

2. External opposition

Organisations becoming mutuals might well meet opposition from unions and management, according to Le Grand. "Unions are very hostile," he says. "You might have thought they would support this because it's largely about improving the lives of workers, but they appear to be worried because it erodes their membership and threatens their power."

In many cases, he argues, management might also oppose mutualisation because it reduces their authority and increases their workload. "There might need to be an independent ombudsman to appeal to," he says. "If management opposes your plan, you might need to approach someone independent who can rule on whether they have good reason to."

3. Procurement

Even if management is supportive, Le Grand says, it might well lack the contracting skills needed to negotiate with former staff. "Many will find it difficult to move away from a management relationship to a contractual one," he says. "When we work on business planning, we must make sure we work with commissioners, as well as providers."

Another issue is competition. Competition laws might make it impossible to offer guaranteed contracts to spin-outs, and services will instead have to be procured competitively. "What if you trigger a procurement process and Capita comes along and wants to bid?" Le Grand asks. "That will put many people off."

4. Money matters

As new organisations, mutuals will face several technical financial difficulties, says Le Grand. They will lack credit histories, which will make it difficult to bid for contracts and afford insurance.

Pensions are another issue. Most employees will be keen to retain generous defined-benefit pensions, while new organisations would not be able to take on historical deficits built up by almost every public sector body. "The pensions difficulties are extremely complex, and we haven't really started to get our heads around them yet," Le Grand says. "But we will have to."

Mutuals will also have to worry about the issue of VAT, he says, which local authorities can reclaim but mutuals can't.

5. Start-up funding

"Mutuals will need money to buy capital items, particularly buildings, and for cashflow," Le Grand says. "However, they shouldn't begin life with too much debt. We're looking at ways of getting capital into these groups."

Mutuals will have access to a £10m fund, he says, but this is intended to pay for training and business support, rather than offering start-up capital.

How big an issue this is will depend in part on asset ownership, he says. If a group spins out, it is not clear yet whether it will be able to take with it items such as buildings, vehicles and computers.

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