The Royal Borough of Kensington and Chelsea is expected to hand over the running of its youth service to a staff-led mutual from next April.
The new organisation will have about 150 staff, making it one of the largest to spin out of government outside the NHS. It will provide a range of services that are currently run by the local authority, including advice, guidance and activities for young people.
The mutual idea was first proposed publicly in 2010, and the borough was selected as one of the 21 organisations to take part in the Cabinet Office’s pathfinder mutuals programme.
A spokesman for the council said the mutual still needed final approval from the local authority’s cabinet, which is expected next month. Work will start on the spin-out in September, with the intention that it will be a completely independent entity by next year.
The new mutual will be a community interest company limited by shares: each member of staff will own one share, which will be redeemable when they leave. The contract with the new organisation has not been finalised – however, the existing budget for the services it will run is about £5m.
The mutual will also attempt to win contracts with other London boroughs, including Hammersmith & Fulham and Westminster, which already share a number of combined services with Kensington and Chelsea.
A spokesman for the council said that 81 per cent of staff supported the mutual, although some of them had said they wanted to know more before giving unqualified support. He said the mutual would give more opportunities for young people to sit on the board and make decisions about services.