Analysis: The mutuals plan that might sideline the charity sector

Details surrounding the £10m mutuals fund remain unclear

Francis Maude, Minister for the Cabinet Office
Francis Maude, Minister for the Cabinet Office

Much fanfare greeted the announcement last week by Francis Maude, the Minister for the Cabinet Office, that groups of public sector staff would be encouraged to run public services as mutuals, cooperatives or social enterprises.

The organisations would be allowed to bid for contracts to deliver public services in areas such as health, education, welfare and the prison system, he said. A £10m fund will be available to help them.

Most of the services involved will never have been outsourced by the state before. In these cases, says a Cabinet Office spokesman, proposals from the new mutuals will not have to go through a full tender process.

But many details remain unclear. Will the contracts automatically be renewed when they run out? Will the services simply be taken back in-house? Or will charities, social enterprises and private firms be able to bid to deliver them? The answer, according to Maude, is a mixture. "There is no identikit model," he said at a meeting to launch the plans last week. "We want a diverse ecosystem of providers that can improve quality by competing."

Charity staff, broadly supportive of the principle, have queried its implementation. A major concern is whether the mutuals will be included in the 'community right to challenge' in the Localism Bill, due to be published this week. This will allow voluntary sector groups to challenge the choice of service providers by councils and bid to deliver services "differently and better", according to Greg Clark, the decentralisation minister.

Mutuals are allowed to make profits and attract private finance, and are likely to be bigger than most other service providers in their areas. If they could challenge local authorities in this way, there are fears that small voluntary groups might struggle to get a foothold.

Maude has acknowledged this. "The mutuals will have an advantage because they have contacts within a big public body and will find the commissioning process less onerous," he said. "But I don't think we're in a bad situation if there are too many good organisations competing."

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