Cabinet Office minister Francis Maude wants to see public sector teams spinning off into the voluntary sector as mutual societies – and the first 12 projects are now up and running. Colin Marrs examines the exemplars

“Most civil servants and politicians are not well versed in the subject of mutualism,” says John Goodman, head of policy and regions at campaigning body Cooperatives UK. But central government officials will need to get up to speed on the topic over the coming months and years: the coalition government plans to boost the mutual movement, and is pushing public sector workers to move into the voluntary sector with their own employee-run organisations.

In August, Cabinet Office minister Francis Maude announced a programme of support for 12 pathfinder organisations looking to opt out of public sector management to run their own services. These pilots are involved in delivering local services in health, care, youth services, housing support, social services and education. Each of the pathfinders will be allocated a mentor from a pool of experts – including staff from John Lewis and Lord Victor Adebowale, chief executive of homelessness charity Turning Point.

Maude has said that he hopes the programme will help the government learn more about the sector, and understand better what support and structures will best develop employee-led mutual bodies. Such bodies, he believes, will be able to innovate in service delivery and work more flexibly with local partners and communities. “I know that across the country there are thousands of frontline employees who can see how things can be done better, but at the moment, with the existing constraints, they just can’t get it done,” he says.

The concept has been given a qualified welcome by the mutual sector. Ralph Michell, policy chief of the Association of Chief Executives of Voluntary Organisations, says: “Broadly, allowing public sector employees the opportunity to run services allows them to draw on frontline experience rather than relying on Whitehall diktats.” Pathfinder mentor Margaret Elliot, executive director of social enterprise Sunderland Home Care, says: “Staff don’t just know the problems better than others – they also often know the solutions.”

Goodman argues that the mutual model can allow services to be aligned more closely with the needs of their users; the best organisations, he adds, will formally involve users as well as staff. Keith Edmondson, manager of the Lambeth Resource Centre – one of the pathfinders – says: “Our idea is about users of the service taking more control. We as service providers sometimes perceive ourselves as being the experts, and that is not necessarily the case.”

Financial rewards also lie at the end of the rainbow. Independent mutual bodies will be able to apply for funding and borrowing from a greater range of sources than public sector bodies. And the freedom to create spin-off organisations and special-purpose vehicles creates further opportunities: one of the pathfinders, a consortium of 28 further education colleges hoping to set up a qualification-awarding body, says it hopes to make “major financial efficiencies” by working together.

The pathfinders will have to choose from a complex array of possible legal forms, including those of limited company, community interest company, industrial and provident society, development trust and charity. Whatever the form, though, the aim is for staff to become shareholders and play a major role in governing the organisation – sometimes alongside users. Michell says that these arrangements will help allay fears over public accountability that might arise when services leave the control of democratically-elected politicians. “The model increases the scope for a different kind of direct participation by service users and staff, even if it is not formally democratic,” he comments.

With the government taking a “suck-it-and-see” approach to the pathfinder programme, the details of how the bodies will interact with central government are unclear. For nascent mutuals planning their relationship with Whitehall, says Goodman, achieving any kind of certainty over the future is “even more complicated now that the government is reorganising its departments and making severe cuts to many departments”. But Goodman points to existing work in the NHS that offer clues as to how things could work.

Since 2008, every health worker in the public sector has had the right to request that a primary care trust considers their proposals for establishing a social enterprise to provide care or support services. And in East Anglia, one such enterprise is nearly off the ground: Julie Young, assistant director at North Essex Primary Care Trust, hopes its pathfinder spin-off body will be launched by January 2011. The organisation will provide community health services, she says; due to rigorous checks designed to ensure that the body will be a robust organisation, the process of giving approval has taken two years. “We have had to prepare a detailed business plan checked by independent accountants, and meet a set of eight tests set by the Department of Health in order to get approval,” she says.

Initially, new health providers will be awarded fairly lengthy contracts ranging from three to five years, in order to give them time to “incubate”; at the end of this period, the services will be tendered to the open market. Michell worries that this protected period could provide an unfair advantage to the social enterprises, making them less likely to innovate. However, others fear that at the start of the open tendering process, large-scale multinationals will move in and undercut the social enterprises on price.

Another issue to overcome is that of the pension rights of staff transferring to the new organisations. There is no guarantee that staff moving into the new breed of organisations will retain their generous public sector pensions; indeed, speaking at Civil Service Live in July, Francis Maude confessed that he didn’t know whether staff would remain civil servants, and professed himself open to suggestions on the matter.

These worries have led public sector unions to actively fight the proposals. Unison has announced it will challenge the coalition’s health white paper in court, arguing that there was inadequate consultation over proposals to expand the spinning-off of public sector teams to create more social enterprises. Mentor Margaret Elliott says the union issue is a “time bomb” that could derail the process. But their opposition is misguided, she argues: “I have always been under the impression that the unions were there to help the workers gain ownership of the means of production – and that is exactly what this type of mutual organisation does.”

Written by Colin Marrs