A revolution is underway in Bromley. The average time that it takes for a leg ulcer to be treated and healed has been cut from 21 weeks to 5 weeks. The partnership that has achieved this dramatic improvement is one of 100 new public sector mutuals employing 35,000 people across England. These are employee-controlled businesses that have been spun out of the public sector, and which now account for £1.5bn worth of public services.

Francis Maude, the Cabinet Office minister, is possessed by ‘missionary fervour’ for mutuals.  He told Coffee House that they ‘improve morale and boost productivity.’

Productivity is among Maude’s foremost concerns. Public sector productivity, according to the ONS, flattened between 1997 and 2010 — a result of stultifying management and low morale. The Cabinet Office says that after a mutual is spun out, absenteeism and staff turnover fall by 20 per cent 16 per cent on average, and the improvements in Bromley are an indication of what can be achieved when the state entrusts public services to the people who run them.

Why does mutualising make a difference? ‘Ownership is a very powerful thing,’ says Maude. ‘Responsibility and accountability galvanise people.’ He argues that freedom from bureaucracy, coupled with greater collective responsibility among workers, have encouraged frontline staff to innovate. ‘Free to do things — that’s what [mutualised workers] say [to me],’ he says. ‘Ownership is an emotional and psychological change.’

Maude illustrates his point by recalling a recent visit to a healthcare partnership: ‘All of them, even though they are committed health professionals, they talk about “when we used to work in the NHS”.’ It’s a subtle but important change of mind-set.

Maude says that mutualisation is a form of privatisation. A contract for mutualisation contains conditions about efficiencies and productivity. Each one is different because mutuals reject the mantra that ‘one size fits all’. Yet the principle is consistent.

But, is the principle popular? Critics ask why there are only 100 mutuals. One former management consultant, speaking on condition of anonymity, told Coffee House about the problems encountered when mutuals were spun-out of local government:

We found they only really worked if the local authority continued to provide financial and capacity support and occasionally assets, which defeats the object. The nature of most public sector workers is a desire for stability, limited risk, and work/life balance; so their desire to do what’s required to make a mutual work is fairly limited, given that it doesn’t really increase your earnings. We found the drive was always from the top, and staff appetite was low, which isn’t really how it should work.’

Maude counters these observations by pointing out that the government, be it local or national, supports the would-be mutual through the ‘spinning-out phase’. This assistance comes in various forms: legal, accounting, business strategy, management and so on, all of which is geared towards the aim of boosting efficiency and productivity in line with the contractual obligations. The Cabinet Office has spent £6m of a £10m fund designed to provide those services. Local authorities and the parent public services also help. Maude emphasises that no public sector mutual has yet failed, although he is quick to concede that ‘eventually one will’. The message, though, is: so far, so good.

The next challenge is to mutualise larger public services. There are encouraging signs. A fire brigade has expressed an interest. The idea is that the fire stations would mutualise to provide the local authority with a service under contract. It is thought that this structure would provide greater operational flexibility, thereby improving the quality of the service while offering greater value for money.

Maude knows that there will be difficulties and disappointments. As he put it at an event last week: ‘We know this is just the beginning of a massive transformation.’ Nevertheless, his conviction is unshakeable.

Tags: Fire Service, Francis Maude, Health, mutuals, Public sector