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Cabinet Office launches £10m support fund for spin-out mutuals1

Finance | Vibeka Mair | 6 Dec 2011

The Cabinet Office has launched a £10m support programme for staff-led mutuals spinning out from the public sector.

The new £10m Mutual Support Programme (MSP) will provide business and professional services to groups of staff or existing mutual organisations. PA Consulting, leading a consortium of experts in employee ownership, will manage the programme to purchase HR, legal, financial, tax and business planning services to develop new mutuals.

In addition, the Cabinet Office has set up a new Mutuals Information Service.

The MSP will also fund support which will help organisations tackle common barriers and share information so that many others benefit from the work. The first progress report from the government’s Mutuals Pathfinder programme has also been published today. Over the past year, 21 staff-led mutual projects have been supported through mentoring and advice provided by experts in the field of employee ownership.

The report shows a high level of success with seven launching as mutuals, another seven being close and five making firm progress. The report highlights barriers that staff have faced including a tendency for contract tenders to make requirements beyond what is legally necessary, such as demanding an organisation has a multi-million-pound bond before taking the contract.

Commenting on this, Francis Maude, minister for the Cabinet Office, said: Too often tender processes go way beyond what’s necessary, asking for massive bonds up front and insisting that the organisations have existed for years.

"Iron cladding contracts bars all but a few big companies from winning them. It is a fundamental barrier to creating the vibrant, innovative and competitive public services this country needs.

“Through our mystery shopper exercise, mutuals and other small businesses can tell us about discriminatory practice. We will intervene when problems are exposed. I do understand that Commissioners may feel stuck in the middle. Where they feel they are forced to over-complicate things they can let us know through the Tell us How website and we will address the problem.”

In addition, the Mutuals Taskforce, appointed by the government to champion staff-led mutuals across the public sector, published an evidence paper which finds that mutuals:

•    have lower absenteeism and staff turnover than non-employee-owned organisations;
•    have lower production costs and generally higher productivity;
•    deliver greater customer satisfaction; and
•    are innovative, profitable and resilient to changes in the economic climate.

Professor Julian Le Grand, chair of the Mutuals Taskforce, said: “The Mutuals Taskforce has gathered evidence for why employee-led mutuals make sense in public services. The next phase of our work will be focused on making the case across the public sector and stimulating demand.”