Mutuals in the public sector: Supporting the Brave

Employee ownership can transform the public sector

Task Forces come and go. Some have dramatic success and others disappear into the long grass of political life.

The independent Mutuals Task Force (MTF) is no ordinary Task Force though. The remit of the MTF is to help public service entrepreneurs to spin out the services they manage into new businesses that are now commonly referred to as mutuals. As such the MTF is centrally involved in an emerging revolution in our public services – put simply, it is supporting the brave.

The MTF is, in the words of its Chairman, concerned with "unleashing the power of employee ownership and control". Its final report, published today, will be listened to right across the political spectrum.

Mutuals are officially defined as new businesses that have high degrees of employee ownership or control that have left their public sector parent body in order to manage and expand public services.

There is a wide variety of models and types of mutuals in terms of their legal form, business model, membership, stakeholders and investors, and they currently operate, or are being developed, in almost every part of the public sector.  There is now compelling evidence that public service mutuals raise the quality of the public services received by users, increase the returns on investment for commissioners and deliver many benefits for employees.

The Task Force report lauds the progress of public service mutualisation so far. But any revolution that seeks to change any ancien régime requires more and more collaboration from some key players inside that regime. And so, with clarity, the Task Force report makes a series of future demands on Government as a whole, individual departments, local councils, health bodies and also investors.

But the biggest "asks" are of Government. Hence, it advocates aggressive promotion of the Right to Provide – a key measure that gives employees the right to take over the public services they deliver.

It asks for proactive marketing of the range of information, advice, mentoring and finance that is available to employees contemplating mutualisation, and seeks an end to the current situation in which many new and existing mutuals compete for new contracts within processes that are designed for, and favour transactions with, large, long established, corporate organisations.

It encourages public service decision makers to overcome, via their pursuit of value for money, the cultural opposition of some of their colleagues to mutualisation in principle, irrespective of the evidence. And it does all this in the same breath as praising, quite rightly, the impressive work in support of public service mutualisation going on within some parts of Government.

It is a request for faster travel in the current direction. The recommendations and more are set out in detail in the Task Force report. Their implementation will need a major further injection of resource, energy and enthusiasm by and within Government and huge further changes in its operational behaviours. The implications for Government if it agrees with the recommendations are enormous.

This will only happen if diversification of public service delivery remains a priority for the Coalition.

I hope that the main recommendations in the report will be endorsed and acted on. I say that because I want to see a permanent obligation on Government, regardless of its political colour, to play a leading role in removing the barriers faced by employees who want to improve the services we depend on by setting up employee owned public service mutuals.

If the MTF report’s recommendations are implemented it will be fantastic to see even more public service entrepreneurs – the brave - as a direct result of that. If they are not implemented – the brave will remain the few.

Central Surrey Health is one of the largest public-sector mutuals in operation today

Iain Hasdell is the chief executive of the Employee Ownership Association the voice of employee owned businesses in the UK and a member of the Mutuals Task Force.

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I was wrong about Help to Buy - but I'm still glad it's gone

As a mortgage journalist in 2013, I was deeply sceptical of the guarantee scheme. 

If you just read the headlines about Help to Buy, you could be under the impression that Theresa May has just axed an important scheme for first-time buyers. If you're on the left, you might conclude that she is on a mission to make life worse for ordinary working people. If you just enjoy blue-on-blue action, it's a swipe at the Chancellor she sacked, George Osborne.

Except it's none of those things. Help to Buy mortgage guarantee scheme is a policy that actually worked pretty well - despite the concerns of financial journalists including me - and has served its purpose.

When Osborne first announced Help to Buy in 2013, it was controversial. Mortgage journalists, such as I was at the time, were still mopping up news from the financial crisis. We were still writing up reports about the toxic loan books that had brought the banks crashing down. The idea of the Government promising to bail out mortgage borrowers seemed the height of recklessness.

But the Government always intended Help to Buy mortgage guarantee to act as a stimulus, not a long-term solution. From the beginning, it had an end date - 31 December 2016. The idea was to encourage big banks to start lending again.

So far, the record of Help to Buy has been pretty good. A first-time buyer in 2013 with a 5 per cent deposit had 56 mortgage products to choose from - not much when you consider some of those products would have been ridiculously expensive or would come with many strings attached. By 2016, according to Moneyfacts, first-time buyers had 271 products to choose from, nearly a five-fold increase

Over the same period, financial regulators have introduced much tougher mortgage affordability rules. First-time buyers can be expected to be interrogated about their income, their little luxuries and how they would cope if interest rates rose (contrary to our expectations in 2013, the Bank of England base rate has actually fallen). 

A criticism that still rings true, however, is that the mortgage guarantee scheme only helps boost demand for properties, while doing nothing about the lack of housing supply. Unlike its sister scheme, the Help to Buy equity loan scheme, there is no incentive for property companies to build more homes. According to FullFact, there were just 112,000 homes being built in England and Wales in 2010. By 2015, that had increased, but only to a mere 149,000.

This lack of supply helps to prop up house prices - one of the factors making it so difficult to get on the housing ladder in the first place. In July, the average house price in England was £233,000. This means a first-time buyer with a 5 per cent deposit of £11,650 would still need to be earning nearly £50,000 to meet most mortgage affordability criteria. In other words, the Help to Buy mortgage guarantee is targeted squarely at the middle class.

The Government plans to maintain the Help to Buy equity loan scheme, which is restricted to new builds, and the Help to Buy ISA, which rewards savers at a time of low interest rates. As for Help to Buy mortgage guarantee, the scheme may be dead, but so long as high street banks are offering 95 per cent mortgages, its effects are still with us.