If David Cameron becomes prime minister, he plans to "unleash a new culture of public sector enterprise".
The Conservatives will give public sector workers such as teachers, nurses and social workers and service users the right to form co-operatives to run public services. The new managers would decide how they were run – within minimum national standards.
The twin objectives of reducing public sector debt and reconnecting with citizens increasingly disillusioned by current power structures could spawn some interesting new models for public service delivery.
Mark Johnson
Lambeth council has already announced plans to become a "co-operative" council. Residents who help run services would get council tax rebates. Lambeth hopes the scheme, based on the John Lewis partnership business model, will save about £30m.
How would it work?
Mutual models could take a variety of legal forms. They could be true co-operatives, established as companies limited by guarantee or industrial and provident societies, where members derive benefit from the venture's economic success.
Alternatively, they could be wholly non-profit distributing vehicles established in the public interest, such as community interest companies or even charitable companies. Civil servants are very attracted to models where citizens would become "co-producers" of services, to reduce costs and improve outcomes.
Growing interest
There is now growing interest from local government services, such as education support services, leisure, cultural services and libraries, as well as from health and social care.
Many managers are attracted by having more control over their own destinies and shaping the direction of their services. Often the services may be seen currently as "non-core" to the public sector host and, by gaining a degree of independence, access to new funding streams and selling their services into wider markets, they may be able to achieve a more sustainable future.
The 'right to request' in health
The Department of Health has encouraged the creation of social enterprises in primary health and social care since 2006. Lord Darzi provided new impetus when he promised frontline staff the "right to request" to set up a social enterprise in his 2008 review.
These organisations were supposed to be the 'disruptive innovators' who would reform the system from within. Progress to date in building scale from these models has been slow.
Our research shows there are essentially three reasons for this. First, there are often powerful vested interests in senior management who simply oppose large swaths of their service empire disappearing.
Yet, under the current process, senior management support must be secured to allow services to float off. Tactics as basic as stopping items from reaching a primary care trust board agenda can be used to halt progress. Some people have even been put through disciplinary hearings for daring to go behind the board's back. Without a powerful independent champion, it may be difficult to gain momentum.
Secondly, there is a shortage of early-stage working capital to support the fledgling enterprises in the initial start-up phase. However, once a contract has been secured, lenders will be keen to support enterprises with often very significant turnover.
Thirdly, the commissioning and tendering process to gain contracts is too cumbersome. Tender documents and contracts are often not fit for purpose and try to load too much risk onto fledgling providers. Outside providers find it difficult to compete on a level playing field. The current debacle over Andy Burnham's announcement that the NHS in-house team should be the 'preferred provider' has magnified the problem.
No one should underestimate the hard slog the 'disruptive innovators' face to launch new enterprises. It is a rollercoaster for some to navigate the bureaucracy to gain approval to spin out and persuade staff to make the jump, faced with union opposition on pension rights, which is often spun unfavourably. They need a unique blend of skills: a mission driven-zeal combined with a strong commercial nous and an appetite for risk. Exercising the 'right to request' requires nerves of steel and a strong determination to succeed. These pioneers will be a rare breed indeed.
Mark Johnson is managing director of specialist public services law firm TPP Law
