Ensuring accountability on the path to mutualism

Mutualisation can give public sector organisations better efficiency but their distance from government means they need to ensure they are more accountable to users

Mutualisation, or the employee-ownership of public services, is one of the key planks of the government's public services reform programme.

Alongside positive messages about employee empowerment, one of the primary reasons for their popularity is mutuals' apparent efficiency: the ResPublica thinktank, for example, suggests that public sector mutuals could provide savings of between 20% and 40%.

But the model isn't without its challenges. Being at a distance from government, and therefore outside direct democratic control, public service mutuals will need to ensure they are accountable to users in order to meet their needs effectively.

As the reforms progress, designing the right accountability mechanism for the situation at hand will therefore be vital to success. Fortunately, experience highlights two tried-and-tested mechanisms.

Choice is the more familiar mechanism. We are all consumers, and we are used to the concept of changing supplier when we are unhappy. A disappointed customer of the Co-operative is more likely to take their business elsewhere, for example, than remain with the Co-operative movement and attempt to effect change through its participatory structures.

Understanding this has meant choice has been a major feature in many public sector reforms of recent years. For example, in the introduction of personal budgets in health and social care. Choice can also be exercised indirectly. Public sector commissioners act as proxies for the public, exercising choice on their behalf through mechanisms like competitive procurement.

Over time, as markets mature, new mutuals may be exposed to such competition as commissioners use existing mechanisms to select the best value supplier. Commissioners may also increase accountability by aligning supplier incentives with outcomes that users value using mechanisms such as payment by results.

Whether exercised directly or indirectly, choice can harness the power of market forces to drive improvements in outcomes.

But reliance on choice is not always the answer. Markets have their inefficiencies, and in some circumstances choice may be limited or completely unavailable and having voice becomes more important.

In thinking about voice, potential mutuals should consider how best to engage their users. Some of the first mutuals have brought their users directly into the process of organisational design. The first wave of children's social care mutuals, for example, have involved looked-after children in thinking about how they provide their services.

An alternative is the stakeholder-empowerment model. In social housing, for example, tenant management organisations offer residents control over their housing; the largest of these, Kensington and Chelsea, manages almost 10,000 homes.

This allows service users the chance to shape services to meet their needs, but also means devolving significant power to the user from not only government but also the service provider.

Either way, many public services mutuals will have to become accustomed to offering users a significant role in the running of services, and potentially even taking a role in management.

Whether the solution is choice or voice, new accountability relationships will be a fact of life for public sector mutuals and the challenge will be to build the capacity for robust accountability and market management mechanisms.

Early indications are that the public service reform white paper expected in February will recognise the importance of effective accountability to the success of the mutualisation policy. It remains to be seen whether it identifies any solutions.

Chris Davies is director of public services reform at Tribal and Stephen Farrington works as a consultant in Tribal's government business

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