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Are ‘public service mutuals’ a good thing?

14 December 2017

News and media


Are public service mutuals a good thing?

Are ‘ public service mutuals’ an innovation that could allow Australia’s public services to deliver better services?

Visiting British academic Professor Julian Le Grand gave an enthralling speech on the potentialities for ‘public service mutuals’, based on the experience in the UK, at an ANZSOG event at the ANU’s Crawford School.

Professor Le Grand heads Social Policy at the London School of Economics and is a key advocate of expanding the role of mutuals in delivering public services. Mutuals are hybrid organisations, controlled by members or employees, which make their own decisions and have rights to dispense residual incomes. These then contract with the public sector to provide services.

In the UK, many mutuals have spun out of the public sector and are made up of former public sector employees. Professor Le Grand that many have escaped the constraints and rigidities of the public service and have attracted experienced and dedicated staff by giving them greater autonomy and control over decision making.

Mutuals aimed to combine the very best of public service ethos and delivery logistics with the very best of what markets could perform for customers or users of the service. They are not necessarily small organisations, in the UK health sector the 40 organisations that have been formed have an average size of 500 employees and average turnover of around £20m.

Within public service mutuals Professor Le Grand included social enterprises (which invest the majority of their profits in their social or environmental mission) and socially-oriented businesses (who perform social benefits and redistribute some funds and services to social ends).

Collectively these socially-oriented organisations known as the ‘fourth sector’ number over 20,000 in Australia and 1.7 million in the UK, many of which were formed relatively recently (within the last 10 years).

Mainly they are found in the service and caring sector, social work, health services, providing employment opportunities, but also in habitation and environmental areas. Their clients are often women in need, young people and people with disabilities. More business-oriented mutuals were also active in banking and finance, insurance, pensions, motoring and travel-related activities.

He spoke passionately of the UK’s initiatives to incubate mutuals under both Labour Prime Minister Tony Blair and Conservative minister Francis Maude, including his role in personally heading a mutuals taskforce to drive policy and implementation, and the establishment of a mutuals support fund to provide small inducements to help seed-fund community initiatives. The long-term aim of UK government policy has been to encourage the development of sustainable enterprises that can deliver long-term benefits for both employees and users.

He said the benefits of public service mutuals were tangible. They produced better quality services, more effective services that were highly valued by clients and improved productivity by 4-5%.

In terms of the organisational dynamics, they worked from flatter hierarchies, had less middle management, increased trust in management from front-line staff, increased motivation, encouraged peer pressure, reduced free-riding by staff or contributors, reduced turnover and had less absenteeism.

They add to the range of organisations which can be used to deliver public services, and provide another forum for innovation in the delivery of those services.

Professor Le Grand said mutuals were not necessarily about reducing spending on public services. He said that some governments had thought they could invest in mutuals to enable them to spend less in the future on these services, but in fact it turned out that mutuals often consumed the same level of resources while producing better services in terms of value to the client or user

Given the newness of mutuals as part of the UK’s public sector landscape, there are some aspects of concern about their operations and long-term future.

These included the debate around which services and public activities were appropriate to mutualism, where did the natural boundaries lie, how did governments (who may be part funding some of them) evaluate performance of mutuals.

He concluded that we would be in a position to better answer these kinds of questions or concerns once this new wave of mutual social organisations has been operating for a longer period of time.