On 19 November 2010, First Minister Alex Salmond launched a new
Commission on the future of public services in Scotland. The
Commission aims to respond to the £1.3 billion cut in public
spending - described by Mr Salmond as "the biggest reduction
in public spending imposed on Scotland by any UK government"-
by developing recommendations to improve quality and ensure the
sustainability of Scotland's public services - recommendations
which could prove to be very interesting for the third
sector.
A key component of the Commission's remit is to find ways to
provide services that "are delivered in partnership, involving
local communities, their democratic representatives, and the third
sector." The importance of third sector involvement is
further reinforced by its representation on the Commission panel,
including Dr Alison Elliot, OBE, Convener of SCVO and Kaliani Lyle,
Scottish Commissioner of the Equality and Human Rights Commission,
former Chief Executive of Citizens Advice Scotland and former Chief
Executive of the Scottish Refugee Council.
South of the border, various new policies have already been
introduced by the UK Government as part of the 'Big
Society' concept, with a similar set of aims. In David
Cameron's launch speech, he announced plans to encourage
volunteers, charities and community groups to take charge of public
services and described the Big Society plan as "the biggest,
most dramatic redistribution of power from elites in Whitehall to
the man and woman on the street".
Despite attracting criticism for failing to ensure adequate
accountability, queries over funding and concerns that this could
leave the door open for privatisation in the future if suitable
safeguards are not put in place, the plans present clear
opportunities for the third sector in the provision of public
services.
Whilst Alex Salmond took care to distance developments in Scotland
from the Tories' Big Society agenda - saying that he was
"more concerned by the Fair Society" - the launch of the
Commission nevertheless provides further evidence of the growing
pressure across the UK to explore new ideas around public service
delivery.
Burness has already been involved in developing innovative
alternative delivery models across a range of public services. In
this article, we aim to give a broad overview of these alternatives
and begin to explore the most relevant developments for charities
and the third sector - but look out for further articles to come in
our next issue, which will examine the models in greater
detail.
Arm's length social enterprises and co-operatives
Francis Maude, the Minister for the Cabinet Office, gave a
keynote speech in London on 17 November urging public sector
workers to form co-operatives to take over the running of public
services. Maude stated that the so-called 'John Lewis
model" where staff run their services as mutual organisations,
could transform the public sector.
Burness is involved in a number of such projects in Scotland which
are now starting to take shape; in one instance, senior officers
employed by a Council are in the process of forming their own
social enterprise to take over a service strand - which has been
under threat from public spending cuts - from the local
authority. In another example, other Council workers involved
in a different service strand are also currently looking to form a
social enterprise, this time prompted by a desire for greater
autonomy and the belief that this will enable them to better manage
costs and achieve improved outcomes. One local authority is
itself investigating taking a proactive role and looking to hand
over the running of certain services, currently threatened by
spending cuts, to an independent arm's length social
enterprise.
It is worth pointing out that, at the moment, terminology in this
area remains very fluid and the expressions "social
enterprise"; "co-operative" and "mutual"
are used interchangeably. We would suggest, though, that the
nomenclature is very much a secondary concern; it is far more
important when setting up such an organisation that the right model
is chosen and that the fundamentals are all in place for the
organisation to function and achieve its objectives.
Independent social enterprises/co-operatives have a range of
benefits, including a greater clarity of purpose and more
integrated service, which focuses on service users and reduces
bureaucracy. There is also enhanced opportunity for greater
creativity, innovation and an altogether more entrepreneurial
approach. Co-operatives can also build on officers'
first-hand experience of delivering the service whilst retaining a
public service ethos; and crucially, under the current climate,
they can also access new sources of funding and new markets.
It could also be said that accountability is increased by enhanced
stakeholder engagement.
On the flip side, it might be argued that there is actually less
accountability, since the services are being distanced from
publicly-elected representatives; and that there is the potential
for a focus on financial performance, which could distort the
pattern of service delivery. There are also heavy
consequences of failure – in relation to staff, as well
as service users. The removal of local authority control over
pay, terms & conditions and pension entitlements could also
mean a worse deal for staff, but again, it could be argued that
whilst such cuts are unpalatable, they are necessary if certain
service strands are to survive at all in the current climate.
There is also limited access to investment finance (as compared
with private sector providers) and, at the same time - even if the
organisation is set up by staff previously employed by the local
authority - if they are not wholly-owned or controlled by the local
authority then procurement procedures for the delivery of the
service will usually come into force. This would then open up
the market to private sector providers, against whom an independent
social enterprise or co-operative may struggle to compete in a
tender process.
Public-Social Partnership (PSP)
A further option is the Public-social Partnership model, which
usually involves third sector consortium-working, i.e. a number of
existing social enterprises forming a joint offering (potentially
via a jointly-controlled company) to deliver a contract. The
social enterprise company that delivers the service still remains
wholly independent of the public sector authority (the authority is
not represented on the board of the social enterprise
company). However, in this case, the public sector body works
jointly with the social enterprise company to establish a framework
for future delivery of services, including defining the
specification for the services. There is also a parallel
process of capacity-building in relation to social enterprises, and
following that initial stage, the public sector body runs a
procurement exercise in relation to the services; but the ability
of the social enterprise to compete on a level playing-field with
other potential service providers has been significantly
enhanced.
Wholly-owned public sector offshoots
Another increasingly popular model is a body formed by a local
authority as a separate legal entity, but which remains
wholly-owned or controlled by the authority. Such
organisations do not face the same procurement issues as
independent social enterprises/co-operatives or consortia, but
still retain many of the benefits. There is again a sense of
a clearer mission, less bureaucratic clutter, a greater sense of
empowerment among staff and an increased scope for innovation - all
benefits which can contribute to higher quality service delivery
without additional cost to the authority.
The move towards the offshoot model reflects wider shifts in the
general local government environment, and the fact that traditional
reservations and barriers have been weakened. The Scottish
Government is now generally supportive, and there is an increased
availability of specialist technical support - all factors which
are driving the process forward. There are also a variety of
legal entities - or even combinations of legal entities - that can
be employed, each tailored to the needs of the particular project
and again, this is an area in which Burness have had a major role
in development of new models. An increasing number of local
authorities are choosing to set up such offshoots as charitable
trusts (technically, companies limited by guarantee with charitable
status), indicating a further blurring of boundaries between the
public and third sector. We will be looking at the
implications of this in our next issue.
We will also be examining all of the different alternative delivery
models in greater detail, taking you through the different
structures and legal entities available, and looking at the pros
and cons of different approaches. We will also look at case studies
to demonstrate how these models are already working in practice,
and explaining what this might mean for your organisation.
We will also be keeping a close eye on the Commission on public
service reform and will give you a full update and analysis when
findings are published later in the year.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.