Understanding the challenges and barriers to developing a mutual to deliver public services.

Introduction

Catalysed by the Coalition Government's "Big Society" agenda, we are witnessing a resurgence of interest in the use of employee and community led mutual models to deliver public services. The mutual governance model necessitates meaningful stake-holder engagement thereby incentivising performance; it will therefore offer greater diversity on a wide range of public service externalisation giving rise to a welcome shift towards community empowerment and civic engagement.

What is a mutual organisation?

Whilst mutual organisations may come in a variety of shapes and sizes, they have the following core characteristics:

  • Member owned – a key concept of mutuality is that the undertaking will be owned by and run for the benefit of its members. Because the benefits afforded may either be public (i.e. philanthropic) or private in nature, mutuals have the flexibility to operate as a charity, voluntary organisation, social enterprise or for-profit business.
  • Defined purpose – mutuals are considered well suited to public service delivery as their objectives or purposes may be closely aligned or tailored to those of the community.
  • Governance – because of their membership structure, mutuals allow for greater stakeholder engagement and influence, facilitating bottom up decision making and greater accountability.

Challenges

At their best mutual organisation may offer a perfect blend of efficiency, community engagement, tailored services all within an accountable framework. Whilst this presents significant opportunities for innovation and greater choice for the end user, there will be a number of operational, commercial and legal challenges about which these types of organisations must be aware to ensure that they are well placed to compete including:

Governance

  • Does the local authority or public body have the power to establish the mutual?
  • Are there fiduciary duties/obligations to consider?
  • Will the public body require control/decision making powers to be reserved to it?

Commercial

  • Will there be a transfer of assets and/or staff arising from the public service contract?
  • On a transfer of staff under TUPE, what are the pension implications for the staff?
  • If a public body will transfer assets to the mutual, how will that be documented and will there be any tax implications?
  • Will the mutual be eligible for third party finance?

Legal Structure

  • Will the mutual be incorporated or unincorporated?
  • Will the mutual operate for the public benefit or only its members?
  • What are the regulatory/reporting requirements of the legal structure?
  • How will the structure facilitate governance as between the board and the members?

Procurement Rules

  • Will the mutual operate inside or outside the scope of the Public Contracts Regulations 2006?
  • Will a newly formed mutual be in a position to compete alongside established service providers?
  • Will social issues and community benefits be relevant to the contract subject matter?

Our experience

The methodically of public service delivery is in a state of rapid evolution, requiring greater innovation and new ways of working. As one of the leading public and not for profit law firms in the UK, we are well placed to advise organisations from across the whole spectrum of public service delivery. The scope of our expertise means that wherever your organisation sits within a transactional chain, we will be able to offer practical guidance to help you navigate this radically changing landscape.

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.