Distribution by TSO (The Stationery Office) and available from: Online www.tsoshop.co.uk FIFTH REPOR Mail, Telephone, Fax & E-mail TSO PO Box 29, Norwich NR3 1GN General enquiries: 0870 600 5522 Order through the Parliamentary Hotline Lo-call 0845 7 023474 T FROM THE COMMUNITIES AND LOCAL GOVERNMENT COMMITTEE: SESSION 2012–13: HC 112 Fax orders: 0870 600 5533 E-mail: [email protected] Textphone: 0870 240 3701 House of Commons The Houses of Parliament Shop 12 Bridge Street, Parliament Square London SW1A 2JX Communities and Local Telephone orders: 020 7219 3890 General enquiries: 020 7219 3890 Government Committee Fax orders: 020 7219 3866 Email: [email protected] Internet: http://www.shop.parliament.uk TSO@Blackwell and other Accredited Agents © Parliamentary Copyright House of Commons 2012 Mutual and co- This publication may be reproduced under the terms of the Open Parliament Licence, which is published at www.parliament.uk/site-information/copyright/ operative approaches ISBN 978 0 215 05085 4 before to deliveringPY: form local CO 2012 any in services part, ADVANCE or December 6 Fifth Reportfull, of Session 2012–13 in Thursday EMBARGOED on publishedam be to 00.01 Not HC 112 EMBARGOEDADVANCECOPY: Nottobepublishedinfull,orpart,inanyformbefore 00.01amonThursday6December2012 House of Commons Communities and Local Government Committee Mutual and co- operative approaches to delivering local services Fifth Report of Session 2012–13 Report,EMBARGOED together with formalADVANCE minutes,CO oralPY: and Nottowrittenbepublished evidence infull,orpart,inanyformbefore Ordered by00.01 the Houseam of CommonsonThursday 6December2012 to be printed 21 November 2012 by authority of the House of Commons London: The Stationery Office Limited Published on 6 December 2012 HC 112 £22.00 The Communities and Local Government Committee The Communities and Local Government Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Department for Communities and Local Government. Current membership Mr Clive Betts MP (Labour, Sheffield South-East) (Chair) Heidi Alexander MP (Labour, Lewisham East) Bob Blackman MP (Conservative, Harrow East) Simon Danczuk MP Rochdale (Labour, Rochdale) Bill Esterson MP (Labour, Sefton Central) Stephen Gilbert MP (Liberal Democrat, St Austell and Newquay) David Heyes MP (Labour, Ashton under Lyne) James Morris MP (Conservative, Halesowen and Rowley Regis) Mark Pawsey MP (Conservative, Rugby) John Stevenson MP (Conservative, Carlisle) Heather Wheeler MP (Conservative, South Derbyshire) George Hollingbery MP (Conservative, Meon Valley) was a member of thebefore Committee during this inquiry. PY: form Powers CO 2012 any The committee is one of the departmental select committees, the powers of in which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the internet via www.parliament.uk.part, ADVANCE or December Publication 6 The Reports and evidence of the Committee arefull, published by The Stationery in Office by Order of the House. All publications of the Committee (including press notices) are on the internet at www.parliament.uk/parliament.uk/clg.Thursday A list of EMBARGOED Reports of the Committee in the present Parliamenton is at the back of this volume. published am The Reports of the Committee,be the formal minutes relating to that report, oral evidence taken and some orto all writte00.01n evidence are available in a printed volume. Not Additional written evidence may be published on the internet only. Committee staff The current staff of the Committee are Glenn McKee (Clerk), Sarah Heath (Second Clerk), Stephen Habberley (Inquiry Manager), Kevin Maddison (Committee Specialist), Emily Gregory (Senior Committee Assistant), Mandy Sullivan (Committee Assistant), Stewart McIlvenna, (Committee Support Assistant) and Hannah Pearce (Media Officer). Contacts All correspondence should be addressed to the Clerk of the Communities and Local Government Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 1234; the Committee’s email address is [email protected] Mutual and co-operative approaches to delivering local services 1 Contents Report Page Summary 3 1 Introduction 5 Our inquiry 6 This Report 6 2 Co-operative models 7 The co-operative and mutual concepts 7 A short history 8 Mutuals and co-operatives delivering services in the public sector 8 Mutual and co-operative models being used by local authorities 10 Employee-owned mutuals or co-operatives 10 Two-way and multiple stakeholder models before 11 Multi-way models 12 PY: form The Lambeth model—co-production CO 2012 14 any 3 The evidence for co-operative and mutual approachesin 18 The benefits of mutuals and co-operatives 18 part, ADVANCE Evidence of benefits or December 18 6 4 The Government’s role full, 22 The Right to Challenge in 22 Public Services (Social Value) ThursdayAct 2012 23 EMBARGOED Mutuals Information Service andon Support Programme 23 The Mutuals Taskforcepublishedam 23 Cross-departmentalbe working 24 Regulation to 00.01 25 Not 5 Barriers to co-operatives and mutuals 26 Finance 26 Taxation 27 Procurement 29 Public Services (Social Value) Act 2012 30 Cultural barriers 31 6 Risks of using co-operatives and mutuals 34 Accountability 34 Local engagement 36 Employees 37 Service Fragmentation 38 Asset loss 39 7 Conclusion 41 Conclusions and recommendations 42 2 Mutual and co-operative approaches to delivering local services Formal Minutes 47 Witnesses List of printed written evidence 49 List of Reports from the Committee during the current Parliament 50 48 EMBARGOEDADVANCECOPY: Nottobepublishedinfull,orpart,inanyformbefore 00.01amonThursday6December2012 Mutual and co-operative approaches to delivering local services 3 Summary 2012 is the International Year of Cooperatives. The Cabinet Office is promoting the use of employee owned mutuals across the public sector and the Department for Communities and Local Government, through its localism reforms, has provided both a stimulus and opportunities for co-operatives and mutuals to take over local services. Many local authorities themselves are examining mutual and co-operative approaches to working and delivering services. A small number of authorities are significantly changing their methods of work and organisation to mutual and co-operative approaches to the delivery of their services. It was against this background that we held our inquiry. Although the prevailing winds favour mutual and co-operative approaches to delivering local services, we found less change than might be expected in local government. The lack of progress was surprising given the benefits claimed for mutuals and co-operat ives. Their organisational structures offer employees, and in many cases service users too, a say in how the organisation is run and services are provided and adapted to changing local needs. before They have the potential to provide greater customer satisfaction, an improved ability to innovate and a more motivated and productive workforce.PY: formWhile there is some evidence (from the health sector) to underpin these claims, theCO evidence 2012for the benefits of mutuals any and co-operatives operating in local gove rnment is limited. That may accumulate in time in but we are in a “chicken and egg” situation with local authorities holding back until the part, evidence is stronger and the evidence cannotADVANCE be produced until more authorities move to a or December mutual or co-operative approach. 6 full, The Government has encouraged mutuals, especially employee-owned mutuals. We in welcome the Government’s proactive approach but it needs to go further to help remove Thursday the barriers we found that were preventing more mutuals and co-operatives from starting EMBARGOEDon up. First, the Government has a responsibili ty to inform and educate financial institutions published about lending to mutuals and co-operatives.am We also see an opportunity for the be Government to examine tax incentives for mutuals and co-operatives. In addition, we to 00.01 found a case for ensuring procurement rules gave the maximum flexibility in tendering for services so that mutualsNot and co-operatives are able fairly to compete with large companies and in-house providers. From the handful of authorities adopting new approaches to their services a number of models with some or all of the characteristics of a mutual or a traditional co-operative are emerging. It must be right that no one model will fit the diversity of local circumstances in England but we see scope for the Government and local government itself to provide “off- the-shelf” models and guidance and advice. This is needed to reduce the confusion and risks that deter local authorities from considering using mutuals and co-operatives. Two key areas we indentified were, first, that all new organisations had to remain accountable to the Council—this will usually be through a contract—and they have to be transparent in their operations. Second, through commissioning processes and subsequent oversight authorities must be able to prevent services from fragmenting and the beneficial use of local public assets has to be protected. We see scope for greater co-ordination between the Government’s Mutuals Support 4 Programme, the Department for Communitie Government Association in ga operatives in deliverin local government have a choice: they must take action to provide the