Those employees setting up their own public service mutuals will hopefully have entrepreneurial drive in buckets, as the track record of public service mutuals  in the open market is looking decidedly patchy.

What’s more the government is committed to ensuring that a level playing field exists that enables all qualified providers to compete, with new rights of appeal given to those that feel excluded from the commissioning process.  There are to be no favours for fledgling mutuals in an open and competitive market.

We reported before how employee-owned social enterprise and ‘big society’ pin ups Central Surrey Health lost out in their first competitive bidding process to Assure Medical, owned by Virgin.

Earlier this month we also saw DA Partnerships, the employee-owned mutual set up by staff in advance of the abolition of the Audit Commission.  DA Partnerships has now folded and become a wholly owned subsidiary of audit firm Mazars as a result of managing to secure only one local audit contract in a market where Ernst and Young, Grant Thornton and KPMG shared the rest between them.  Those ex-Audit Commission staff learned the hard way what empowerment means in the market.

Many supporters of mutualisation have argued that specific conditions need to be put in place to develop and grow the sector, a key tool being the use of long term contracts that incubate fledgling mutuals, providing some breathing space to develop sufficient experience and capacity to compete in the market.

In their report of June 2011, the All Party Parliamentary Group on Employee Ownership stated that they favoured “longer contracts for employee led mutuals, such as five to seven years in length, and do not see any conflict if the ultimate aim is increased diversity in supply.”

Several other organisations including Co-operatives UK, the Kings Fund and Association of Public Service Excellence have called for long term commissioning to be used as a way of nurturing the growth of public service mutuals.

I suspect that there is real concern among the mutual sector about the government’s stated commitment to embed open competition across all commissioned services.  Providers will be granted rights of appeal where they feel they have been “unfairly excluded from the commissioning process”.

But no doubt this will be music to the ears of large private sector providers looking for an uninhibited access to public service contracts and, I suspect, to the legal teams they employ.

Promoting the release of Open Public Services 2012, an update to the government’s white paper released last July, Cameron reiterated his “instinctive belief” that a combination of individual consumer choice and increased competition and diversity of provision was key to securing innovation and value for money in public services.

The TUC’s response to last year’s white paper provided ample evidence to show that opening up public service markets actually has the opposite effect, leading to a concentration of provision in the hands of unaccountable private providers.  At the same time services became increasingly complex and fragmented, with the greatest impact on the most vulnerable. 

To see David Cameron’s diversity of provision in action, let’s take a quick look at developments in the NHS under his open public services agenda.

In September last year, community health services in Surrey were awarded to Assure Medical, owned by Virgin, despite competition from the celebrated employee-owned Central Surrey Health.  In November, Circle Healthcare, the ‘social enterprise’ majority owned by private investors, took over the management of Hinchingbrooke Hospital in Cambridgeshire.  Earlier this month Suffolk’s community health services were taken over by Serco.  Currently Serco and Virgin are the two preferred bidders in line to take over Devon NHS children’s services.  And looking ahead, George Eliot Hospital NHS Trust is considering the outsourcing of its management, with Circle Healthcare, Care UK and Serco in line for the award.

So much for diversity, accountability and the breaking up of monopolies.

Yet the ambition set out by the government yesterday is to extend commissioning and competition across the virtually the entire range of public services, including sensitive areas such as prevention, detection and investigation of fraud, debt management and enforcement services, immigration and visa administration and support for looked after children.  This last area demonstrating that the lessons of Southern Cross have clearly not sunk in.

As well as extending commissioning, the government is also looking to embed competition by introducing new rights and complaints processes for service users and providers who feel that they have been excluded from competition and choice in public services.  The government are keen to enshrine a new “right to choose” for service users, already described as “unworkable in practice” by the Institute for Government.  In addition, potential providers will be given “a right of appeal to an independent organisation when they feel that they have been unfairly excluded from a commissioning process”.  Every service must be open to competition, every commission open to every provider.

This creates a whole new layer of complexity and cost, with consultants and lawyers no doubt lining up to seize the opportunities. And it also undermines any attempts by public authorities to use the commissioning process to nurture and grow new forms of provider such as mutuals or social enterprises, with few wanting to risk “unfairly excluding” the corporations who will be willing and able to challenge every case .

While Open Public Services 2012 brought little new to the table, it was perhaps the government’s boldest statement yet of its privatising intent.

But the Public Services (Social Value) Act 2012 has some potentially far reaching implications for the commissioning of public services.  Trade unions and community activists should take note.

With cross party support and government backing, Tory MP Chris White’s (heavily amended) private member’s bill gained royal assent on 8 March.  The aim of the Act is quite simple, to require public authorities to ensure that they procure services in a way that provides ‘social value’.  The complexity arises around what is considered ‘social value’ and how best it is identified, evaluated and monitored.

The Act applies across the public sector in England and Wales, including central government, non-departmental bodies and agencies, the NHS, local authorities, police, fire and rescue services, housing associations and the criminal justice system.  The key part of it requires that, while remaining within EU procurement rules

The authority must consider –

(a)   how what is proposed to be procured might improve the economic, social and environmental well-being of the relevant area, and

(b)   how, in conducting the process of procurement, it might act with a view to securing that improvement.

Of course, this sits very comfortably with a government bent on outsourcing as much public service provision as possible and, in theory if not practice, likes the idea of social enterprises, voluntary organisations and charities picking up some of the work.  Social Enterprise UK have been keen supporters of the bill from its inception and were elated at the arrival of the Act.

While the TUC will continue to press the case for publicly owned and accountable public services, we have long campaigned for the strengthening of social value in procurement and, as such, we welcome this legislation.

That said there are a number of potential problems that we should be alive to.

The most obvious point to make is that social value does not come cheap.  And with public spending cuts intensifying, the ability of public authorities to go down this route is severely limited, particularly in those areas facing the biggest cuts and upheaval such as local government and health where outsourcing is most rife.

There is also the danger that as part of the procurement process, social value becomes overly defined and commoditised.  While the public sector client needs to be clear about the value it is seeking to acquire and how it will be measured, there is a threat that this could be become a bureaucratised process or a box ticking exercise that stifles genuine social innovation.  Overly prescribed outcomes may also create mission drift within voluntary and community providers who end up chasing narrowly defined outcomes rather than serving their social purpose.

Moreover, requirements for bidders to demonstrate social value may well favour only those providers who have the capacity and means to undertake the kind of Social Return on Investment type analysis that will offer the quantifiable outputs that the procurement process might require, namely large charities and private enterprises. 

The Economist estimates that there are currently £80bn worth of public contracts currently being contested in national and local government and this is likely to increase to over £140bn by 2015.  They quote an investment banker, Caroline de la Soujeole, who calls this “a golden age of outsourcing” and the number of corporate events aimed at public sector outsourcing is growing each week.  Corporate providers are lining up and increasingly adept at displaying their social value credentials, or ‘partnering’ with others who do a better job of it.  As we’ve pointed out before, evidence under this government shows that this is where the business is likely to flow.

Sp we need to ensure that social value is defined in its broadest sense and is based on a genuine dialogue between public service providers, users, communities, unions and other stakeholders.  The definition of social value will differ in different contexts and between services, providers, communities.  We need to ensure that we’re capturing the right kind of value and this can only come through an informed commissioning process that meets genuine need defined through that process of dialogue.  And we need to ensure that social value is applied to all potential providers, so this isn’t just an exercise in giving public contracts to charities or social enterprises on the assumption that they ‘do a bit of a good’.  Social value must apply to any provider, whether the service stays in-house or goes out to a contractor from the private or community sector.

The scope for trade unions and community activists to use the new legislation to support living wages, investment in local employment, training and apprenticeship schemes and labour standards is evident.  This new Act makes this a more tangible proposition.  But concerted local organising and campaigning will be necessary to ensure that we are setting the agenda on social value and making procurement work to deliver the right outcomes.

We saw in the Chancellor’s Autumn Statement that the combination of attacks on pay and pensions is imposing massive cuts on the average living standards of public sector workers.

Little wonder then that yesterday’s joint report from the Audit Commission and Local Government Association on the future of workforce pay and employment in local government gives us real cause for concern.

The report tells us that, as councils face 26% cuts in funding between 2011/12 and 2014/15, workforce costs will be increasingly targeted.  This will be achieved in three main ways:

Cutting the pay bill

Councils are already cutting pay bills through a range of measures including pay freezes, increasing part-time working, reducing additional payments, such as over-time and mileage allowances, and cutting the number of agency workers and use of consultants.

It is worth noting that TUC research has found that public sector workers are the most likely to do unpaid overtime, with over one in four (26.3%) regularly putting in more than seven hours of unpaid overtime a week, compared to around one in six workers in the private sector (18.9%).  Cutting overtime pay while expecting depleted numbers of staff to maintain existing services means that the pressure will intensify to work longer hours without pay.

The report also points to councils exploring the potential for greater “local adjustment” within the national pay bargaining agreements.  It recommends that councils should “benchmark pay rates with public, private and voluntary organisations in similar labour markets”.  While it stops short of recommending local pay bargaining, it clearly links local variation with potential labour cost savings thus echoing the government’s direction of travel that we highlighted here recently.

Patrick Butler at the Guardian also rightly points out that the report doesn’t mention those councils, like Shropshire, who are trying to push through pay cuts by threatening to sack staff who refuse to accept enforced changes to their terms and conditions.

Shedding jobs

PricewaterhouseCoopers estimate that local government lost about 145,000 jobs in the last year, accounting for about 5% of full time equivalent posts.  So far, this has largely been achieved through recruitment freezes, early retirements and voluntary redundancies.

Next year will be more brutal.  The report states:

The numbers of compulsory redundancies are likely to increase as councils make further budget cuts following service and departmental reviews.

The report acknowledges that redundancy costs are spiralling.  This is why 43% of councils plan to reduce their local redundancy severance payments.

The increasing use of part-time work is another part of the strategy.  In the two years to April 2010, full-time working dropped by 4.1% while part-time working rose by 4.4%. The report attributes this, to some extent, to:

many people working shorter hours to help their employers cut labour costs and thereby minimise redundancies

Outsourcing

Outsourcing is clearly seen as a means to remove workers from the pay bill.  The report suggests that:

outsourcing helps to explain why the pay bill reduced by 5.6% in real terms between 2008/9 and 2010/11

One county council featured in the report estimates that of its 7,500 full time staff, around 2,000 are included in current outsourcing plans with the potential to outsource a further 2,500, leaving a remaining core staff of just 2,500 by 2014.

In their guide to insourcing, the Association of Public Service Excellence (APSE)   have shown that time and again local authorities have found service delivery to be more flexible, higher quality and better value for money when brought in-house.  None the less, increasing numbers of councils will view outsourcing as a means of cutting wage bills.

What is particularly worrying is where the axe is likely to fall most.  The LGA claim that 90% of councils have reduced senior management costs by employing fewer people or paying them less.

However, the proportion of staff earning over £50k represents just 7.6% of the total pay bill.  Those looking to find big savings through pay cuts are likely to target those who represent the biggest slice of the wage bill.  In 2009/10 most spending on pay was on three groups:

• Non-teaching staff in education, such as teaching assistants (35%)
• Social care staff (22%)
• Management and support services (14%)

No prizes for guessing what kind of workers fill these jobs.  As Heather Wakefield of UNISON comments:

Teaching assistants, youth workers and social care workers are among the groups facing the largest cuts – despite record youth unemployment and an ageing population. Low paid women are the biggest losers, as they make up 75% of council workers and 90% of the occupations worst hit.

Once again low paid women will be bearing the brunt of the cuts.  And, of course, those most reliant on the services being cut.

The government’s u-turn on rail fare increases is a welcome victory for the Campaign for Better Transport, rail unions and passenger groups who maintained the pressure on ministers.  But the move is temporary and, as Manuel Cortes at TSSA has pointed out, this smacks of a tube fare sweetener for the incumbent Mayor of London ahead of next year’s election. 

 Let’s not forget either that 6% rises are still well ahead of pay awards and UK rail fares remain the most expensive in Europe, this is a retreat to unacceptable status quo.  The Fair Fares Now campaign will be keeping up the pressure for affordable and fair ticketing for passengers.

Investment in Trans Pennine electrification is to be welcomed.  But where will the rolling stock be coming from?  There are several existing calls on ex-Thameslink stock already and no one yet knows when this will become available.  And while support for Southern’s purchase of new stock made it in, the upgrade of Voyagers on Cross Country remained conspicuous by its absence and no other new rolling stock announcements were made.  London commuters will continue the wait for the postponed new tube trains on the Piccadilly and Central Lines.

This might sound like mundane stuff but it represents a considerable missed opportunity.  Accompanying electrification with a managed programme of new rolling stock procurement could have been a massive boost to the UK’s hard pressed rail manufacturing sector, providing potential investment into UK-based manufacturing supply chains and supporting high value jobs with significant multipliers in the wider economy.  As it is, we have the usual make-do mess. 

However, it remains to be seen how tenable these positions remain in the face of a deepening crisis across the sector.  It seems that every week brings worsening prospects for jobs, funding and services. 

While this clearly makes a mockery of the government’s Big Society aspirations, it might be argued that voices of opposition in the sector have been muted.  But is this soon to change?

Anger is clearly growing and not without reason.  Not only are voluntary organisations facing huge cuts and loss of jobs and services but, as we’ve blogged before, the promised opportunities are failing to materialise as private enterprise looks to dominate the open public services market.

Just how bad are things in the sector?  A quick trawl through reports in the last few months gives you a good idea.

The NCVO’s Charity Forecast shows that charity leaders’ confidence is lower than ever.  As NCVO’s report says:

98 per cent of charity leaders expect economic conditions within the sector to be negative over the next 12 months. This is the bleakest outlook in the survey’s three year history, with confidence levels lower than they were at the height of the recession.

Evidence from the Labour Force Survey shows that employment in the sector has fallen by 5% in the previous 12 months.  In addition, part time working is on the increase and average earnings have fallen to just over £10 an hour.  NCVO and Third Sector Research Centre report that employment is down over two successive quarters following the flatline towards the end of 2010.

An example of the impact on the workforce can be seen at Quarriers, the Scottish social care charity.  All 2,000 workers there are facing pay cuts, around a quarter of them losing at least 10% of their take home. On top of that are reductions in sick pay, maternity pay, paternity and adoption pay, increased pension contributions and an end to automatic pay increases in future.  This is not an isolated case.

Funding is nose-diving.  London Councils, for example, plans to cut voluntary sector funding by 75% from 2013.  Funding to the sector will reduce from £26m in 2010/11 to £8m in 2013/14.

Services are clearly at risk.  A report by the Charity Finance Directors Group and accountants PKF shows a picture of uncertainty and confusion over government policy with charities facing significant funding shortfalls and difficulty in planning and delivering services.  Richard Weighell of PKF says in Third Sector that:

there is a fundamental imbalance between supply and demand in the not-for-profit sector; charities are seeing growing demand for their services but are unable to invest enough to provide these services effectively

This is borne out by a poll of 120 organisations in the North East by Vonne that found that a quarter were expecting to close in the next 12 months and almost half were likely to shed at least one service.  73% had seen funding decrease in the previous year, 64% are using reserves.  Yet over two thirds had experienced a rising demand for their services.  And a London Voluntary Service Council survey showed, 70% of voluntary organisations reported an increase in demand for their services but 75% were not confident in meeting that demand now or in the future.

No wonder then that rumblings from within the sector are growing.  Will 2012 be the year when the sector begins to fight back? Feedback from trade union colleagues at voluntary sector events suggests so.  Building effective links between us will be essential if a serious challenge is to be made.

Unions, charities and voluntary groups have worked well on individual campaigns such as The Hardest Hit  and Justice for All.  And there have been some interesting developments on a regional level, interesting discussions have been taking place between the TUC and voluntary sector partners in the North West for example. It will be interesting to see how things progress but my prediction is that trade union and voluntary sector relationships are bound to develop as next year’s cuts bite even deeper.

I came across a blog from Gibb’s Barrow who had this to say on the politics of positioning in relation to product development:

Some people believe that the best way to produce a successful product is to align it with power and influence … while this might be an effective short term strategy, it is often the very reason why products fail to meet customer needs, why infighting occurs within organizations, and why product plans fall short of their goals.

The parallels are clear.  It is time for voluntary sector leaders to re-assess their strategy with a focus on what they are for and who makes up their constituency.  There’s a long game here with very high stakes, short term damage to the sector and those communities that rely on it could take years to repair.  The noises I’m hearing suggest that a re-alignment may be underway.

The Big Society seems increasingly conspicuous by its absence in government circles.  It might be about to make itself heard once again.

So the Local Government Chronicle quarterly survey of local authority directors and chief executives is a particularly useful snapshot of how public service providers are coping with government-imposed austerity.

The latest survey (see LGC 10/11/11)  has some telling results, with three key themes particularly apparent.

Firstly, services targeted at the most vulnerable are those that have suffered the greatest impact in the last 12 months.  Confidence that local authorities will be able to deliver corporate aims in the coming year remains worryingly low across all service areas.  But there’s large variation. Of the identified service areas, only waste broke the 50% mark.  Around a third were confident that street cleaning, licensing, planning and cemeteries and crematoriums were safe.  Significantly adult social care, housing, homelessness and economic development all registered below 10%.

Secondly, fears that the brave new localist dawn will overtaken by councils’ urgent need to cope with cuts are well founded.  The “dominant themes” for the next 12 months were all issues directly related to cuts and restructuring.  The three most dominant were making spending cuts (95%), reducing workforce (69%) and alternative service delivery (46%), the last of these being a polite term for outsourcing.  Languishing far behind were housing (16%), big society (12%), public health (18%), school building (4%) and the green agenda (3%).

Thirdly, unsurprisingly, pessimism over the economy is increasing.  Confidence that the economy will be better in a year has fallen from +28 prior to the general election to -85.  Net confidence of avoiding a double-dip recession has fallen from -44 before the election to -83 today.

The government will be producing a white paper on the future of UK rail in the next month or so.  With three quarters of franchises up for renewal in the next five years, the opportunity remains to make a significant change to rail policy.

Will the government put the interests of rail passengers and tax payers first and put an end to our dysfunctional and costly privatised rail industry?  Or will it take the option presented by the McNulty report and slash jobs, break up the rail network further and hand more power to private train operating companies, rewarding their executives and shareholders alike?

At a rally and lobby in Westminster today, organised by the RMT, ASLEF, TSSA and Unite, hundreds of railway workers came along to call on the government to reject the McNulty proposals and to use the franchising process to bring rail services back into public ownership.

It is worth reminding ourselves of some of the proposals that he recommends:

• the loss of tens of thousands of frontline workers such as train guards, station and ticket office staff, as well as safety critical infrastructure and operational workers
• the closure of over 600 station ticket offices
• even greater commercial freedom for train operators, higher fares, cuts in services and more crowded trains
•  the breakup of Network Rail and an end to its ‘not-for-dividend’ status, making the railway more fragmented and inefficient and putting safety at risk

The TUC, RMT, ASLEF, TSSA and Unite have put together this briefing report which provides more detail.

The impact on rail passengers, particularly vulnerable passengers and those in rural areas, will be severe.  This is why the union campaign against these proposals will be building alliances with a range of passenger groups and community organisations.

Europe shows us that integrated, publicly-owned railways eliminate the massive costs and inefficiency of the privatised rail market where shareholders, consultants, executives and lawyers are the winners.  The McNulty report is clear that state run competitors in Europe are more cost efficient and offer cheaper fares to passengers.  With three quarters of franchises up for renewal in the next five years, bringing rail services in-house would be a painless process.

The choice is simple. We urge the government to put the interests of taxpayers and passengers first, and put an end to the disastrous privatisation experiment on our railways.

The Open Public Services white paper was big on rhetoric. But does it bear up to scrutiny?

Let’s take one example, public service mutuals. 

Take a moment to remind ourselves what the white paper says:

We are giving public sector staff new rights to form new mutuals and bid to take over the services they deliver, empowering millions of public sector staff to become their own bosses … we will not dictate the precise form of these mutuals; rather, this should be driven by what is best for the users of services and by employees as co-owners of the business.

To give them credit, the Government provide us with a specific example so that we can see this new wave of employee empowerment in practice.  The civil service pensions administrator, formerly part of the DWP, is to be spun out as a new employee-owned mutual, as part of a joint venture with a yet to be named private sector partner:

plans have been announced for MyCSP to become the first mutual enterprise to spin out of a central government service … the innovative ownership model will be matched by a participative management approach: there has already been a strong turnout in elections for the Employee Partnership Council, through which employees will have a meaningful say in the running of the business.

Interesting then that survey results published today by PCS show that the staff are feeling very far from empowered.  211 out of a total of 380 staff based at the MyCSP offices in MyCSP offices in Basingstoke, Cheadle Hulme, Liverpool, Newcastle and Worthing responded to the poll run by PCS.

94% of respondents said they did not agree with Mr Maude that turning MyCSP into a ‘mutual joint venture’ would “empower employees and drive up performance”. More than 95% said they wanted to retain their civil service status – a request the government has refused.

No wonder then that the employers have consistently opposed surveys of staff opinion.  Prior to the latest findings by PCS, the only other ballot to have taken place among MyCSP staff was for industrial action where a majority voted in favour of strike action to protest against their enforced transfer.

It looks like staff are having a meaningful say through their union, at least.

• Local NHS Foundation Trust, Surrey and Borders Partnership
• Much lauded NHS social enterprise spin out and ‘Big Society Award’ winner, Central Surrey Health
• Private provider, Assura Medical Ltd, 75% owned by the Virgin Group?

Those of you familiar with the Government’s private sector bonanza that was the Work Programme will probably have worked it out.  The award of NHS Surrey’s community health services to Assura Medical Ltd has caused a fair degree of outrage.  Clearer evidence of the privatisation by stealth of the NHS would be hard to come by.

And, of course, this is also another wake up call for those who retain faith in the Big Society and the Government’s stated intention to open up public services to social enterprises, charities and employee-led mutuals.

Advocates of the role of social enterprise in the delivery of public services are understandably dismayed, afterall Central Surrey Health was described by Cabinet Office Minister Francis Maude as “the Big Society in action”.

We’ve said before that the market is at the very heart of the Government’s public service reforms.  As a social enterprise, employee-led mutual or local community or voluntary organisation you will be invited to compete but don’t expect any favours.  The market is fundamental.  The Open Public Services White Paper is very clear on this.

And so it goes.  More ’open  public services’.  More private sector winners.

No wonder then that Peter Holbrook, Chief Executive of the Social Enterprise Coalition, is becoming increasingly hostile.  The Social Enterprise Coalition found plenty to criticise in the Open Public Services White Paper.

In response to this week’s news in Surrey, he had this to say:

It is not enough for government to open up markets; it needs to create fair markets that benefit society. Some of the financial criteria used in contracts create an unequal playing field in which social enterprises are unable to compete because they may not have the same financial backing as private sector providers. Unless swift action is taken to address this we will see social enterprises and mutuals lose out to the private sector.

Judging by the direction of travel outlined in the White Paper, the Localism Bill and the Health and Social Care Bill, we don’t think this Government is about to alter its adherence to competition at all costs.

To its credit, the Social Enterprise Coalition is unafraid to call the Government out on this, unlike some other ‘leaders’ we might mention in the not-for-profit sector.

Peter Holbrook is completely right when he suggests that

public sector workers would be ‘understandably anxious’ about spinning out from the NHS and setting up a social enterprise on the back of this news.

But his call for reassurance from the Government that “they will not be operating in markets weighted against them” might be misplaced.

Markets will be inevitably be weighted against any kind of provider that does not share the economies of scale, access to capital (reportedly the crucial element in the Surrey example) and capacity to tender that larger private providers do.  This is why evidence across the EU suggests that the main result of the liberalisation of public services is the transfer of ownership rather than an increase in the diversity of providers.

What the white paper does do, however, is re-affirm the Coalition Government’s commitment to the marketisation of all public services outside of national security and the judiciary.  We are back in the territory the Prime Minister occupied in the heady days before the Health and Social Care Bill unravelled.

David Cameron was adamant:

This white paper says loud and clear that it shouldn’t matter if providers are from the state, private, or voluntary sector

A clearer message to the market could not be given.  Public services are open for business.

In his speech today, David Cameron compared receiving public services to purchasing a mobile phone.  And this inability to differentiate between private consumer and public goods is reflected in his inability to discern between the motivations and likely outcomes from public, private and voluntary sector providers.

Those who think the Big Society means a greater role for charities, voluntary and community organisations and employee-led mutuals in delivering public services would do well to heed those words.  For this government, it does not matter if service delivery comes from the state, voluntary or private sectors.  There are no special favours in the Big Society, only the market.

And this is the really the nub of our concerns about the government’s approach.  For while there is plenty in the white paper related to the opening up of markets and competition for public services, there is next to nothing about safeguarding against privatisation.

On the day that Southern Cross announced that it was shutting down, the Government ploughs ahead with its marketisation plans regardless.  In the light of the current crisis, the White Paper makes the astonishing claim that:

The wider public sector has much to learn from local authority successes in commissioning, for example in adult social care.

Opening up competition is a primary objective and all barriers must be removed, with TUPE, Fair Deal on Pensions and “employment regulations” all on the table.  All providers should be able to compete on a level playing field.

But so much of the new delivery framework will favour larger operators.  Shared services, payment by results and personal budgets will necessitate providers with economies of scale and access to capital and cash flow to compete effectively.

This doesn’t bode well for the community organisations and employee-owned co-operatives out there.  Particularly when just two or three lines are dedicated to ways to ensure new providers can compete, through access to the hardly yet tested Social Impact Bonds or through access to philanthropy or enterprise capital.

Time and again, reference is made to the Work Programme as the model.  But as we reported before, this has led to private enterprises cornering the market and letting out sub-contracts to voluntary sector organisations, most of whom appear unhappy with the terms of their sub-contracts and the weakness of the Merlin Standards that have been established to police those contractual relationships.  The Work Programme does not stimulate innovation as it restricts providers to exclusively chasing output targets and little else.  The document’s reference to “aligned incentives” brings to mind the tortuous language of rail privatisation.

While there’s much in the White Paper that has already been announced, there are some significant policies that are conspicuous by their absence.  Key members of the Mutuals Taskforce, Co-ops UK and plenty of others have called for more clarity from the government on safeguarding against private take over, for example through the use of asset locks.  The complete absence of any such safeguards is a huge concern and explains why the Government is now incurring the wrath of previous supporters of this model of public service reform such as the Social Enterprise Coalition.

Concerns about continuity and integration of services, accountability, service quality and regulation of public services in a fragmented landscape of largely private sector provision are addressed by a combination of presentational gimmicks (local TV anyone?) and faith in consumer-led accountability.  We will provide more consideration of these proposals as the details are fully absorbed.

But the fact that the Government is using the White Paper to promote the accountability role of “independent champions” such as the “Taxpayers Alliance” does little to calm our fears.

But it also points to an alternative approach to public service reform, raising arguments that have been conspicuous by their absence in the current policy debate.  We believe there’s real value in exploring these arguments further.

The report poses the simple but pertinent question:

“If innovation, responsiveness, user-focused services and flexibility are seen as characteristics valued in the mutual sector, what scope exists for their introduction or expansion in the public sector?  And what prevents, or has prevented, their adoption to date?”

But before we look at this further, it is worth reiterating two other points that the author, Steve Davies of Cardiff University, makes in this report.

First, there are a range of assumptions made about the benefits of mutuals on the basis of very little actual evidence.

Francis Maude claims that mutuals “reduce absenteeism, improve performance management, encourage innovation and increase productivity”.   However, the evidence base is patchy to say the least.  The Public Administration Select Committee reported that they “were unable to corroborate” these claims and that “too much of the discussion is still hypothetical and anecdotal”.    The Third Sector Research Centre report on social enterprise spin-outs from the NHS reports an “absence of a convincing body of evidence that such organisations can consistently deliver the expected innovation and efficiencies in health provision”.  And the Department of Health’s own findings are that “the benefits of the social enterprise model are not always clear, not only to potential commissioners, but also to staff and stakeholders”.

This is not to say that employee-ownership is without its benefits.  But the policy agenda is advancing a rapid rate on the basis of speculation and aspiration, rather than firm evidence.

Second, changing structures is less important than changing culture.  Employee ownership on its own does not automatically produce the goods.  What is required is a dynamic process of workforce participation.

One of the more plausible arguments for the benefits of mutualism is that workers become more productive where they have a stake and are engaged in the decision making process.  But this is not exclusive to mutuals.  Evidence shows that productivity and service improvements within the public sector have been derived from greater staff involvement.  Jo Ellins of Birmingham University looked at this within the health service, reaching the conclusion that the organisational model is less important than the culture of employee participation.

The UNISON report is right to ask why the qualities of service user and workforce engagement and participation cannot be applied within a public sector framework.   As Davies comments :

“there is no real reason why mutual approaches cannot be implemented within the public sector.  It does not require a spin-out to involve both staff and users in the service more effectively – particularly in the design, improvement and monitoring of the service.”

In fact, the point is very well made that in-house delivery enables the accountability and long term approach to provide the space, time and managerial support to boost innovation, as opposed to the prescriptive commissioning and procurement process that inhibits innovation and forces independent providers to stick to rigid contract requirements and short term imperatives.

In the TUC report ‘Rethinking Public Service Reform’ we outline a model based on consultation and negotiation between service users, public service workers and the commissioning bodies to identify priorities, strategy and service implementation that best meets the needs of the community, within the context of restricted public resources and an accountable public sector framework.  In this way, services are commissioned in a way that meets local need but balances this with the broader needs of the community, the prioritisation of scarce resources and the promotion of public value.

This model meets the Government’s stated intentions to shift power towards communities and enhances efficiency and flexibility but avoids the harmful and expensive fragmentation and complexity caused by further outsourcing and marketisation.

This requires a culture change across many parts of the public sector and public sector unions need to be at the heart of the debate.  Evidence of good practice is growing but we need to ensure a stronger voice for this alternative approach which is missing from current policy debate on public service reform.

As the UNISON report states:

“The emphasis on engagement of the workforce, involvement of clients, innovation and flexibility are all qualities that should be part of the day-to-day work of public service provision.  There is no reason why these virtues should not be present in all public sector provision and in the best parts of the public sector, they are.  Equally there is no reason why outsourcing and marketisation is necessary to achieve this.”

“We want the words ‘Made in Britain,’ ‘Created in Britain,’ ‘Designed in Britain,’ ‘Invented in Britain,’ to drive our nation forward. A Britain carried aloft by the march of the makers. That is how we will create jobs and support families” – George Osborne, Budget Statement, March 2011

Bombardier Transportation, part of the French-Canadian global manufacturing group, is the last remaining train manufacturer in the UK and the heart of a rail engineering and production supply chain which constitutes one of the largest manufacturing clusters in Europe.  It employs 2,600 workers at its main plant in Derby, and more in its production centres in Crewe and Plymouth.  It builds trains for London Underground, UK rail and overseas markets.  It has formed groundbreaking learning agreements with its unions.

You would think that this is exactly the sort of company that will spearhead the government’s drive to rebalance the economy towards production industries and export-led growth. Well, think again.

Today Teresa Villiers announced that the £6bn contract to build new trains for Thameslink would be awarded to the rival bidders from Germany, Siemens.  The government stressed the benefits to commuters and taxpayers, as well as pointing to hundreds of new construction and maintenance jobs arising from Siemens depots in the UK.

What they didn’t mention was that this has dealt a damaging body blow to rail manufacturing in the UK.  This contract would have plugged a gap in Bombardier’s order books, securing the future of this industry in Derby and providing a platform the company to grow and bid for future work, not least for Crossrail.

This decision has thrown the company’s UK future into doubt.  The maintenance jobs created by Siemens will be dwarfed by the potential job losses at Bombardier and its suppliers around the Derby area.  Not just that but once again we will be losing vital skills and experience from our manufacturing sector.

While manufacturing is clawing its way back in recent months, our economic recovery still depends on companies like Bombardier winning crucial contracts such as this.  So it is astonishing that the government would turn its back on UK manufacturing in this way, at a time when growth is weak and unemployment remains high. The Chancellor’s warm words in his budget statement sound hollow today.

The TUC has long campaigned for the government to adopt a more proactive approach in ensuring that UK businesses benefit from public contracts for goods and services. While recognising that the UK must maintain its commitment to open competition and EU regulations, the TUC has argued that more can be done by government to level the playing field and work with businesses to build their capacity to put in effective bids for contracts.

Using public procurement in this way should form an essential component of our industrial strategy, just as it does in Europe and elsewhere.

And this isn’t about gifts from the taxpayer to failing industries.  Bombardier is a successful business producing high quality products.  It supports high quality an engineering supply chain.  When Teresa Villiers talks of “best value for the taxpayer”, has she factored in the long term damage inflicted on a key part of our manufacturing sector by this decision? Has she factored in the detrimental impacts of job losses and business closures?

Real value to the UK taxpayer would be to work in partnership with the likes of Bombardier to make sure they have the very best opportunity to win those contracts, creating employment and supporting the kind of industries that will boost the recovery.

There are a number of lessons that can be drawn from the European experience.  There are three that struck me in particular.  Public service mutuals succeed when they meet specific community needs, where the state supports and nutures them and where models are clearly defined.

The poorly defined and market-orientated model proposed by the Coalition fails on all accounts.  Which probably accounts for the lack of interest from the public and resistance from the workforce.

Responding to demand

All the successful models outlined in the paper have been set up to meet specific demands from local communities based on tangible needs.  Spain’s co-operative schools were set up to respond to specific regional needs, reflecting complex local cultural imperatives in places like Catalonia, Valencia and the Basque Country.  Italy’s co-operative social care sector plugged the gap left by the absence of state provision and diminishing family support as traditional roles at home changed in post-War Italy.  Sweden’s co-operative pre-schools met need created by the local authorities’ lack of capacity to meet the strict duties placed on them to provide places to all residents within 3 months of application.

As we have shown on here before, demand for public service mutuals remains low among workers and the public in the UK.  Public opinion largely supports public services being delivered by the public sector.   It might be that demands for mutualisation grows in response to crises in specific sectors or institutions, I’m thinking here of social care or Northern Rock.

State support

In Spain, Italy and Sweden the state plays a very active role in funding, capacity building and supporting mutuals.  Whether this is achieved through creating specific funding mechanisms, through procurement or capacity-building, state support is integral to the growth of mutuals.

In all three cases mutuals grew in partnership with state services.  In Spain, co-operative schools are provided with long term contracts, up to 40 years in some cases.  In Italy, local authorities can become members of a mutual through their status as investors, thereby safeguarding their success and protecting public assets.    And the social purpose outlined in the legal model of mutuals used in Italy, enables them preferential treatment in the public procurement process.  In Sweden, co-operative pre-schools add capacity and niche choices while 80% of provision remains within the state.

The Coalition Government may believe that mutuals will flourish where the state withdraws but evidence from Europe suggests that the relationship is a lot more complex than that.  Mutuals flourish in partnership with the state.

Clearly defined models

In all three countries, there are clearly defined models of public service mutual.  For example, in Italy, the legal structure makes specific reference to community interest and the procurement regime allows preferred bidder status on the basis of this.

As the report states “in the UK there is an array of different models and some risk therefore that core elements of being a mutual or a co-operative could be watered down in favour of quasi-mutual private enterprises”.

The likes of MyCSP and Circle Healthcare Ltd would suggest that this certainly is the experience in the UK.

On the back of further evidence that the general public is still failing to get the message, David Cameron used his speech in Milton Keynes today to once again set out what the Big Society means and how his government plans to support it.

I’m not entirely sure that the prime minister made things that much clearer.  But one thing’s for sure, the market for public services remains integral to the Big Society vision.

The speech covered a range of policy areas loosely knitted together under a roaming narrative of family values, social responsibility and punishing welfare scroungers.  As before, we were reminded of Mr Cameron’s personal commitment:  “it’s what fires me up in the morning”.  And, in a move no doubt aimed at critics in his own ranks as well as others, the Big Society was placed at the heart of government policy.  The Big Society is “not some fluffy add-on”.

On this last point, I believe he is correct.  Because so much of this provides the ideological underpinning that is integral to a wider policy of cutting public spending and opening up markets for public services.

The prime minister was clear.  The Big Society way to improve public services is to “break open state monopolies and open them up to new providers” and to call on “our charities, social enterprises and private companies to get involved.”

We have blogged before on how spending cuts are devastating the voluntary, community and charity sector and who the winners tend to be in a public service market.  We know, therefore, that spending cuts and marketisation may prove a toxic combination for civil society.

But even where organisations are able to win contracts, what does this mean for voluntary action?

In a working paper of July 2010, the Third Sector Research Centre identified six potential impacts on the shape and direction of third sector organisations through the commissioning and procurement process:

• compromised independence
• mission drift
• loss of innovation
• worsening employment conditions
• deteriorating inter-organisational relationships
• polarisation within the sector.

Mission drift and compromised independence are significant risks.  A survey by the Charity Commission found that only a quarter of charities providing public services agreed that they are free to make decisions without pressure to conform to the wishes of funders, compared to nearly three fifths of charities that did not deliver public services.

This led the Commission to conclude that:

“charities that deliver public services are significantly less likely to agree that their charitable activities are determined by their mission rather than by funding opportunities”

This dilemma is summed up in a report commissioned by the Institute for Voluntary Action Research where the authors found that, although evidence was variable, overall the impact of public service delivery was that:

“some organisations have been drawn by the availability of funding away from community development and community responsiveness towards delivery of public services and services designed externally rather than in direct response to local need … in making this shift, their potential to act as agents of community change or as advocate for local people has been diminished.”

The problem is intensified for smaller, niche organisations that often struggle to engage with the commissioning process.  Many of these niche operators will be dependent on other organisations sub-contracting their services, many of which will be private sector or larger charity organisations imposing tougher commissioning regimes.

This may also be the case as public service commissioners are encouraged to achieve procurement efficiencies through larger contracts and the sharing of procurement functions across departments and organisations.

In their excellent report on the Big Society, the National Coalition of Independent Action (NCIA) identify the government’s aim as “to institutionalise the idea that the preferred way to fund traditionally charitable activity is through ‘social enterprise’ methods:  loans and income generation through contracts or trading, rather than grants or public subsidies”.

In the Big Society, charities and voluntary groups become providers and businesses.  Advocacy, campaigning, independence and voluntary action in communities disintegrates as market imperatives take over.

Nick Hurd, the Minister for Civil Society, was not wrong when he told Third Sector that “the role of civil society will change significantly”

And this also might explain why the Prime Minister’s vision places such an emphasis on individual volunteering.  As NCIA put it:

“In the gap between what the state won’t provide, determined by the cuts, and what the private or voluntary sector can’t make money from, people will be left to their own arrangements”.

Using Freedom of Information requests, LGC have revealed that, across eight RDA regions, 2,841 separate regeneration, economic development and business support projects have ended in the past twelve months as a result of £1.36 budget cuts.   In addition, over 1,800 RDA staff have lost their jobs.

This represents a reduction in economic development activity of 73% from 2010.

In place of this, the Government has announced 50 projects worth £450m as part of the first round of the Regional Growth Fund, with a further £1bn available over the next three years.

Local Enterprise Partnerships, expected to fill the gap left by RDAs, remain largely unfunded and with question marks still lingering over their capacity to deliver.  The 21 enterprise zones to be created within LEPs do provide some levers but these will not be in place until 2012.

The shadow business minister Gordon Marsden is therefore correct to warn of a hiatus created by the RDA abolition that is harming regional growth prospects.

Given the scale of the public subsidy and the painfully high fares inflicted on passengers, the review offered a great opportunity to address the long standing problems within the privatised rail industry.

It is disappointing that this opportunity has been squandered. 

All the evidence points to inefficiency and waste brought about by a complex and fragmented system of multiple operators, contractual relationships leading to unnecessarily high transaction costs and public money leaking out into train operators’ profits and shareholder dividends.

McNulty’s remedies?  Further fragmentation, greater “commercial freedom” for operators and a predictable, though misdirected, attack on rail workers’ pay and conditions.

The TUC and rail unions are united in their condemnation of the report’s recommendations, issuing this joint statement today.

The most disappointing, and yet unsurprising, aspect is the complete failure to seriously consider the benefits of a national integrated rail system under public ownership.  Here we come to the elephant in the room that McNulty, Secretary of State Philip Hammond and, let’s face it, successive Labour and Conservative governments have tried their best to ignore.  Historical comparisons with British Rail and benchmarking against European networks clearly demonstrate that integrated, state run systems are more efficient.   But this option remains off the table.  Talk of avoiding large scale structural change masks an ideological blind spot to the benefits of public ownership.

Perhaps more alarming is the attack on rail workers pay and conditions.

In his interim report of December 2010, Sir Roy McNulty made the claim that “a large increase in staff costs” was one of the “principle drivers of the increase in taxpayer support”.  We challenged him on this.  There is no correlation between the big spike in taxpayer subsidy from 2002 and rail industry pay, which for most rail workers has remained close to RPI inflation in that period.  In a letter to the TUC earlier this month, Sir Roy admitted his mistake, stating that “the correlation, which the Interim Submission suggested, would not appear in the final report”.

This has not, however, prevented the report from identifying “excessive wage drift” caused by “weaknesses in HR/IR management” as a key factor in cost increases.  And the report has made a number of recommendations directly attacking workers’ pay and conditions, including:

• Driver only operation to be the “default position for all services on the GB rail network”
• “Changes to ticket office opening hours and staffing”
• “A review of station staffing as a matter of priority”
• Reviewing the “salaries and employment terms for new entrants to the industry”
• Reversal of the “trend to reduce continually the length of the working day and the working week”
• An end to “the expectation that salaries, at all levels, will increase ahead of inflation”

The extent to which the Government and, more importantly, the train operating companies take up this agenda of job cuts, closures and pay freezes will remain to be seen.  But noises in the press suggest that the Government are more than sympathetic to McNulty’s recommendations in this area.  What’s more, there’s many in Conservative ranks, including the Mayor of London, who might well see this as the start of a campaign against the rail unions themselves.

Is this focus on staff costs warranted?

Our own research, informed by TAS Business Monitor, IDS, ASHE and LFS data, indicates that while the rail wage bill has increased by 50% since privatisation, average earnings and unit wage cost increases have not been particularly excessive when compared with the national average.  What’s more rail industry pay has advance largely in line with rail workers’ productivity.

Pay settlements in the rail industry since 1994 have been fairly consistently higher than RPI inflation and median settlements for the whole economy.  This is not surprising given the use of long term pay settlements usually negotiated along ‘inflation-plus’ formulae.

However, rail industry median earnings have not risen dramatically more than those of the UK economy as a whole, as table 1 suggests below suggests:

Source:  Incomes Data Services

The table below shows that it is clear that privatisation of rail did not lead to significant reductions in staff or labour costs for train operating companies.  However, TOC unit labour costs have risen at a lower rate than those for the UK economy as a whole.  Furthermore, real revenue per staff member has increased by 56.3% indicating that productivity has increased at a greater rate than both unit labour costs and the total wage bill over this period.  If we took a different measure of productivity, say volume of passengers, then we find that train passenger kms increased by around 50% since 1996/97, again corresponding closely to wage increases.

Source:  TAS Business Monitor:  Rail Industry Performance 2010 and ONS Labour Force Survey Unit Wage Costs data

Earnings data from ASHE suggests that rail industry pay is not excessive and that most workers in the industry earn less than the median earnings for all employees, when hours of work are taken into account.

Source:  ASHE 2010

Cutting staff numbers will likely prove to be counter-productive.  Research by Passenger Focus and others demonstrates time and again that the travelling public value station and ticket staff.  Passengers faced with unstaffed ticket barriers, ticket machines and empty platforms suffer frustration and fear.  Is this the customer experience that will attract increasing punters on to the trains?  Unlikely.

So it would seem that, in many ways, McNulty’s recommendations on rail industry pay and conditions are wide of the mark and will fail to solve the fundamental cost push factors that are really driving the rise in fares and public subsidy.

What might these be?

Well, that would be a whole new article.  But from their research, the RMT calculates that a combination of high borrowing costs, transaction costs through numerous interfaces and dividend payments to shareholders mean that rail privatisation is costing the tax payer up to £1 billion a year.

“Charities and social enterprises play a hugely important role in delivering high-quality, efficient NHS services, and a policy of enabling whoever is best-placed to deliver could see them do more, to the immense benefit of NHS patients and taxpayers. We need to seize that opportunity, and leave debates about privatisation where they belong – in the last century.”

These are the words of Sir Stephen Bubb, the Chief Executive of ACEVO, one of the Government’s preferred voices from the community and voluntary sector.

At a time when the vast majority of ACEVO members are faced with spending cuts, job losses and service reductions, Sir Stephen sees a wealth of opportunity in the Government’s push to create a market for public services. Without wishing to sound too “last century”, I’d like to suggest to Sir Stephen that debates about privatisation seem increasingly apt.

Unlike colleagues at the Institute of Fundraising who unequivocally told the Public Administration Select Committee that “the voluntary sector cannot be – and should not be – called upon to do the job of the state”, Sir Stephen thinks that his members can only benefit from the market.

So it was interesting to see how the voluntary sector fared in the recent round of contracts awarded for delivery of the DWP’s Work Programme , a government initiative that represented “a massive boost for the big society” according to employment minister Chris Grayling .

Of the 18 preferred bidders for 40 prime contracts, the voluntary sector was awarded two.  The public sector got one.  Fifteen went to the private sector, including SERCO, A4E and G4S.

Worth also noting that the two voluntary sector consortia that won bids were effectively voluntary/private partnerships, with Careers Development Group bidding with multi-national employment and training provider MAXIMUS and Rehab partnering up with Interserve, described as “one of the world’s foremost support services and construction companies”.

The DWP have been quick to stress the point that 289 voluntary groups are likely to conduct around half of the work under payment by results sub-contracts.  It will be interesting to see just how much work goes to the voluntary sector subbies and what those contractual relationships with the private sector will entail for the voluntary organisations delivering them.

As Rachael Maskell national officer for health and the not for profit sector at Unite puts it “the agenda is being controlled by the private sector”

So said Francis Maude in November last year as he launched the Government’s drive to enable more public sector workers to create mutuals that will take over the running of services they provide.

But are public sector workers embracing the brave new world of the mutual?  Events at MyCSP this week would suggest not.

Along with extending the ‘right to provide’ to nearly all public sector workers, the Government has set up a £10m enabling fund and brought together a Mutuals Taskforce, Chaired by Julian Le Grand of the LSE, to drive through reform in Whitehall and beyond.

Of course, as has been pointed out by the Office for Public Management and others, the benefits of employee ownership such as innovation, efficiency and creativity are only derived when there is genuine employee ownership and buy-in.

This process cannot be driven from the top.

The Minister himself acknowledged as much, reassuring us that “the Government will not seek to dictate what is best for employees”.

It is interesting then, that the Government and public service managers continue to drive mutuals forward in the face of the overwhelming opposition of the workforce.

This week it was announced that the administration of the pensions of over 1.5 million civil servants will be handed over to a joint venture between MyCSP, a new ‘employee-owned’ mutual and an as yet unnamed private sector partner.

The press release was surprisingly low on detail.  Why was the private sector partner not named?  What was the structure of the new mutual?  Given the ground breaking nature of the announcement, weren’t the public going to be interested in the model of ownership that the employees had signed up to?

The Government are unable to provide this detail as it has yet to be decided.  The employees have had nothing to sign up to because they have been presented with no options.  The announcement was made to the staff, currently within the DWP, earlier this year following no consultation.

PCS have sought more details from the leadership of the new enterprise, the Cabinet Office and those in charge of the mutuals ‘incubator fund’ but few, if any, have been forthcoming.  What’s more, PCS have held meetings packed with concerned MyCSP staff hostile to the move that is being imposed on them.

Were this an isolated example of a mutualisation going badly wrong, we might not have much to worry about.  But this is part of a pattern that has emerged very strongly in other parts of the public sector, particularly health.

Evidence from UNISON and CSP suggests that in the vast majority of cases where staff have been balloted, a clear majority have chosen to remain within the NHS.  In many cases the results have been emphatic, as the following table indicates:

In some cases, such as Greenwich, Sandwell and Shropshire, these overwhelming votes against transfer have led to a change of course and the retention of services within the NHS.  However, in other cases, such as Mid Essex and Cornwall, the views of the staff have been ignored and the move to social enterprise status has been driven ahead regardless.

In many cases, staff engagement has been peripheral or skewed in favour of an outsourcing option, with ballots or staff surveys precluding in-house or NHS options.

Why then is the Government so keen to force ‘employee-ownership’ on a reluctant workforce, despite this being exactly the wrong way to develop the mutuals model?

Mutuals are clearly seen as a cheaper option for service delivery.  Francis Maude made clear his expectation that mutuals would “deliver cost savings to the taxpayer” back at his launch in November.

But, perhaps more importantly the use of joint venture mutuals, as in the case of MyCSP, is creating new opportunities for private sector ‘engagement’ in public service delivery.  Phil Bartlett, until recently a senior civil servant, now CEO of MyCSP thinks that “this new and innovative structure will give us the agility to exploit opportunities in the changing pension landscape and grow our business”.  I’m sure his private sector partners will enjoy the proceeds.  And no doubt Mr Bartlett too.

This approach may raise a few eyebrows in the world of genuine co-operatives where certain principles are fundamental.  But the Governement takes a more relaxed view.

They have showered praise on Circle Healthcare, expounding its virtues as a model of employee ownership and awarding it a 10 year contract to run Hinchingbroke Hospital in Cambridgeshire.

But Circle Healthcare Ltd is registered at Companies House as a private limited company.  Staff own just over half of the shares, the rest are owned by external investors including companies such as BlackRock, the asset management firm with the highest paid CEO on Wall Street.   There’s few outside the Government that regard Circle as either employee-owned or a social enterprise.

The Government tends to get quite touchy when the ‘cynics’ talk of “privatisation by the back door” but it is becoming increasingly hard to find a more suitable term.

Yes, I’m talking about the Big Society.

As with the NHS, so with the Big Society.  The Prime Minister nailed his personal colours to the mast.   He told us of his “passion” and his “100% commitment” to his “mission” to “try and build a bigger and stronger society whatever is happening to public spending.”

But evidence continues to suggest that the Big Society remains crippled by the devastating impact of the Government’s cuts on the voluntary sector and the resulting levels of sceptism among the workforce and general public.

The general public certainly don’t seem to be buying it.

59% of voters responding to YouGov agreed with the statement that the ‘Big Society’ was “mostly hot air” and “a cover for the government while they cut public services” and 68% said that it would probably not work.

Perceptions among the workforce are much the same.

A survey by Third Sector and LGC shows that there is not only a lukewarm response to the government’s ‘Big Society’ agenda among public sector staff but also those working in the voluntary sector.  According to their findings only 9% of voluntary sector respondents thought the main effect of the ‘Big Society’ would be an increase in citizen action and only 11% thought it would bring greater opportunities to set up voluntary and community groups.  These figures were similar to respondents from the public sector.

Again, drawing parallels with the ill-fated Health and Social Care Bill, the Government put this down to poor communication and a failure of people to understand their message.  Sources close to the Prime Minister admit that there has been somewhat of a “communication failure” and an inability to “sell” its key policies.

Coming from a PR background, it’s understandable that the Prime Minster would attribute policy failure to a poor sales pitch.  But a closer look at the available ‘market research’ might reveal two important, albeit uncomfortable, home truths for Mr Cameron.

First, the voluntary and community sector is in freefall and things are going to get worse.

It is true that the leadership of some the umbrella bodies in the sector feel some enthusiasm for the perceived  opportunities offered through competing in a market for public services.  But the vast majority of community and voluntary organisations and charities are facing desperate times.  A quick glimpse at the Voluntary Sector Cuts website gives you an idea of the carnage.

Employment in the sector fell towards the end of last year and continued to flatline coming into this year.  A clearer picture will emerge as we enter the financial year end and organisations up and down the country discover the future of their funding.

Predictions are grim, however.

The NCVO’s charity forecast shows that 97% respondents expect economic conditions to worsen in the voluntary sector in 2011, 66% expected their organisation’s expenditure to decrease and 55% intended to reduce staff numbers in the next three months.  Worryingly, 35% said that their organisation planned to decrease the extent of their services.

At a recent event hosted by the TUC and NAVCA, many organisations present were planning for job cuts.  NAVCA predict over 20,000 job losses in the local voluntary sector, including community development workers, volunteer centre organisers, youth volunteering workers and funding advisers.

One particular example from the TUC and NAVCA event was Community Links, a high profile community organisation operating in East London, who claim that 3 of their 10 community centres will close, a further 5 are under review and the whole children, youth and community work team were at risk of redundancy, representing 25% of their total workforce.

Clearly this is going to badly damage the sector’s ability to deliver effective services.

Again, survey evidence makes for depressing reading.  97% of respondents to a London Voluntary Service Council survey reported that their communities were still suffering the effects of the recession, 70% reported an increased demand for their services and 75% were not confident of meeting this demand now or in the future.

The second home truth that the Government (and perhaps some members of the opposition) might want to consider is that there remains very little appetite among the general public for the marketisation of public services and the role of the voluntary sector in delivering those services.

Research from IPPR/PWC found that there was a degree of appetite among the public for a greater say in public services,  however their report found that that “while there is support for the public to take more of a role, people nevertheless believe that the state should remain primarily responsible for delivering most public services”.

94% of respondents to their survey believed that national or local government or public service providers should be mainly responsible for providing health care, 93% believe that different state agencies should be responsible for running local schools and 93% believe that national or local government or public professionals should be responsible for keeping the streets safe.

A YouGov survey found that 73% of voters disagreed or strongly disagreed with more competition within the NHS, while another survey found that 89% of the public thought that “public services should be run by the Government or local authorities”.

What is all this telling us?  Deep and rapid spending cuts undermine service delivery.  The public don’t trust the market with their public services.

Two valuable lessons the Government might want to take on board in regard to the Big Society.  And the NHS.