End in sight for a mixed economy?

youthDuring the reign of the coalition Government one significant focal points was their attempt to reduce the size of the State through the creation of mutual organisations, inspired by the success of companies such as John Lewis. Whole sections were transferred into Community Interest Companies along with their budgets. One could argue they were as crucial to the coalition as PFI was to the Blair Government, and both proved to be a problem as well as a solution. The focus has gone since the General Election perhaps partly impacted by the Referendum campaign focus on sovereignty which is at odds with the idea of moving state delivery into nominally independent bodies. However as we continue to see huge cuts in local government funding, some of those who were involved in the early experiments to mutualise local services are starting to call for others to follow their lead. This call is not based on how best to deliver services, but on the risk that workers will otherwise discover their last paycheck and P45 has arrived in the post. The possibility of CIC’s attracting external funds is one of the carrots on a very long stick.

Brendan O’Keefe was Head of  Youth Services at Kensington and Chelsea from 2005 to 2013 when he launched the Epic ELM CIC which took over the work of the Council. He became MD of Epic with a 5 year contract worth £21M which included the running of 4 youth clubs. The fact is that few Councils have a budget close to £4M a year for youth services so this is far from typical. Nick Hurd who was a Government Minister at the time was quoted in this article saying: “The entire public sector faces the challenges of reduced expenditure and rising customer demand. To meet these challenges, the government is transforming the way services are delivered by creating an alternative to the old choice of in-house and outsourced delivery. We are supporting public service mutuals because we know that letting entrepreneurial front-line staff take ownership of their services results in greater innovation, efficiency, and improved outcomes for young people and communities.” Whether or not Brendan is entrepreneurial is open to question, he is certainly a risk taker, at least in the medium term. In my view calling someone who starts with a team of 152 people and a guaranteed budget of £4M for 5 years an entrepreneur is at best optimistic and speculative. Epic will shortly file its third set of accounts and in turnover terms the first two years do not show growth. In March 2015 the accounts showed £7.5M and a year later £5.5M and having passed the half way point of the original contract it will be interesting to see how things fare over the next two years and beyond.

In this recent article Brendan is quoted as warning that rather than relying on local authority funding, youth services must adapt, and seek out different forms of investment in order to survive, designing themselves around invest-to-save principles and creating new funding models with social investment organisations. “If spending trends continue as they are, local authorities may sooner or later vacate the youth services arena altogether,” he said “The best of the sector can show a demonstrable link between impact, value for money and diversion from present and future harmful behaviours and by extension, high cost interventions. This appears nailed on for a social investment approach based around funding for outcomes and impact.”  I believe that large youth charities such as the YMCA which I was a Trustee of for 12 years have a vital role to play in delivering provision in communities. These charities play a complementary role to smaller, more locally focused charities. Being a charity albeit one that is financed in large part by state funding is very different to the work of mutuals such as Epic which are exclusively cut out from the state and of course very different to the work of local authorities. Charities are not obliged to cover their area with services but can often move much quicker than the state when it comes to addressing need. They can also focus on unpopular areas of policy without the risk of Councillors being voted out at the next election.

In an ideal community the private sector, small and large charities and the state (including mutuals) will work in a cooperative way, complementing each other. My concern following Brendan’s comments is not whether the Government pretends that mutuals such as Epic are not part of the state, particularly when first established, but if the state completely disconnects from their role as commissioner and care-taker of the community. If it does so the end result will be communities where young people are ignored and as Brendan suggests the cost of dealing with such a broken system will become much greater than the cost of maintaining one that works some of the time. Brendan compares the national ‘saving’ of £200M from youth budgets with the extra cost of £280M in areas such as child protection and children in care services. Whilst these are may not be directly linked, the savings in one area will inevitably lead to extra costs in the other and along with those extra costs goes a high level of human pain.


About ianchisnall

I am passionate about the need for public policies to be made accessible to everyone, especially those who want to improve the wellbeing of their communities. I am particularly interested in issues related to crime and policing as well as health services and strategic planning.
This entry was posted in Charities, Community Safety, Economics, Education, EU Referendum, Justice Issues, Parliament and Democracy, Youth Issues and tagged , , , , , , , , . Bookmark the permalink.

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