What about medium-sized?

In 2006, before the financial crisis and the resultant fiscal collapse, the last Government published a Local Government White Paper, Strong and Prosperous Communities. This is to some degree the ur-text of localism. It also points to some of the financial and administrative challenges that have confronted councils, with increasing intensity, ever since.

The White Paper exhorted councillors and officers to get out of their town halls and take local government to where people really live, into the communities electors recognise. Services were to be tailored to meet the needs and demands of those localities and even, where possible, personalised to address individual end user requirements. This is the essence of localism. But the White Paper also announced that there was no more money. Councils would need look at more efficient models of delivery and achieve economies of scale. Two-tier areas were invited to submit proposals for unitary government and authorities generally were encouraged to embark on shared services projects and to make more use of third party supply.

The ostensible paradox of the White Paper – that councils should shift their policy focus “downwards” towards communities and individuals, but that financial necessity required them to integrate their delivery models “upwards” – was resolved through the language of commissioning. Councils could separate the production of services from the issue of where and by whom those services were bought. A big unitary authority, an inter-authority shared service, or a large private service delivery company, could all deliver locally tailored services, provided localities were involved in the design of the service and held it to account, ideally through budgetary control.

So, the emergent countywide unitary proposals extolled the efficiency and headcount benefits of creating single direct service organisations, by merging all those belonging to the councils that would disappear, but they were also often peppered with new neighbourhood committee structures, often budget-holding, that would purchase services from the integrated and leaner DSOs. Shared service models, previously based on the scale economies of developing single “vanilla-flavoured” service approaches, in some cases became more sophisticated, with participants expecting the integrated (and reduced) service capacity to deliver subtly different service flavours to their respective localities. And private service companies argued that their size allowed them to invest in service capital – contact centres, refuse disposal fleet, new technologies – which could nevertheless be deployed in locally tailored ways in line with contractual requirements.

Since the White Paper, the parameters of this debate have been adjusted by several factors, notably the increased fiscal pressure and the intensification of the language of localism by the Coalition Government.

Councils have to make whatever service models they develop stretch further still with even less money than was anticipated in 2006. But the developing language of localism– at least as used by certain of its adepts – has complicated the commissioning/production solution to the problem. While shared services are still on the menu, there has been some hostility to “big” service production solutions to local problems. Some within the Coalition – as well as sympathetic commentators, such as Phillip Blond – believe that localism should be enshrined not just in commissioning but also in service production. They argue that the private service companies in particular have been weak in providing imaginative and transformational solutions to local problems. These “oligarchs” have exploited weaknesses in the contracting process to enrich themselves at the expense of local enterprise and capacity, enjoying inflexible long-term deals whose results look a lot like the status quo, save for being a little cheaper.

Blond – echoing the perspective more generally promoted by Cabinet Office Minister Francis Maude – has argued that local charities, voluntary groups and a new army of community mutuals, should emerge. These would respond with local intelligence to local needs, promote local employment, and, by getting things right first time, realise efficiencies.

So, big is ugly and nasty, while small is beautiful.

But in practice, small is also vulnerable, and even far-fetched. Small local service enterprises, like the little platoons of the “Big Society”, are unlikely to emerge spontaneously. To bid for service responsibilities, discharge them, and then commercialise and secure new markets, thereby promoting medium-term viability, these new enterprises would need capital, accountancy skills, sales and marketing functions, HR, IT, as well as basic delivery capability. Some doubt their sustainability. For example, in the health arena, local community care services are being encouraged to mutualise. There is some fear that the resulting bodies will be financially vulnerable. In a desperate bid for survival, they may play a zero sum game of pursuing each other’s markets or, worse, could get swallowed up by the oligarchs.

So if big is nasty, and small is beautiful but highly vulnerable, what about medium-sized?

Could clusters of local authorities brigade their DSOs into sub-regional mutual companies, large enough to be sustainable, to maintain the necessary capability and expertise to survive, but close enough to communities to adapt to their needs? These mutuals – perhaps grouped thematically around particular areas of service expertise, and potentially involving related local services, such as aspects of healthcare – could operate under contract to councils (or even to their local, intra-authority governance structures) and provide locality-specific services. They would keep employment reasonably local, with all profit being shared among mutual workers or reinvested in services. These mutuals could also be encouraged to provide support and even a mutual “shell” for smaller local enterprises: partnering with community groups, charities and small local companies while, for a management fee, removing from them procurement, HR, IT and other burdens that prevent them bidding to deliver services.

For the Coalition, the attraction of this model would be two-fold. It would provide a shot in the arm for its flagging mutuals revolution. And, given that the consolidated sub-regional thematic mutuals would almost certainly, in the short-term at least, have smaller headcount than the status quo ante arrangements, they would make a significant efficiency contribution. For social democrats, to whom the language of mutualisation should in any case be attractive, there is the prospect of these new, quasi-public enterprises growing in the medium term, either when Britain turns the fiscal corner, or by working in other sectors. A property services mutual would not necessarily be confined to maintaining and managing public sector buildings, but could compete for contracts in shopping centres, industrial estates and in private housing.

These new medium-sized mutuals would be near enough to localities to deliver local solutions. They would be visible, accountable, but would also be a means of developing inter-authority solutions and brokering debate on sub-regional issues, such as the service implications of spatial, housing and transport planning. As such, they might prove a useful contribution to otherwise thorny problems of cross-authority decision-making and budgeting, and, through their emergent accountability structures, could evolve into new forms of “networked governance”. Areas such as Greater Manchester, where inter-authority collaboration on transport planning and other questions is already well advanced, could pioneer the approach. The result could be a public service infrastructure for the future, an advance on both the authority-specific DSO model, with its lack of commercialised potential and restricted ability to exploit scale economies, and on the service company model, where contractual inflexibility and the interests of shareholders may run counter to the principles of public service and localism.