Wandsworth launches mutuals

London Borough of Wandsworth is to launch two mutual companies – one to run leisure and learning services and one covering physical disability services – from the start of next month.

A total of 220 staff will transfer from council employment to the two new companies, which will be owned by the employees.

The larger of the two companies, covering arts, culture and leisure services, will have 160 staff and  is expected to save the council £2.65m over the four year term of a contract the new company has signed with the council.

Chris Buss, director of finance at the council, told Room151: “The council believes in competition and has always tried to diversify its providers.“We had a choice of going out to competition but wrote to all service heads saying that if they thought they could get savings through a mutual model then we would go down that route.”

Buss said that savings would come from reduced staffing costs, running costs and improved income.

In addition, the companies will qualify for business rate relief, reducing the amount of the levy which currently goes to central government and the Greater London Authority.

“We are relatively satisfied the savings will be similar to those we would achieve by going to the market,” Buss said.

The council will provide a small working capital loan to the arts, culture and leisure mutual company for start-up costs.

However, Buss said that because the firm will start receiving income from services including sports facilities and cemetaries immediately, there would not be a big cash flow issue.

The mutual providing learning and physical disability services will be provided with a bigger loan from the council because it will need to wait until clients are billed and then pay for the services provided.

Any profits the companies make will be retained, and could be used to help them bid for services when both are market tested four years from now, Buss said.

Council leader Ravi Govindia said the mutual would “have the freedom and ability to win contracts from other authorities which is what makes it such an attractive proposition from the workforce’s point of view”.

The two companies have already unveiled a joint senior management team, which will be led by a single chief executive, aimed at delivering savings of £1.5m a year by reducing senior executive posts by 30%.