Francis Maude on Big Society Mutuals

They are very different in ambition and range: from NHS staff wanting to launch an employee-owned social enterprise to help homeless patients, to employees from local authorities getting together to form a mutual to deliver children's services, and further education colleges coming together to see if they can set up a new awarding body.

But they do all have certain things in common. At their heart are frontline public sector entrepreneurs ready to take control of the services they run. And there's often a common focus: the desire to join up the services they know so well so that they are actually designed specifically around their communities' needs, or so they can start using potential economies of scale to generate efficiencies. In a time when we need to save money we have to be ready to explore ideas like this.

Following the mutuals or "doing a John Lewis" is very much in vogue with the Conservatives at the moment. On the surface, John Lewis looks like a model for the public sector. It doesn't make profits for capitalist owners, it works very well and it has very happy customers.

The single point that is missed, the single cog that means that the whole philosophy doesn't roll, is that John Lewis exists in a competitive market. As do Baxi, the Co-op and the people who run the health food shop near me. That means that if they have to get customers, they have to do a good job, and if they don't, like any other fat-cat owned capitalist company, they go to the wall.

I'm not even sure what the model of these mutuals is because the whole notion of a mutual that is to do with government seems to be full of contradictions. Are the owners able to sell the company, like the owners of my health food shop can? Who funds them, and if it's the taxpayer, then are they accountable, and if that's the case, what's the difference to a government department? Is there plurality of supply and if so, what happens to the ones that go to the wall?

Because if they're funded by the taxpayer, then they should be responsible to the taxpayer. If they can make private profits, then these people can put in their own cash and should be subject to private losses. If they're fully private, then making them monopolies would be bad.

I don't understand if these are supposed to replace external, contracted suppliers, or monopoly government departments. But what the government seems to think is that they can create something with all the benefits of the free-market like innovation, but without things like incentives or the downsides of people being put out of business. And that simply doesn't work. Experts left in charge to run things their own way will run them in a way that they think is important. Which might match what customers want, but if it doesn't then you're knackered.

I suspect in 5 or 10 years time, we'll see that this doesn't actually work, and something else will be tried, and eventually, we'll get to what is the only way to do government: reduce it down to what can't be delivered by markets, and deliver those things as close as possible to the consumer.