First youth mutuals prosper by extending reach and expertise

In 2014, Knowsley Council in Merseyside and the London borough of Kensington and Chelsea became the first authorities in England to "spin out" youth services into "employee-led youth mutuals".

The creation of Epic CIC and Knowsley Youth Mutual (KYM) was partly a response to ever deepening cuts to local government budgets that forced all councils to consider how they could deliver youth services with less money.

Since then, initiatives such as Delivering Differently for Young People by the Cabinet Office have launched, allowing other local authorities to test out different ways to deliver youth services. This has seen three other authorities create youth mutuals, with two others set to follow (see below).

Olivia Schelts, manager at Baxendale Advisory, which has provided consultancy support for Epic and KYM, says both mutuals have generated in the region of £400,000 in savings and an income surplus in their first year of spinning out, while Epic has also brought in £1m of revenue beyond its core council contract.

Two years on, how have the trailblazers of the youth mutual approach fared?

Knowsley Youth Mutual

The fact Knowsley Youth Mutual is still standing at a time of continued pressure on local government shows that the youth mutual has been a success, says Sandra Richardson, chief executive of KYM.

Since spinning out in April 2014, KYM has delivered youth work in youth clubs, outdoor education and youth engagement as part of its core contract for the youth service.

In addition, it has pursued and won contracts to deliver more targeted pieces of work. One project aims to help integrate young people aged 18 to 25 with learning difficulties and disabilities more into the community through personal development work and "travel training".

Meanwhile, other contracts focus on young people not in education, employment or training, work to promote teenage health and a £45,000 contract from Knowsley Council supporting young carers.

However, Richardson admits the mutual model does come with flaws. She says KYM needs to start making more links with businesses and one of its "downfalls" is not being able to work outside of the immediate area.

She says money has had to be spent on business development, while cuts to core funding have placed added pressure on winning new contracts.

"We have lost nearly half of our original council funding," she says. "I think we have lost £700,000 to £800,000, and the original model for all of this was to come out of the council and get more contracts.

"The fact is to replace £800,000 worth of funding, we would need £8m worth of contracts even on something as little as 10 per cent profit. So in a way, it is quite flawed."

Despite these drawbacks, Richardson says the mutual is far more nimble, particularly around decision-making, administrative processes and team structures.

"The main advantages are the decision-making around how you run the business, how you deploy your staff, and get things done quickly and efficiently," she adds. "There is a lot less bureaucracy."

The model has also allowed KYM to be more flexible in deploying youth workers. Richardson says the skills of staff are always expanding and this has allowed them to work in a broader range of settings, including child protection.

KYM, which is owned equally between young people and workers, has 65 members of staff (46 full-time equivalents) who are all qualified in youth and community work.

The fact that staff are highly qualified means they are an expensive team to run, says Richardson. However, this is something that she hopes commissioners recognise when considering the quality of service.

Staff skills around business acumen and understanding have also developed, with youth workers having to be more aware of cost. So far, there has been no staff turnover.

Richardson says KYM has measured impact differently since spinning out, but has not necessarily done more. "We have focused more on the quality of the young people's experience rather than the number-crunching," she adds.

Despite the ups and downs, Richardson believes the relationship with Knowsley Council is still strong, although she admits it can be difficult when there is a change in leadership at the council.

Plans for the future include improving the marketing of KYM so contracts can be won from outside of the immediate area.

The mutual also wants to do more detached and outreach youth work because it is a more cost-effective way of reaching more young people.

"We have had an incredible journey, we are trying to develop the service and business in a marketplace where there is no market yet," she says.

Epic Community Interest Company

"I have no doubt this is one of the best ways of running public services and there are large swathes of the public sector that could be better run through mutuals or similar types of models," says Brendan O,Keefe, managing director of Epic Community Interest Company (CIC).

Kensington and Chelsea's youth services established itself as Epic CIC, the first employee-led youth mutual, in January 2014 after the council acknowledged it valued the youth support service, but could not continue to fund it.

Since spinning out of local authority control, the organisation has continued to deliver generic youth work such as youth clubs, but has also extended its remit to deliver arts and drama programmes, sport and health initiatives, careers advice and guidance, and apprenticeship schemes.

The mutual has also gone on to deliver programmes around mental and physical wellbeing, and work with young people involved in gangs.

It has even branched out into play services by winning a £230,000 a year, two-year contract from the council that can be extended by a further two years.

O,Keefe says Kensington and Chelsea Council is Epic's primary funder, but 25 per cent of funding comes from clinical commissioning groups, health sources and European grants, and from trading with schools and the general public.

One advantage of being a mutual, he says, is the opportunity to bid for contracts in other boroughs, something that the youth service would not have been able to do under local authority control.

It has also been able to reduce backroom costs and salaries, but O,Keefe insists Epic will never join the so-called "race to the bottom" - he says salaries are "market competitive" and in line with the London Living Wage.

"In the past, salaries were benchmarked against other local authorities, so that has reduced our running costs because we are not able to provide things like final salary pension schemes, which is beyond virtually every voluntary sector provider," he explains.

The number of staff has risen by 12 people to 170 in total, although this number grows during peak holiday seasons.

Staff have had to become more entrepreneurial in their focus, O,Keefe says.

"We have a much greater emphasis on hitting contract targets because in the past if you didn't hit your target, the consequences weren't great, whereas now we have to hit our targets or we lose the contract," he adds.

Epic recently won funding from the Cabinet Office Impact Readiness Fund and has designed its own outcomes framework, which it will begin to use shortly.

In addition, it has tried to retain both targeted work and universal youth work by taking an integrated approach, so young people who come through the generic services can move onto more targeted work if they need it.

Despite all the positives, O,Keefe says some barriers have arisen, particularly around commissioners, lack of understanding of social enterprises.

"Some commissioners we have come across are excellent, and understand the commercial perspective and the commercial issues that mutuals and the voluntary sector work under, but others find that difficult to grasp," he says.

"Some tenders we haven't gone for because they are not viable. The gap in understanding between some commissioners to providers is still too wide and we need to bridge that."

Looking ahead, he says Epic is open to advising other local authorities about spinning out youth services.

"We think the social business model is the right way to go," he adds. "You get better value for services and young people benefit because you are able to provide services in a much more cost-effective way."

GUIDE TO EMPLOYEE-LED YOUTH MUTUALS

• A mutual or Industrial and Provident Society (IPS) is an organisation set up to carry out a trade or business for community benefit
• Under the Companies Act 1985, you qualify as a mutual if you trade for the benefit of members or if you run for the benefit of the community
• An IPS can own property, enter into contracts and can make a profit if it is put back into the organisation
• Community interest companies are companies limited by shares or guarantee that are in the public or community interest. They are bound to use their assets, income and profits for the benefit of the community they serve
• Youth mutuals operating include: Epic CIC (Kensington and Chelsea); Knowsley Youth Mutual (Knowsley); Young Lambeth Cooperative (Lambeth); Torbay Youth Trust (Torbay); and Investing in Children (Durham). Mutuals are also being developed in Devon and Lewisham

Source: Local Government Group: Social enterprise, mutual, cooperative and collective ownership models - a practical guide; and Cabinet Office