Government spin-out staff 'must have say in running of company'

SPINNING out government departments into the private sector will not be enough to create the efficient operations required by the coalition government, says an expert in employee-owned businesses.

John Alexander, managing director of the Fife-based Baxi Partnership, has been brought in by the UK government to advise departments that are considering a transfer into the private sector.

In August, Cabinet office minister Francis Maude identified 12 bodies that could be spun out of government - including staff who are planning to set up a trust to run Newton Rigg Agricultural College in Cumbria and North East Essex Primary Care Trust spinning out into a "community interest company".

Maude said the initiative would support the "entrepreneurialism" of front line staff who wanted to take control of running their services.

But Alexander said workers in such departments would also have to undergo a major culture shift and "take ownership" of their new businesses if they wanted to succeed.

While spin-outs may receive government contracts for the first year while they get going, they will then be subject to strict European Union procurement rules that mean they will have to bid for future government work.

Alexander said: "Giving employees a share certificate saying they own a stake in the company is not enough.

"They need to be motivated so that they feel their views count and that they get a say in how the company is run."

He added: "Economies of scale also come into the equation. If you spin out the human resources departments of three neighbouring local authorities then they will end up competing with each other and the three wouldn't be sustainable. Instead, they should look at merging the three departments into a collaborative venture that could then be spun out."

His comments came as the coalition government begins to look for a second wave of "pathfinder mutuals" which could be set up within the private sector.