Since 2010, about 50 new staff-led mutuals have been set up from local authorities in England.  Nearly all have been granted uncontested initial contracts of up to 3 years from their council. 

However, new rules from the EU mean that the way councils will need to go about setting up mutuals will have to change, in all likelihood, from June 2014.  

So what do councils need to know?  There are three important points to take on board.   One is that the new rules mean that all services broadly of a social nature (there is a specific list) with a contract value under 750,000 euros (around £635,000) do not need to go through any procurement process at all.

So, very small staff-led ventures in many areas of council activity, e.g. a very specialist team that seeks to spin-out could easily be offered a contract without a need for further procurement effort on the part of councils, provided the case is made under their own contract standing orders (which themselves are designed to reflect the law at any given time). 

This is very good news for niche services with councils who can be given unambiguous legal support to simply spin-out of the organization in a no-fuss way without any risk of legal challenge.

The other really important point for councils is that they will no longer be able to simply offer a new mutual an uncontested contract for services over the 750,000 euros threshold as now often happens for services of a social nature.

This is because the EU itself has to comply with international trade obligations.  The ‘sweetener' here is that there will be more flexibility about how those services are contested with, it is hoped, a range of less bureaucratic approaches available to council procurement officers than has been the case up till now. 

A final point, and this is critical, the EU has created a special list of services, for which the council can, if it chooses, restrict the competition only to organisations which themselves have a clear social mission, commitment to employee involvement and a commitment to reinvestment of profits.  

This list of services includes most social care, education, youth, library and heritage services.

So what are the implications of these changes for councils either actively setting up a larger mutual now or contemplating one? 

The main thing to say is that any plans for uncontested contracts need to be changed if the mutual is to go live after pretty much after June this year.   Instead, councils need to consider how they approach what will be a mandatory competition under new EU regulations.  

When it comes to how this is done, there will, broadly, be five alternative options.  

1. Standard Competition