Government must improve legal and fiscal framework for mutuals: report

The UK needs to improve the legal and fiscal framework for public service mutuals if they are to prosper fully, a report commissioned by trade association Co-operatives UK has argued.

The report, Time to Get Serious: International Lessons for Developing Public Service Mutuals, said the UK must learn from the experiences of Spain, Italy and Sweden, where public service cooperatives are said to be flourishing.

Report author Jonathan Bland, managing director of Social Business International, said the governments of the three countries had provided long-term commitment and investment to social enterprises.

Italy has arguably the most extensive and successful programme of mutualisation anywhere in the world, he added, with more than 7,000 co-operatives providing social care, health and employment services. Their success comes from creating a clearly defined legal structure for “social co-operatives”, he suggested.

Bland said: "The international review shows that in all three countries, the growth of public service co-operatives has been closely linked to enabling legal and fiscal frameworks, with sector-led support structures that are able to provide specialist advice and share learning.

"I am impressed with the government's vision for public service mutuals, however, the UK is not yet equipped to make it happen.”

Bland argued that understanding of the business models was limited and support was fragmented. He also criticised the failure to invest sufficient resources into the area.

The report said: “In the UK, there is an array of different models and some risk therefore that core elements of being a mutual or a co-operative could be watered down or lost in favour of quasi-mutual private enterprises.

“There is also still work to do to make it more straightforward to form a co-operative or mutual. There may also be a case for exploring the potential for intelligent tax or other incentives to encourage the capitalisation of public service co-operatives and mutuals, for example through bond issues or co-investment in shares.”

Bland urged the government to invest in the creation of a new long-term specialist support service for public servants to provide training, business advice and help with access to finance.

Ed Mayo, Secretary General of Co-operatives UK, says: "The government has ambitious targets for the number of public sector workers setting up co-operatives, and predicts that as many as one million people, one in six public sector employees, could be working in new mutual enterprises delivering public services by 2015.

"However, with the international review concluding that the UK policy context does not emerge particularly well from the comparison with other countries, this must be something of a reality check."

Bland’s report can be downloaded here.