Government spin-outs of which as little as 25 per cent is owned by employees should not be called mutuals, social enterprise leaders have insisted.
The government has announced one spin-out that is a quarter-owned by staff – the pension scheme manager MyCSP – and said earlier this week that it was seeking a partner to spin out its Behavioural Insights Team, which might follow a similar model.
Several other services are also being considered for similar spin-outs.
Francis Maude, Minister for the Cabinet Office, has said that an organisation can be called a "mutual joint venture" if employees own 25 per cent of it and thus have a "blocking stake" in any decisions.
The term "mutual" is not a legal definition and can be used to apply to any organisation.
But Ed Mayo, secretary general of Co-operatives UK, the umbrella body for cooperatives, said in a statement that he did not believe the term should be applied to an organisation unless its members held a controlling stake – generally considered to be more than 50 per cent of the votes.
He said any proposals that required only 25 per cent staff ownership "will not necessarily result in true mutuals. Mutuals need to set be up as having a controlling stake by the members – whether staff or users – rather than outside investors."
Peter Holbrook, chief executive of Social Enterprise UK, told Third Sector that he agreed staff needed to control at least 50 per cent of an organisation if it was to be called an employee-owned mutual.
"Ed is right to point this out," he said. "People setting up and running mutuals need sector leaders to speak up to defend the meaning of the term.
"It’s part of sector leaders’ jobs to ensure the waters aren’t muddied when it comes to the way people understand social enterprises, mutuals and cooperatives."
Holbrook said he wanted to ensure that public assets and services were properly protected against privatisation.
"Without safeguards, there is always a danger that mutuals can be demutualised and sold off to the private sector," he said. "Mutuals need to be asset-locked and mission-locked to ensure that they operate for the benefit of the public forever."
A Cabinet Office spokesman said: "This government is determined to unlock entrepreneurs from within the public sector to help Britain get ahead in the global race.
"Where employees share ownership and have a minimum 25 per cent stake, we are clear that is a mutual joint venture. We don’t have a fixed view about the level of employee ownership in a mutual joint venture. But we do think that, for their voice to be heard effectively, employees should have at least a 25 per cent stake – a blocking minority.
"We support a variety of commercial models including those which are employee-owned and social enterprise organisations. All these options give employees who want to work hard and get on more say in how they do their jobs."