Labour Government’s Support for Mutual Trust and Cooperatives

Benefits of Mutual Trust and Cooperatives

The main advantage mutual trust and cooperatives have over corporate entities is the alignment of interests derived from ownership and control residing entirely within its members. This creates a symbiotic relationship, ensuring that they are inherently member-centric in their focus (the are operated by the members, for the members).

This model eliminates the conflicts of interest that can arise when an entity is owned by third-party shareholders, where the primary performance metrics transition from meeting members’ needs to prioritising shareholders’ needs.

Blended Solutions and Funding Mechanisms

But the choice isn’t necessarily one or the other. Blended solutions can deliver on the strengths and advantages of both models. This can arise through the use of mutual capital instruments or through other similar funding mechanisms, which can provide mutual trust and cooperatives with the capital they require without undermining their founding objectives or ownership.

Providing access to the necessary funding to establish, launch, and operate new mutuals and cooperatives (where this isn’t available from the members or potential members), or to fund the expansion of existing ones to better meet their members’ needs, is critical to unlocking the potential of this sector and delivering the targeted level of growth.

Corporate Integration of Mutual Structures

Not only should corporate entities be able to fund mutual trust and cooperatives, but mutual structures can also be deployed within the corporate environment (see our paper on Group Company Mutuals).

This enables the advantages of mutuals to generate value within the corporate sector, providing an onshore cost and tax-efficient alternative or complementary partner to predominantly offshore captive insurance companies.

Ensuring Sustainability and Focus

Simply creating a mutual trust or cooperative isn’t the complete answer. It’s crucial that appropriate guidance, support, and controls are put in place.

Like corporate entities, mutual trust and cooperatives can lose their focus and fail. Ensuring the operating model and requisite support services and oversight are in place is equally critical for the survival and prosperity of mutuals and cooperatives.

Long-term Strategic Goals

Meeting members’ needs isn’t just a short-term goal; it’s a long-term strategic objective.

This commitment to the sustainability and durability of mutuals and cooperatives is crucial in meeting the enduring needs of their membership.

What is in the best interest of the collective membership should always take precedence over individual member interests. This can sometimes be a difficult decision to make but the upsides always outweigh the downsides.

Responsibility and Risk Management

With ownership and control comes an enhanced level of responsibility for all members. This shift can support the adoption of a more holistic view of risk, transitioning from a primarily reactive approach to a predominantly proactive one, which is financially prudent.

If appropriate risk mitigation, monitoring, controls, checks, and balances are not integrated into the operating model, the legal framework chosen for the entity will have a minimal impact on the outcome.

While the selected legal structure is important, it alone will not determine the outcome. Responsibility for this rests with the board and management team, irrespective of the entity’s legal structure.

Support and Resources

Fortunately, through organisations such as financialmutuals.org, icmif.org, and prospectmm.co.uk, the required knowledge and expertise are available to support entities and communities in successfully undertaking this journey.

Join us in leveraging the Labour government’s support to grow the mutual and cooperative sector. Discover how aligning interests and securing sustainable funding can drive success and stability for your organisation.