MPs move to stop private equity grabs on mutuals

A VITAL Bill to prevent mutuals being snapped up by private equity firms and milked for cash is being pushed through Parliament.

The Co-operatives, Mutuals and Friendly Societies Bill, tabled by Labour MP Sir Mark Hendrick, is due for its second reading in the Commons this week.

It would help mutuals such as life insurer LV, which are owned by their members, to raise money from external investors if they need more cash.

LV, founded in 1843 to help the poor of Liverpool bury their dead, was offered for sale to US private equity giant Bain Capital last year by its management. They claimed LV desperately needed money to modernise and that it was unable to raise capital from its members. The deal was voted down following a campaign by the Daily Mail and The Mail on Sunday. Sir Mark, supported by organisations such as the Association of Financial Mutuals and consultancy Mutuo, now wants to make it easier for mutuals to raise cash.

He said: ‘I want to come at this from an agenda that should suit the Government. Co-operatives and mutuals are about self-help. People pulling themselves up by their own bootstraps and trying to get on with life and business without necessarily needing the state to look after them.’ There are four pillars to his Bill. The first would be ‘fixing’ a 2015 law designed to allow institutional investors, such as pension funds, to invest in mutuals.

Although the law was enacted, it came up against Revenue & Customs, which decided it would hit any organisations that tried to use it with corporation tax.

Sir Mark also wants to extend the scheme to co-operatives. In addition, he believes that members should be allowed to vote to protect the savings that have been stored up within mutuals for generations.

The Bill would give members the ability to protect this cash for ever, so it could be used only for the purposes the business specified.

Finally, Sir Mark also wants to reform the outmoded laws governing friendly societies.

Peter Hunt, managing partner of Mutuo, said: ‘Why would the Government not want to do this?’

The Treasury said it had ‘consistently’ supported the sector and its ‘unique contribution’ to communities.