The government's controversial "nudge unit", which encourages people to make better lifestyle choices, is to be part-privatised, transforming it into a profit-making business.
The Behavioural Insights Team will join with a commercial partner, and as a mutual joint venture, the new business will be part-owned by the government.
It could be the first of "dozens" of elements of Whitehall to be spun out under Cabinet Office minister Francis Maude's strategy to shake up the Civil Service.
A competition will be soon announced to find a business partner for the "nudge unit."
The team, established after the 2010 election, was set up to find ways of "nudging" people to make better choices for themselves rather than through state intervention.
A psychometric test for jobseekers from the nudge unit has been exposed as bogus this week
It attracted controversy earlier this week after it was revealed that one of its psychometric tests given to jobseekers gave the same results no matter how the applicant answered.
It was accused of being "patronising" by one charity, who said that young people will see through such manipulation, and that it will backfire on the DWP.
Charles Drew, the chief executive of Amber group, a charity which helps disadvantaged unemployed young people to gain the motivation and skills they need to get a job, told the Huffington Post UK: "They are dealing with unemployed young people who already know their failings. You can't simply fool people into building self esteem. If young people know they are unsociable and answer truthfully, they will see through it.
Included are statements such as "I never go out of my way to visit museums," "I have taken frequent stands in the face of strong opposition" and "I have not created anything of beauty in the last year."
The test, first piloted in an Essex job centre before being rolled out to Middlesbrough, came under scrutiny after one blogger noticed it gave him the same 'personality' whatever he answered.
Although the Department of Work and Pensions confirmed to the Huffington Post UK that the test is not mandatory, a letter posted online from the blogger who first exposed the story suggests otherwise, and instructs the recipient to take the test, followed with the line 'Failure to comply with this direction may result in loss of benefit.'
The test was devised by the government's behavioural insight or 'nudge' unit which draws on insights from academic research in behavioural economics and psychology, to apply them to public policy making.
The DWP said trials in the US have shown that it can improve subjectively reported well-being and reduce anxiety and depression.
David Halpern on the right, is the Director of the Behavioural Insights Team, and Owain Service, Deputy Director of the Behavioural Insights Team, is on the left
It is this that is to be sold as a business. However the Public and Commercial Services union said the announcement proved the lack of appetite from civil servants to become part of a mutual, adding that the unit was a small team of just a dozen people, "wedded to the Cabinet Office's ideology".
A survey last year showed that only 16% of civil servants were even interested in exploring the idea of becoming a mutual, said the union.
PCS general secretary Mark Serwotka said: "There is nothing mutual, co-operative or employee-led about what Cabinet Office minister Francis Maude is trying to do.
"The first mutual in the civil service was imposed by Maude's Government against a backdrop of strikes by the staff who wanted to remain as civil servants.
"Improving public services requires investment, not gimmicks and back-door privatisation."
Francis Maude says the privatisation will help deliver services more efficiently
A spokesman for Mr Maude said: "We are in a global race for the jobs and opportunities of the future. To get Britain back on the rise we must find innovative ways to deliver better services more efficiently.
"It's great news that the world-renowned 'nudge' unit is spinning out from central Government. As a mutual, they will combine the benefits of private-sector experience and investment with the innovation and commitment from staff leadership.
"This accelerates our drive to make public assets pay their way.
"We hope to support dozens more new spin-outs over the next few years. This is a whole new growth area and Britain is leading the way."
A Cabinet Office source said: "In 2006 a policy team spun out from the Department for Education and Skills. Unlike with Labour's spin-out we are ensuring that the Government retains a stake in the new company, so the taxpayer benefits as their business grows.
"The Office for National Statistics recently showed that public sector productivity flat-lined from 1997 to 2010 - the entire period that Labour was in power. We are on the side of those who work hard and want to get on - that's why we are determined to set free the legions of entrepreneurs in the public sector and help them run their work in the ways they know best".