Issue - meetings

Purpose of the report:  Scrutiny of Services /Policy Development and Review

To update the Committee following agreement by Cabinet to create a Local Authority Trading Company for the future delivery of day services and community support options for people with disabilities and older people.

THE FOLLOWING ITEMS OF BUSINESS WERE CONSIDERED IN PRIVATE BY THE SELECT COMMITTEE.  HOWEVER, THE INFORMATION SET OUT BELOW IS NOT CONFIDENTIAL.

Declarations of interest: None.

Witnesses:

Simon Laker, Lead on Trading and Income Generation – Business Services

Paul Carey-Kent, Strategic Finance Manager - Adult Social Care

Key points raised during the discussion:

1.    The Committee was provided with an update on the creation of a Local Authority Trading Company (LATC) to deliver a variety of Adult Social Care services. It was highlighted that the approach had been to exercise caution, and learn from the experiences of other local authorities in implementing LATC models. The Committee was informed that the business principle had been to ensure a continuity of service. It was outlined that the LATC was expected to be implemented by April 2014. It was explained that the Council wanted to ensure a continuity of service, with the new branding for the LATC being gradually introduced.

2.    The Committee was informed that the LATC would receive no favourable terms when considered alongside other commissioning options for the Council. It would be commissioned for five years with a break clause after three years.

3.    The Committee queried who would be appointed as directors for the LATC. It was confirmed by officers that this was in the process of being decided, and the appointments would be made by the shareholder board. The Committee was informed that the shareholder board consisted of the Chief Executive, the Council’s Leader, Deputy Leader and the Cabinet Member for Business Services. It was clarified that the Council would retain full control of the LATC as sole shareholder. The Committee asked what contingencies were in place if the LATC proved unsuccessful, and officers commented that an exit strategy was in the process of being developed.

4.    The Committee raised concerns about the potential to create a two-tier staffing system through the transfer to a LATC, with new staff being paid at a lower rate than those who had Transfer of Undertakings (Protection of Employment) (TUPE) arrangements. Officers assured the Committee that both the Leader and Chief Executive had made it a clear priority that the LATC continued to invest in staff. The Committee was informed that it was proposed that Local Government pension schemes remain open to current and new employees. Officers commented that the business case made no assumptions about reducing staff levels of pay.

5.    The Committee was informed that the properties currently used by services in the LATC would be transferred, with a review of business requirements planned. Officers commented that the intention would be to make the LATC services more community-based. Officers outlined the details of the loan made by the Council to the LATC.

6.    The Committee queried whether the transfer of staff would increase the cost-per-head expenditure of staff remaining in the Council. Officers commented that the LATC would be strongly encouraged to continue using the Council’s support services, and that this would reduce a potential impact on the Council.  ...  view the full minutes text for item 11

Part 2 annexes for item 9.

Exempt: Not for publication under paragraph 3

Information relating to the financial or business affairs of any particular person (including the authority holding that information)

The Cabinet noted the Part 2 Annex which had been circulated in relation to Minute item 231/13.

·      That the creation of a Local Authority Trading Company (LATC) limited by shares and owned wholly by the Council to deliver the services within the scope of the report submitted be approved.

·      That authority be delegated to the Shareholder Board to approve the relevant steps set out in the report submitted to form the LATC, appoint its Directors and put in place appropriate governance arrangements to commence trading activities in April 2014.

·      That the award of a contract to the LATC for an initial five year period with a break point after three years to deliver the services in scope on behalf of the Council be approved.

·      That debt financing to the LATC be approved to enable it to purchase operational assets from the Council, pay for start-up costs and provide working capital, as set out in paragraph 42 of the report submitted.

·      That officers commence consultation with staff, Trade Unions, partner organisations and stakeholders.

Reasons for Decisions:

A LATC will deliver benefits to Surrey residents by ensuring the sustainability and continued improvement of existing services. It will also deliver financial benefits to the Council over the five year contract term, including those benefits which could not be obtained without setting up the LATC such as price reductions and surpluses derived from trading activity.

There is also potential to develop additional and alternative business opportunities - both within the services in scope, and by expanding into other areas - in the longer term, which could lead to substantial profits beyond the five year period covered by this proposal. These longer term gains would not be available if services remained in-house.

Trading on something close to an “as is” basis will ensure the continued stability and viability of existing services.  This LATC provides a relatively low-risk environment in which to establish and take forward the principles and practice of running a trading company, which could feed positively into the broader trading developments which are an integral part of the Council’s longer term financial strategy.

The Cabinet had considered an options appraisal at its meeting on 22 October 2013 that recommended that a Local Authority Trading Company (LATC) could be the preferred model for the future delivery of day services and community support options for people with disabilities and older people. The Cabinet gave its support to the Cabinet Member for Adult Social Care to prepare a business case to confirm the feasibility of an LATC to ensure financial benefits and service outcomes are achieved while retaining the public sector ethos and values of the Council. 

The Cabinet considered the business case, assessment of the benefits to the Council, the expected revenue streams and profitability of the company, along with a draft business plan and consultation and engagement proposal, to be co-designed with stakeholders. Central to the recommendation to create an LATC was that it would deliver benefits to Surrey residents by ensuring the sustainability and continued improvement of existing services. The benefits of the proposal included:

·        continued commitment to the Personalisation Agenda

·        delivery of high quality, well-regarded services for local people

·        responsiveness to the requirements of commissioning plans

·        the ability to meet current and projected demand

·        responsiveness to the increased take-up of personal budgets and privately purchased services

·        flexibility to deliver a new model of services embedded in local communities.

It was noted that the contract award would continue services provision already provided by the council. Whilst other local authorities had set up similar structures, Surrey’s direct involvement of users of the service was thought to be unique. The LATC would be able to access greater market opportunities which would provide long term benefits.

RESOLVED:

1.         That the creation of a Local Authority Trading Company (LATC) limited by shares and owned wholly by the Council to deliver the services within the scope of the report submitted be approved.

2.         That authority be delegated to the Shareholder Board to approve the relevant steps set out in the report submitted to form the LATC, appoint its Directors and put in place appropriate governance arrangements to commence trading activities in April 2014.

3.         That the award of a contract to the LATC for an initial five year period with a break point after three years to deliver the services in scope on behalf of the Council be approved.

4.         That draft debt financing to the LATC be approved to enable it to purchase operational assets from the Council, pay for start-up costs and provide working capital, as set out in paragraph 42 of the report submitted.

5.         That officers commence consultation with staff, Trade Unions, partner organisations and stakeholders.

Reasons for Decisions:

A LATC will deliver benefits to Surrey residents by ensuring the sustainability and continued improvement of existing services. It will also deliver financial benefits to the Council over the five year contract term, including those benefits which could not be obtained without setting up the LATC such as price reductions and surpluses derived from trading activity.

There is also potential to develop additional and  ...  view the full minutes text for item 232