Agenda item

Purpose of the item: The report is due to be considered by the Strategic Investment Board at its meeting in December 2023.  As part of good governance, it has previously been agreed to have the annual and mid-year reports scrutinised in advance by the Resource & Performance Select Committee.

Witnesses:

David Lewis, Cabinet Member for Finance & Resources

Natalie Bramhall, Cabinet Member for Property, Waste and Infrastructure (online)

Leigh Whitehouse, Deputy Chief Executive and Executive Director of Resources

Anna D’Alessandro, Director – Finance and Commercial

Neil Jarvey, Strategic Finance Business Partner, Commercial

Simon Crowther, Director – Land & Property

Charles Maxlow-Tomlinson, Managing Director – Halsey Garton Property

Key points raised during the discussion:

1. The Cabinet Member for Finance & Resources introduced the report and provided a brief summary. Members noted that, as part of its strategy to innovate in developing new models of delivery and to benefit from the freedoms introduced by the Localism Act, Surrey County Council had made investments and created trading companies to deliver income and efficiencies and in doing so had established a Strategic Investment Board, which reports annually to the Council. The purpose of the Board was to safeguard the Council’s interest as a shareholder and to take decisions in matters that required the approval of the council as owner of a company. The report was due to be considered by the Strategic Investment Board at its meeting in December 2023. It was previously agreed to have the annual and mid-year reports scrutinised in advance by the Resource and Performance Select Committee. Members noted briefings on the companies, for which details can be found within the published agenda.
2. The Chairman asked for details on the strategic objectives for each of the companies, how they have changed over time, what ‘good’ would look like in relation to Connect2Surrey, and for details on the expansion goals for Surrey Choices. With regard to ambitions for Connect2Surrey, the Strategic Finance Business Partner, Commercial explained that the approach was to reduce the spend on third-party large agency contracts and to increase the number of permanent staff using the resources contained within the council’s Recruitment team. With regard to Surrey Choices, the Strategic Finance Business Partner stated that he understood that the company had some initial financial control issues but now felt confident that the company was in financial control. In relation to expansion of services, it was stated the focus was still on the residents of Surrey and to expand into community-based services to support residents with various schemes which included independent travel and employment support.
3. With regard to Halsey Garton Property, a Member noted that the company delivered a pre-tax operating profit of £1,941k and asked whether the company was still profitable post-tax. The Member further noted that no dividend was anticipated to be paid from the 2023/24 trading year. The witness stated that the company was still profitable following taxation and highlighted the benefits returned to the council through Loan Interest Arbitrage and dividends. 
4. A Member stated that Government had said that councils should not enter into commercial property investments for purely investment benefits purposes. Officers agreed that new legislation would mean that the council could no longer take on these types of investments for purely commercial gain; however, officers had been advised that existing assets would not need to be disposed of. 
5. A Member asked for detail on the risks in current market and forecasts for future years. The Managing Director – Halsey Garton Property stated that general agreement in the commercial property market was that the market had reached the bottom and that Average Total Return was expected to be around 7.5% annually for the next two years.
6. A Member asked for detail on the risk management strategy for loss of income, and whether there was consideration for the creation of a reserve. The Strategic Finance Business Partner, Commercial explained that Halsey Garton Property produced 10-year forecasts where the finance team, in conjunction with the managing director, were able to consider the future of each asset individually and to monitor the Council’s financial position. Members noted details of an asset which was disposed of due to increased risk. Members also noted that, in the event of an exceptional circumstance, a revolving investment and infrastructure fund was in place which contained £11.1 million and could be used if urgently required.

Actions/requests for further information:

None.

Resolved:

The Resources and Performance Select Committee noted the report.