Agenda item

The Executive Director of Finance and Corporate Resources presented the Leisure and Cultural Services Business Case.  During the presentation of this business case the following points were highlighted for Members’ consideration:

·                The Council had considered a feasibility study in respect of future models for the delivery of Leisure and Cultural Services and had agreed in November 2017 that a Local Authority Trading Company (LATC) would be the most appropriate model moving forward.

·                A number of services, though not all, would be included in the LATC. 

·                There was the potential for some services that would not immediately be included in the remit of the LATC to be incorporated at a later date.  This could include the BMX Track and Arrow Valley Countryside Centre.

·                A number of staff would be affected by the introduction of the LATC; 50 would remain Council employees and 62 would be subject to a TUPE transfer process together with a number of casual staff.

·                Officers had been consulting with the Trade Unions throughout the process.

·                Some assumptions had been built into the savings plan and the unions had highlighted a number of concerns in relation to these.

·                Savings of at least £220,000 were anticipated for the first year with further savings of £440,000 anticipated for year two and £480,000 anticipated for years three and four.  These figures had been identified based on savings reported where Councils had introduced LATCs in other parts of the country to deliver similar services.

·                The LATC would be able to secure savings from Non-Domestic Rates (NNDR) and would able to secure VAT savings.  In both cases the Council was unable to take advantage of these financial benefits.

·                The LATC would be a non-profit organisation.  This corresponded with feedback provided by residents in surveys completed in 2017 which called for services to contribute to addressing health inequalities, to continue to have a community focus and to be connected to the Council.

·                The LATC would be a Council company providing services to and on behalf of Redditch Borough Council.

·                Officers were assuming that the Council would continue to provide support services, such as HR and IT services, for the first 12 months in which the LATC would operate.  After this the LATC might opt to obtain these services from another provider, though would need to provide the Council with notice.

·                Subject to the Business Case receiving approval at the Council meeting on 19^th March 2018 Officers would start to work on a detailed business plan for the LATC, scheduled for Members’ consideration in July 2018.

Following presentation of the report Members discussed a number of points in detail:

·                The governance arrangements for the LATC.  Members were advised that this would consist of two parts; a Board of Directors and a Shareholders Committee, which would hold the LATC to account.

·                The appointment of the Non-Executive Directors to the Board of Directors and how they would be paid.  Members were advised that usually Non-Executive Directors were paid expenses and this arrangement was expected to be implemented for the LATC.

·                The arrangements in place to recruit Non-Executive Directors to the Board of Directors.  Members were advised that experts in relevant fields would be recruited as Non-Executive Directors via a transparent process.  This would be a matter reserved for the Council.

·                The likelihood that the LATC would deliver the projected savings and the potential implications for the Council’s balances if this wasn’t achieved.  Officers explained that a robust performance monitoring arrangement would be in place and it was likely that any issues in terms of delivering on savings would be identified at an early stage and the LATC would be questioned about why the savings were not being achieved.

·                The timeframes in which a review of the LATC would be triggered if the company did not perform sufficiently well to achieve the Council’s objectives and anticipated savings.  Officers advised that the first 18 months would be challenging for the LATC.  As part of contract arrangements any difficulties would hopefully be identified at an early stage, though at any point the Council could reverse the decision to have the LATC if it was found that this was not working for the authority or local community.

·                The importance of developing a good working relationship between the Council and LATC to ensure that the company performed as effectively as possible.

·                The management fee associated with the LATC and the cost to the Council.  Members were advised that this fee was predicated on a specified level of savings with the fee calculated in relation to management costs minus those savings.  The Council could review this fee at a later date.

·                The feedback that had been received from the Trade Unions in relation to the assumptions in the business case.  The Committee was informed that the unions would be recognised by the LATC and staff would be TUPE transferred to the LATC under current terms and conditions. 

·                The potential to address some of the outstanding concerns that had been raised by the trade unions.  Officers advised that conversations continued to take place with the unions and they would be consulted alongside staff, should the business Plan in July receive Council approval.

·                The likelihood that the LATC would seek to restructure after staff had been transferred, with a corresponding restructure of the client side of the service being required.

·                The non-recurring costs of establishing the LATC and what these might entail.  Officers explained that this could include a new accounting system, potentially introducing new software at leisure sites and reviewing IT systems so that the Council could comply with PSN security requirements.

·                The date by which it might be possible to confirm the non-recurring costs.  The Committee was informed that this information would be available to confirm in the report to Members in July.

·                The extent to which the Council could cover any non-recurring costs.  Members were advised that some of the savings in the first year could be used as a contingency fund to help cover these costs.

·                The performance monitoring arrangements for the LATC and the extent to which these reflected measures on the Council’s dashboard.  Members were advised that there would be a full range of strategic measures, as agreed in a contract between the Council and the LATC, which would link to both the strategic purposes and community outcomes.  Further operational measures would be developed for the LATC.

·                The transfer of the four Council-run community centres to the LATC and the potential for other community centres that were currently externally managed to be transferred to the company once existing leases expired.  Officers explained that the Council would be able to choose how to proceed with these, though it was noted that the externally managed community centres were all currently the subject of leases with community organisations.

·                The costs of continuing to work with the consultants V4 and the extent to which any further financial support was required to support this.  The Committee was advised that this working relationship would continue under an existing framework agreement and the budget was already allocated for this purpose.

The Chair noted that Overview and Scrutiny Committee had pre-scrutinised the Leisure and Cultural Services Business Case at their latest meeting.  On the basis of their discussions members of the Overview and Scrutiny Committee had proposed three recommendations.  Members noted that unfortunately, due to the inclement weather at the beginning of March, the meeting of the Overview and Scrutiny Committee had had to be postponed until 5^th March, thereby providing limited notice of the Committee’s recommendations or of the background to these for the Executive Committee’s consideration.  Based on this the Executive Committee concluded that a decision in respect of the scrutiny recommendations should be deferred until the Leisure and Cultural Services Business Case was considered at full Council on 19^th March 2018 to provide more time for these to be considered.

RECOMMENDED that

1)        the Executive Director Finance and Resources be given delegated authority to set up and register a wholly owned LATC for the provision of leisure and cultural services in the Borough of Redditch, on the basis of the governance arrangements set out in Section 2.8 (Page 26) of the business case;

2)        the assumptions as included in Section 5.7 (Page 36) in the business case are approved for consideration in the Business Plan when reported to members in July 2018;

3)        a recruitment process is commenced for a Managing Director of NewCo and that the Executive Director Finance and Resources be given delegated authority to prepare a job description and person specification;

4)        Officers be instructed to prepare a specification for the services to be delivered by the NewCo and prepare a report to Members detailing the impact (financial and staffing) on Redditch Borough Council (RBC) of transferring those services to NewCo to be submitted to Members in July 2018;

5)        the Council continues to work with V4 Consulting (with the support and assistance of officers) to prepare a Business Plan detailing how NewCo would deliver the services included in the Specification and deliver best value to RBC during its first 4 ½ years of trading; and

6)        the recommendations in respect of the Leisure and Cultural Services Business Case proposed by the Overview and Scrutiny Committee at a meeting on 5^th March 2018 be reconsidered at Council on 19^th March 2018.