Agenda item

To consider a joint report (which includes a confidential appendix) by Councillor Bobby Feeley, Lead Member for Well-being and Independence and Councillor Julian Thompson-Hill, Lead Member for Finance, Performance and Strategic Assets (copy enclosed) seeking Cabinet’s recommendation to Council to support the business case and establishment of a Local Authority Trading Company for a range of previously agreed “in scope” leisure related activities/functions together with associated authorisations.

RESOLVED that Cabinet recommend that Council –

(a)       support the final Business Case for the Project (this will include refinements to the draft business case attached at Appendix A to the report);

(b)       support the establishment of a not for profit Local Authority Trading Company limited by Guarantee (LATC);

(c)        support the appointment of the Corporate Director: Economy and Public Realm to the Board of the LATC;

(d)       support the retention of the current name ‘Denbighshire Leisure’ for the LATC, and

(e)       that Cabinet confirms that it has read, understood and taken account of the Well-being Impact Assessments (Appendix B, Ref no 564 to the report) as part of its consideration.

Councillors Bobby Feeley and Julian Thompson-Hill presented the joint report seeking Cabinet’s consideration of the draft Business Case (confidential appendix attached to the report) for establishing a Local Authority Trading Company (LATC) for a range of previously agreed “in scope” leisure related activities/functions together with associated authorisations prior to formally reporting to Council so that the anticipated savings could be achieved from financial year 2020/21.

Councillor Feeley reiterated the value and importance of the Council’s leisure service provision in terms of people’s health and wellbeing and highlighted the significant investment in those facilities in recent times.  The reasoning behind the establishment of an Alternative Delivery Model (ADM) was explained in order to provide significant savings for the Council in the current financial climate whilst also enabling the service to trade more commercially to help sustain facilities for the future.  The model would allow a more flexible, innovative and entrepreneurial approach to commercial leisure whilst also allowing the Council to retain complete control with robust governance arrangements proposed.  Reference was made to other Councils who were already using similar ADMs to deliver a range of functions together with lessons learnt and an overview was provided as to how the proposed LATC would operate in practice.  Councillor Julian Thompson-Hill reported upon the financial considerations which had been comprehensively detailed within the report highlighting both the significant savings and operational costs incurred for the new company together with financial management responsibilities going forward.  In brief the savings were estimated at £1,107k with the net annual saving in the first year estimated at £800k.  Councillor Mark Young asked for confirmation of staff terms and conditions for those who would be transferred over to the new company as after meetings with unions it had been raised as a question.  It was confirmed that staff affected would be transferred to the new LATC under TUPE regulations and be subject to the same terms and conditions.  Cabinet was also advised that, whilst the current model related to particular leisure related activities/functions there were potential opportunities to add other activities/functions in the future as appropriate.

Cabinet noted the significant financial savings arising from the proposal together with longer term benefits to help secure the financial viability and quality of leisure services going forward together with future opportunities for growth.  Questions were raised regarding various financial aspects arising from the report together with governance arrangements which were considered a key element in contributing to the future success of the LATC.  Assurances were also sought in terms of managing identified risk and safeguarding staff terms and conditions both upon transfer and in the future.

The Lead Members and officers responded to questions as follows –

·        Councillor Mark Young asked how the new business would be cash flowed.  The Head of Finance confirmed in terms of ensuring sufficient cash flow in the initial stages and going forward the intention was for the Council subsidy to be paid in advance which would allow the LATC working capital to manage its affairs and also to transfer a cash reserve to enable the company some freedom around minor investment – it was not anticipated that the company would go over budget but in that event the net savings figure would be reduced accordingly in line with that amount

·        assurance could be taken regarding the robust governance arrangements proposed with two separate boards (1) Operational Board to manage the day to day running of the company, and (2) Strategic Governance Board to provide strategic oversight.  A 10 year contract would be agreed, along with a new leisure strategy.  Both boards would be in addition to the Council’s established reporting mechanisms on delivery and performance, and the service would also be subject to the service challenge process

·        the reasoning behind the draft business case not being published was explained given that it contained confidential elements relating to exempt information as defined in the Local Government Act 1972 – Councillor Huw Hilditch-Roberts felt there would be merit in removing the confidential elements to allow the rest of the business case to be published given that it was a positive report

·        assurances were provided that staff transferred would be subject to the same terms and conditions and employment policies, including the pension scheme, which would continue in the future – those terms would also apply to any new staff employed by the company, and the contractual obligations and retention of control by the Council provided the necessary safeguards in that regard

·        it was acknowledged that no project was without risks, many of which in this case would still be in place whether the service was in-house or external.  The proposal had been through the usual project methodology which included a risk register in order to mitigate identified risks as far as possible and the proposal was still considered the best option to deliver the service going forward.  Officers elaborated upon the key risks identified which had been detailed in the business case which included future changes in legislation, inadequate governance arrangements, and changes to the leisure market and delivery/supply costs – in the worst case scenario the assets would revert back to the Council

·        confirmed that during the implementation and post implementation phase of the project there would be work undertaken by staff acting on behalf of the Council and the LATC and Chinese wall protocols would be developed and implemented to ensure a separation of advice and where a department of the Council acted on behalf of both parties, different officers would be allocated – those arrangements would need to be put in place for implementation following approval of the business case by Council.

RESOLVED that Cabinet recommend that Council –

(a)       support the final Business Case for the Project (this will include refinements to the draft business case attached at Appendix A to the report);

(b)       support the establishment of a not for profit Local Authority Trading Company limited by Guarantee (LATC);

(c)        support the appointment of the Corporate Director: Economy and Public Realm to the Board of the LATC;

(d)       support the retention of the current name ‘Denbighshire Leisure’ for the LATC, and

(e)       that Cabinet confirms that it has read, understood and taken account of the Well-being Impact Assessments (Appendix B, Ref no 564 to the report) as part of its consideration.