The Executive Director, Sustainable City, has submitted a report which reports  back on the establishment of the Local Authority Trading Companies.

Recommendations: That the City Executive Board resolves to :

1)    Agree the “Transfer Date” of 1 April 2018 – that being the date on which all service delivery currently carried out by the Council’s Direct Services will be transferred to the two new LATCo companies;

2)    Approve the terms of the updated Memorandum of Understanding (as attached to this report as Appendix 1) which sets out the basis of the “Service” and “Support” contracts between the Council and LATCo companies; and delegate authority to the Interim Chief Executive, in consultation with the Council’s s151 and Monitoring Officers and the Leader of the Council to finalise the terms of and to enter into both the Service Contract and the Support Contract on behalf of the Council;

3)    Delegate authority to the Interim Chief Executive, in consultation with the Council’s s151 and Monitoring Officers,  to approve the terms under which the Council will enter into leases and/or licences covering the LATCo companies’ occupation of relevant Council premises and use of Council resources;

4)    Agree the transfer to Oxford Direct Services Limited on the Transfer Date of all Direct Services staff engaged in service delivery immediately prior to the Transfer Date on the terms set out in this report;

5)    Approve the arrangements ensuring that all transferring staff will continue to have access to the Local Government Pension Scheme and delegate authority to the Interim Chief Executive, in consultation with the Council’s s151 and Monitoring Officers and the Leader of the Council, on behalf of the Council, to enter into an appropriate tri-partite agreement with the Scheme Administrator and Oxford Direct Services Limited which sets out the basis of contributions into the LGPS;

6)    Authorise the transfer to Oxford Direct Services Trading Limited  of all customer contracts with third parties in existence on the Transfer Date, and authorise the transfer of all supplier contracts to the two LATCo companies (as appropriate) in existence on the Transfer Date;

7)    Note the provisions of the initial Business Plan for the Companies (the executive summary of which is at appendix 2); and

8)    Note and approve the “client side” arrangements as set out in this report in regard to the Council’s management of the Service Contract with Oxford Direct Services Limited.

The Executive Director, Sustainable City, had submitted a report which reported back on the establishment of the Local Authority Trading Companies.

The Chief Executive introduced the report which had been trailed in the last report on this subject to the Board in July.  The report set out the measures in place and proposed to enable both companies to move from their embryonic state to start trading in April 2018.

In discussion the following points emerged.  It was anticipated that the Shareholder would meet twice a year (the first meeting would be in December 2017).  The two companies’ meetings, would be held consecutively on the same day. Lease arrangements between the Council and the companies would echo those in place for Fusion.

It was recognised that formation of the companies would mean the transfer of a very significant proportion of Council colleagues to the companies. Members were pleased to note that the Memorandum of Understanding (MOU) made it clear that: “…their [the companies] primary reason for existence is to serve the requirements of the Council.” Members were also pleased to note that the MOU noted the companies’:  “Continuing adoption and promoting of the vision and values and behaviours imported from our shareholder.”

The Chief Executive, with reference to the other Council companies, said he envisaged them as a family of organisations with shared objectives.

In relation to pension arrangements, the report made clear that the LGPS would be available to staff for the time being. The Managing Director for Oxford Direct Services said that he would want to discuss subsequent arrangements with the unions in due course, looking to make arrangements that were best overall for the business. He said that he saw himself as the chief custodian of the Council’s values, recognising that, over time, company employees would identify less and less with the Council.

Support services from the Council for the companies will be important. Initially they will be based on current cost allocations alongside a recognition that the arrangements will have, ultimately, to be on a commercial footing. In the event of disagreement over recharges, the final arbiter will be the Chief Executive.

The City Executive Board resolved to :

1)         Agree the “Transfer Date” of 1 April 2018 – that being the date on which all service delivery currently carried out by the Council’s Direct Services will be transferred to the two new LATCo companies;

2)         Approve the terms of the updated Memorandum of Understanding (as attached to this report as Appendix 1) which sets out the basis of the “Service” and “Support” contracts between the Council and LATCo companies; and delegate authority to the Interim Chief Executive, in consultation with the Council’s s151 and Monitoring Officers and the Leader of the Council to finalise the terms of and to enter into both the Service Contract and the Support Contract on behalf of the Council;

3)         Delegate authority to the Interim Chief Executive, in consultation with the Council’s s151 and Monitoring Officers,  to approve the terms under  ...  view the full minutes text for item 102

The Managing Director of Oxford Direct Services introduced the report, which was the third report to CEB on the local authority trading companies (LATCO).  The Council had taken external advice and the trade unions were on board with the proposals.  

In discussion the Panel noted that:

·         The delay in the transfer date was due to the need to take additional time to get bank accounts, payroll and other systems in place.

·         The timing of local elections a month after the transfer date was not considered to be an issue.

·         There would be long term service and support contracts between the Council and the two companies, and the pricing and terms would be reviewed every three years.

·         Works above a certain value carried out by the Teckal company for the Council would have to be priced within certain parameters to ensure competitiveness and standard items would be benchmarked.

·         New and transferred staff would all be employed by the Teckal company on the same terms.  Their labour would be sold to the trading company when work was undertaken for other customers.

·         Vehicles and equipment would be transferred to the companies, providing an incentive for these assets to be looked after. 

·         The Council remained responsible for the fabric of the buildings and has asset management infrastructure in place to service these buildings but interior repairs would be the responsibility of the tenant company.

·         Any financial reserves held by the companies could be invested in a similar way to council reserves and balances.

·         A quarterly partnership board would monitor the performance of the Teckal company by exception.  Service quality issues would be picked up at monthly client meetings.

·         The Council would be the LATCOs largest customer for the foreseeable future and the companies would want to ensure that all customers receive the same high quality service.

·         Reductions in fuel and utility costs set out in the risk sharing agreement reflected the arrangements in place for other council services and the Council’s leisure partner. 

·         Newer debt risk would be shared 50/50 between the Council and the trading company.  If the company did not wish to take enforcement action in line with Council’s processes it would take on 100% of the risk.

·         The same policies would apply to the Council and the LATCO companies but the company directors would need to take a commercial view where there were cost impacts (e.g. if all staff were to be offered an extra day of leave in recognition of a corporate achievement).

The Panel commented that it would be useful for the time series profit data to include current and recent years.  The Panel heard that Direct Services did not current make profits so it would not be a direct comparison but that this information was set out in an interpretation document.

The Panel agreed to see the interpretation document and the business plan for the LATCO companies before it is presented to the Shareholder in December.  The Panel said that the meeting should take place before an all-member  ...  view the full minutes text for item 10

The Executive Director for Sustainable City submitted to the City Executive Board meeting on 18 July 2017 a progress report on the establishment of the Local Authority Trading Company. The full list of recommendations and documents are available on that agenda.

The decision of the City Executive Board will be reported at this meeting.

Councillor Turner, Board Member for Finance, Asset Management will move the recommendations.

Recommendations: Subject to the decision at the meeting on 18 July 2017, the City Executive Board recommends Council to resolve to:

agree to a further loan of a sum up to £200k to the LATCo companies, on State-Aid compliant terms, to enable the LATCo companies to fund their set up costs and to delegate to the Councils section 151 officer, in consultation with the Interim Chief Executive and Council Leader,  authority to approve spending of this money on other related matters.

Council considered a report from the Executive Director for Sustainable City (previously submitted to the City Executive Board meeting on 18 July 2017) detailing progress on the establishment of the Local Authority Trading Company.

Councillor Turner, Board Member for Finance, Asset Management reported that the City Executive Board had agreed the recommendations in the report and moved the recommendations for Council’s consideration.

Councillor Price, Leader, seconded the recommendations.

Council resolved, subject to confirmation of the City Executive Board decision on 18 July 2017, to:

1.    agree a further loan of a sum up to £200k to the LATCo companies, on State-Aid compliant terms, to enable the LATCo companies to fund their set up costs; and

2.    delegate to the Councils section 151 officer, in consultation with the Interim Chief Executive and Council Leader, authority to approve spending of this money on other related matters.

The Executive Director for Sustainable City has submitted a progress report on the establishment of the Local Authority Trading Company.

Recommendations: That the City Executive Board resolves to:

1.    Approve the revised LATCo company structure as set out in this report, i.e. the creation of a “Teckal” company (to provide Council services – “the Teckal Company”) and a trading company (to trade with external customers – “the Trading Company”)

2.    Note that the Interim Chief Executive in consultation with the Council’s section 151 officer, Monitoring Officer and the Leader will be developing a full update report to be considered by the Board in September or October, which will contain recommendations on  the following issues:

a.    A date (“the Transfer Date”), on which all service delivery currently carried out by the Council’s Direct Services will be transferred to the two new LATCo companies. :

b.    In regard to the Teckal Company, the terms of the Council’s entry  into an appropriate agreement with the company (“the Service Contract”) under which the Teckal Company would undertake from the Transfer Date all relevant  Council statutory functions and related work, as currently undertaken by Direct Services;

c.    The  arrangements to transfer all Direct Services staff engaged in service delivery immediately prior to the Transfer Date to the Teckal Company, such transfer being subject to the TUPE regulations;

d.    The arrangements  to ensure that all transferring staff will continue to have access to the Local Government Pension Scheme;

e.    The terms  of the contract between the two LATCo companies and the Council (“the Support Contract”) under which the Council would provide support services to both companies;

f.     The terms under which the Council would enter into  leases or licences  with the two LATCO companies covering their occupation of relevant Council premises and use of Council resources;

g.    The arrangements made to  transfer to the Trading Company of all contracts with third parties in existence on the Transfer Date

h.    The terms of the Shareholder’s  Agreement to be made  between the companies and the Council (acting though its Shareholder Group)

i.      The provisions of an initial Business Plan (or Plans) for the Companies.

3.    Agree to the transfer on the Transfer Date of all Direct Services staff engaged in service delivery immediately prior to the  Transfer Date to the Teckal Company in accordance with all relevant employment law protecting terms and conditions of employment including pension, and for this to be reflected in the contract. This proposal being subject to consultation having taken place with the Trades Union concerned.

4.    Recommend to the Teckal company that it incorporates the new Council  three year pay deal (if endorsed by a ballot of Trades Union members) into the employment contracts of the transferring staff for the three year period following its implementation by the Council.

5.    Agree to a transfer to the Trading company of the Council’s order book/external customer list, on terms to be agreed.

6.    Agree to grant a licence to the LATCo companies to  ...  view the full agenda text for item 40

The Executive Director for Sustainable City submitted a progress report on the establishment of the Local Authority Trading Company.

Cllr Ed Turner, Board Member for Finance, Asset Management and Public Health presented the report.

The Service Transformation Manager presented the report. He said that  work was progressing well and there was verbal agreement that the Local Government Pension Scheme would be available to those staff transferring to the new company.  There had been productive discussions with the trade unions and financial modelling was well underway and a shareholders’ agreement had been drafted.  Notwithstanding the progress, this was a complex matter and much operational detail had yet to be determined.

The Chair reaffirmed that, at this stage, the Board was just being asked for approval in principle, looking to a further report in October. The business plan element of the proposal would be critical.

The Executive Director for Sustainable City reminded those present that the proposal was underpinned by the strong conviction that the proposal was in the best interests of the Council. 

The Interim Chief Executive was pleased that the work done had been able to give confidence to staff. He reaffirmed the importance of the Business Plan and the work now needed to progress it. Successful implementation had the potential to generate considerable new business for the Council. The two companies had been established as legal entities which would be  distinct from the Council but care would need to be taken to ensure that Council values and aims were not lost in the process.  While there was a clear ambition to have the new arrangements in place by 01 November it should be recognised that  (and it did not matter if) not every detail  was sorted by then.

Cllr Brown, Board Member for Customer and Corporate Services welcomed the Interim Chief Executive’s comments,  particularly the recognition of the desirability of a shared  ethos with the new companies.

Cllr Tanner, Board Member for A Clean and Green Oxford reminded those present that a failure to proceed on the lines  proposed would almost certainly result in the need for the Council to curtail its current level of activity. The Board thanked staff for their work on the project to date .

The City Executive Board resolved to:

1.    Approve the revised LATCo company structure as set out in this report, i.e. the creation of a “Teckal” company (to provide Council services – “the Teckal Company”) and a trading company (to trade with external customers – “the Trading Company”)

2.    Note that the Interim Chief Executive in consultation with the Council’s section 151 officer, Monitoring Officer and the Leader will be developing a full update report to be considered by the Board in September or October, which will contain recommendations on the following issues:

a.    A date (“the Transfer Date”), on which all service delivery currently carried out by the Council’s Direct Services will be transferred to the two new LATCo companies. :

b.    In regard to the  ...  view the full minutes text for item 40

(may follow)

Cllr Fry,Chair of the Scrutiny Shareholder Group and Finance Panel presented the report. He said that he was pleased with the protections given to  employees, but felt that the report didn’t sufficiently emphasise the benefits of the trading model for the Council. The Board approved the Scrutiny recommendation.

The Executive Director for Sustainable City introduced the report.  He said that the companies exist and the aim is to start trading on 1 November 2017.  Officers are convinced that establishing the companies is firmly in the Council’s interests and are committed to getting the detail right.  Progress has been slowed slightly by the need to consider various options and trade-offs in arriving at the optimum arrangements, and by the need to get systems in place to support their implementation.  It is expected that officers would come back to members in October with a proposed shareholders agreement and an initial business plan. 

The Panel noted the following points in response to their questions:

Employment:

a)    Trade unions have been involved from the outset and discussions with them are progressing well.  Officers are determined to get this right as the business relies entirely on its staff.

b)    Trade unions are concerned that TUPE doesn’t give the assurances they want over terms and conditions of employment and in particular pension rights in future.  These protections will be written into the contract between the Council and the companies and access to the local government pension scheme will continue unchanged for existing staff.

c)    Subject to its agreement, the recently negotiated new pay deal will also be passported across to the companies. 

d)    In future there may be significant advantages in offering a different employment package to new starters and it is thought that there will be an appetite for this among younger workers entering the market.  Further discussions will continue with trade unions to discuss the possibilities around this at an appropriate time in the future.

e)    There are concerns about creating a two tier workforce but a fundamental principle will be that any different package (for new starters) will be broadly equivalent to existing arrangements. 

f)     There are advantages to creating entrepreneurial companies that combine a public service ethos with commercial practice.

       Finance:

g)    Property assets and vehicles owned by the Council will be transferred to the company via a leasing arrangement.

h)   Future known changes in Corporation Tax have been modelled, but other possible increases e.g. changes to National Insurance rates could have a major impact on the Direct Services pay bill (approx. £25m).

i)     The additional costs (Corporation Tax, audit, non-executive director) need to be met through the Business Plan in order for the Council to continue to build on its strategy of operating commercially to mitigate funding cuts.

j)      Additional income of £2m is already built into the Council’s Medium Term Financial Plan (MTFP) but, with investment, it is a reasonable aspiration for the companies to significantly exceed this.

k)    The companies will return value to the Council in a number of ways (leases, loan interest, support services etc.), not just through a dividend.

       Structure and governance:

l)     Commercial waste is a wholly traded service that will sit in the non-Teckal company.  Other services that predominantly exist to serve the Council will initially sit in the Teckal company  ...  view the full minutes text for item 8

The Head of Direct Services has submitted a report which presents the business case and seeks approval for the establishment of a Local Authority Trading Company

Officer Recommendations: That the City Executive Board resolves to:

1.            Agree in principle the setting up of a Local Authority wholly owned trading group of companies (‘the company’) from April 2017.

2.            Delegate authority to the Chief Executive, in consultation with the Council’s statutory officers and Board member for Finance, Asset Management and Public Health, authority to set up an appropriate company structure, including:

•              Selection of the name of the company(s)

•              Approval of the type of company, the articles of the company and the size and composition of its board

•              Recommending to the Shareholder Committee appointments to the posts of Managing Director, Directors, Company Secretary and Non-Executive Directors of the company

•              Preparation  of a shareholder’s agreement to be entered into between the company and the Council for consideration by the Shareholder Committee

•              Ensuring that the company holds appropriate insurances and/or benefit from insurances that the Council holds

3.            Agree that new externally traded work is managed and accounted for through the new company once appropriate arrangements are in place and it is practical to do so.

4.            Approve provision of an initial loan of £250k for working capital at state aid compliant interest rates.

5.            Delegate authority to the Chief Executive, in consultation with the Council’s statutory officers, to undertake further work and report back to the City Executive Board on matters including:-

•              Which services should be transferred or not and if so into which part of the structure principally having regard to the financial impact on the Council.

•              Which if any staff should transfer from the Council to the Local Authority Trading Company.

•              Client side arrangements as appropriate.

6.            Note the establishment of a Shareholder Committee (comprising the members of the City Executive Board) which will represent the Council as shareholder in the company.

The Head of Direct Services has submitted a report which presents the business case and seeks approval for the establishment of a Local Authority Trading Company.

Councillor Turner, Finance, Asset Management and Public Health presented the report. He thanked senior officers and union representatives for their work towards the establishment of the company.

The Board noted the exempt appendix to this report which contained legal opinion about the creation of a trading company.

The City Executive Board resolved to:

1.            Agree in principle the setting up of a Local Authority wholly owned trading group of companies (‘the company’) from April 2017.

2.            Delegate authority to the Chief Executive, in consultation with the Council’s statutory officers and Board member for Finance, Asset Management and Public Health, authority to set up an appropriate company structure, including:

•      Selection of the name of the company(s)

•      Approval of the type of company, the articles of the company and the size and composition of its board

•      Recommending to the Shareholder Committee appointments to the posts of Managing Director, Directors, Company Secretary and Non-Executive Directors of the company

•      Preparation  of a shareholder’s agreement to be entered into between the company and the Council for consideration by the Shareholder Committee

•      Ensuring that the company holds appropriate insurances and/or benefit from insurances that the Council holds

3.            Agree that new externally traded work is managed and accounted for through the new company once appropriate arrangements are in place and it is practical to do so.

4.            Approve provision of an initial loan of £250k for working capital at state aid compliant interest rates.

5.            Delegate authority to the Chief Executive, in consultation with the Council’s statutory officers, to undertake further work and report back to the City Executive Board on matters including:-

•      Which services should be transferred or not and if so into which part of the structure principally having regard to the financial impact on the Council.

•      Which if any staff should transfer from the Council to the Local Authority Trading Company.

•      Client side arrangements as appropriate.

6.            Note the establishment of a Shareholder Committee (comprising the members of the City Executive Board) which will represent the Council as shareholder in the company.