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.

To enter into the Service Contract and the Support Contract between the Council and the LATCo.

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 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.

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 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 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.

j.      An aspiration that the project aim should be  to go live on 01 November 2017. 

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 use the Council’s “ox and ford” logo and the name “Oxford Direct Services” on terms to be agreed.

7.    Recommend that Council agrees 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 ofiicer, in consultation with the Interim Chief Executive and Council Leader, authority to approve spending of this money on other related matters

8.    Approve the governance arrangements for the LATCo companies set out in this report.

9.    Ensure that “client side” arrangements as set out in this report in regard to the Council’s management of its contract with the Teckal Company are fully worked up and agreed

10.Delegate authority to the Interim Chief Executive, in consultation with the Council’s s151 and Monitoring Officers and the Leader of the Council to agree on behalf of the Council any matter requiring the Council’s consent to properly implement the proposals set out in this report, including the ,terms of any leases or licences to be granted to the companies for operational premises, vehicles, intellectual property or other licences, the terms of any loan agreement and any other relevant matters

The City Executive Board resolved to:

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.