What's on the table for local authorities when considering prioritising budgets and service delivery? Tiffany Cloynes and Rebecca Hazeldine of Geldards take a look.
AN increase in demand for services, while at the same time facing further budget cuts and other challenges, means local authorities are having to be more innovative in terms of service delivery - and consider alternative ways of providing services more efficiently and at a lower cost - while ensuring quality is maintained. Local authorities are also looking for ways in which they can sweat their own assets to try to generate revenue.
There are several options for local authorities wishing to consider alternative and innovative ways of delivering their services:
Collaboration with other local authorities
Local authorities can enter into arrangements to cooperate and work with other local authorities to deliver certain services. This could be by way of a collaboration agreement or other contractual agreement, which would set
out the key objectives and the roles and responsibilities of each of the participating authorities. No separate corporate vehicle is required; it is a purely contractual arrangement.
Wholly owned council companies (single or jointly owned by local authorities)
A local authority may wish to establish a company that is wholly owned by the local authority to deliver a particular service or have a specific function/objective. The local authority retains control of the entity but it would be separate. A company could be owned and controlled by one local authority or jointly by a number of authorities.
Joint ventures with the private sector
An arrangement between a local authority and one or more private sector partners who wish to pool their resources and collaborate to carry on a specific business activity with a shared vision and a view to mutual profit. This could take a corporate form whereby the parties establish a corporate vehicle they own jointly in agreed proportions. Alternatively, this could be in a contractual form where the parties enter into a collaboration or other contractual agreement. The documentation in either form needs to set out the key objectives, allocation of resources, roles and responsibilities of each party and exit arrangements.
Spinning out the service into a new corporate entity (mutuals)
A local authority team may wish to move out of the authority and deliver their services through a separate trading entity. These vehicles are often owned by the local authority staff with some involvement from the authority and/or other key stakeholders. Staff and assets would be transferred to the new entity and they would enter into contractual arrangements with the authority for the delivery of services.
A local authority may wish to contract for services with a third party provider to deliver certain services rather than maintain them in-house. The authority would manage delivery of the services through the contract and performance management provisions.
The authority will need to bear in mind a number of issues when considering how best to structure its services going forward and in appraising its options for future delivery. There is no one-size-fits-all approach - what suits one particular arrangement or service may not necessarily fit another. Some factors to consider include:
- Will the arrangements deliver what the authority is hoping to achieve? Key objectives should be considered and set out from the outset and a business case should be developed to ensure the arrangements are fit for purpose and are sustainable in the future.
- Powers and vires - Does the local authority have the power to enter into such arrangements? Can it use its general power of competence under the Localism Act 2011 or are there other specific powers that may be relevant? If the authority wishes to trade for commercial purposes this will need to be via a separate entity.
- Procurement - The procurement implication of setting up the arrangement, as well as how any new entity will behave in future, needs to be considered. If an authority is looking for a private sector party to deliver services either via a contract or through some joint venture arrangements, they may need to be procured under the procurement regulations. Services being delivered by a wholly owned council company or through a public sector collaboration, however, may benefit from the Teckal and Hamburg exemptions.
- Governance arrangements and level of involvement of each party - To what extent does the local authority wish to be involved going forward? Do they wish to retain control or is there more flexibility in their involvement? And to what extent do they have the resources to be involved? Are there are other stakeholders (i.e. staff or service users) who should have a role in the arrangements going forward? These can all be factored into the governance arrangements going forward.
- Funding and sustainability - The local authority must consider what the set-up costs will be and also what is required for long-term sustainability of the arrangements and how this will be funded.
- Staff, assets and land - If there is to be a new entity, how will it be staffed? Will it be given assets and land from the authority or other parties in order to function and deliver its intended purpose?
Tiffany Cloynes is a partner and Rebecca Hazeldine is an associate in the Public Services Group of law firm Geldards.