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DoE TO TAKE ACTION AGAINST LOSS MAKING COUNCIL SERVICES

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The government is ready to take tough action against local authorities who have made substantial losses on contract...
The government is ready to take tough action against local authorities who have made substantial losses on contracts awarded to their in-house teams.

Last year eight councils either lost over £500,000 on one contract or had five or more of their Direct Service Organisation (DSO) contracts failing to meet financial targets. This is the first tranche of statutory action against authorities who failed to meet their financial targets in 1994/95.

Local authorities will have a month to account for their losses and set out what steps they are taking to rectify them, environment minister Paul Beresford said today.

Notices were served today on Burnley, Hereford & Worcester, Kingston Upon Hull, Liverpool, New Forest, St Helens, Salford and Southwark and will be followed in the next few weeks by notices to other councils.

Some councils making significant losses will escape sanctions because they have already put their DSOs financial affairs in order or closed them down.

Said Sir Paul: 'It is important that when DSOs win contracts they should keep to their financial targets because any losses they incur have to be borne by council tax payers either by higher than necessary charges or by poor services.

'We have now received and scrutinised the 1994/95 accounts for local authorities direct service organisations - almost 2,200 in total. I am glad to say that the vast majority of authorities were able to meet the statutory financial targets we set for their DSOs.

'However, almost 300 DSOs failed to meet those targets. I am determined to keep up the pressure on authorities to improve their DSOs. Today's notices address some of the most serious losses and require the authorities to describe the steps that they have taken to deal with the problems. We will decide whether further action is needed in the light of their responses.

'Statutory financial objectives ensure both fair competition and value for money for local taxpayers. A DSO which fails to meet the objectives is not providing services as efficiently as it should.

'Over the coming months we intend to take action against all authorities whose DSOs have failed to meet these objectives in 1994/95. Exceptions will be made only where there are clearly defined extenuating circumstances.

'Today's notices emphasise the need for authorities to act promptly to address losses incurred by their DSOs. Authorities should not be complacent about such losses - the secretary of state will not hesitate to use his statutory powers against authorities whose DSOs do not offer value for money.'

The notices were served under compulsory competitive tendering (CCT) legislation and require written responses from the local authorities by 12 March.

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