Two councils have been urged to drop plans to shift most staff and services into a standalone company after a report found it would take too long to repay the costs associated with setting it up and pensions.
South Hams DC and West Devon BC had planned to move all but a handful of staff and services into a company they would jointly own, which it was intended would also sell its services elsewhere to generate income. The two councils already share services and managers.
A steering group report, due to go before both councils tomorrow, concluded on a 5-3 vote that the proposal was not viable.
The idea arose in October 2015 when the councils said the company’s approach would be unique in local government, as staff had been reappointed to posts based on ‘behaviour’ rather than experience.
In a joint statement the councils said: “Additional costs in the early years would take the councils longer to pay back than the members of the joint steering group were comfortable with.
“A decision not to move ahead at this time could mean that both councils will have to continue to explore other ways to close their looming funding gap of £1.5m between both councils.”
South Hams’ leader John Tucker (Con) said: “The time it would take for us to pay back that initial investment was just too great and too much of a risk to take.”
Philip Sanders (Con), West Devon leader, said the councils “will have to become more commercial and find other ways of funding ourselves”.
Council-owned companies have mixed record of success in selling services to other bodies, as LGC found when it looked at this issue in March 2015.
While Cambridgeshire and Northamptonshire CCs’ operation LGSS has won custom from four other councils, Somerset CC and Taunton Deane BC’s South West One failed to win such work over its 10 years existence. East Lindsey and South Holland DCs’ Compass Point notes none on its website, which no longer states that it seeks external work.