Worcestershire CC is set to create a company to runs its children’s social care services after being ordered to establish an alternative delivery model by the Department for Education.
The council’s cabinet on 29 March will consider a recommendation by director of children, families and communities Catherine Driscoll to approve the new model after an option to establish strategic partnership with another council was rejected as it did not meet DfE’s requirements for operational independence.
A report to cabinet states the “flexibilities and freedoms” the new company, which will be wholly owned by the council, can provide “regarding new ways of working and workforce development/ recruitment” are “attractive benefits”.
However, the financial appraisal concluded “there are limited quantifiable financial benefits associated with the [company] at this stage, as it does not have an intention in the short-term to generate further income outside of the contract with the council”.
The report estimates £4.6m will need to be invested to establish the company, although this is said to be likely to change as key decisions are taken during implementation.
It adds the cost of service provided by the company is expected to be £77m in 2019-20, increasing to £82m in 2022-23.
However, the additional costs of support services, potential VAT liabilities and £2.5m costs attributable to running and commissioning the company creates a deficit of £7.5m in 2019-20, rising to £11.1m by 2022-23.
However, with “assumed” funding from DfE for irrecoverable VAT, this deficit is reduced to £6.2m from 2019-20, rising to £9.7m by 2022-23.
The report states DfE has stated it is in discussions with Her Majesty’s Revenue and Customs and the Treasury “in the hope” of reaching agreement on a long-term solution in respect of VAT liabilities for councils implementing adopting delivery models.
It also says the predicted deficit position does not take into account the use of children’s services contingency funding assumed in the draft medium term financial plan of £5m in 2019-20 and a £4.5m in 2020-21.
The report adds: “the affordability of the [company] is heavily dependent on the agreement made between the council and the DfE regarding funding” and added: “Therefore, once an agreement has been made regarding funding, the financial model must be revisited to ensure the council identifies the additional budget required to be able to successfully deliver the service within the proposed [company] model.”
Worcestershire CC was ordered by the government to consider alternative models for delivering children’s services in September last year after commissioner Trevor Doughty questioned the council’s capacity to address “deep-seated cultural problems”.
Mr Doughty was appointed to review Worcestershire’s services last March after an Ofsted report identified widespread and serious failures following repeated ‘inadequate’ ratings dating back to 2010.
Responding the recommendation Mr Doughty said: “Ofsted have recognised the progress that Worcestershire has made to date and the continued improvement in the quality of their services.
“The development of an alternative delivery model will provide a great platform on which to sustain improvement in the outcomes for children and young people in Worcestershire.”