(1) Mr B J Sweetland, Cabinet Member for Environment, Highways and Waste explained that Commercial Services was a non-budget funded division of the County Council which funded itself from income generated by its own activities. It had made a net return to the County Council of £7m for the year 2011/12.
(2) Mr Sweetland had taken over responsibility for Commercial Services in May 2011 and had asked the Corporate Director to commission a review. This review had been undertaken by BDO and Eversheds and had identified areas for improvement in terms of transparency, particularly in respect of its ability to demonstrate the arms-length nature of the business.
(3) The Corporate Director, Environment and Enterprise said that following an individual assessment of Commercial Services’ 26 business units, it had been decided to reconfigure them into 5 client-facing divisions. A Board had been established by the County Council in December 2011, consisting of Cabinet Members (Mr Gough, Mr Simmonds and Mr Sweetland) and senior officers.
(4) The Managing Director, Commercial Services informed the Panel that each member of staff in Commercial Services contributed on average £8,000 and an overall reduction in Council Tax per household equating to @ £22 per person per year. 84% of its turnover was from clients outside County Council controlled budgets. It was now appropriate to develop a simpler and more effective structure away from KCC. The staff were fully engaged and supportive, and discussions with the Trade Unions had been constructive.
(5) The Managing Director, Commercial Services then explained that the proposal was to simplify the current operating model from managing under five limited companies to two specific company structures. One would be a “Teckal”-compliant company, trading exclusively with the County Council. The other would enable Commercial Services to trade with the wider public and private sector under the auspices of Section 95 of the Local Government Act 2003. The client-facing divisions would continue as before, covering the areas of Education, Energy, Care, Employment and Direct Services.
(6) The Managing Director, Commercial Services replied to Members’ questions by saying that it would be inappropriate to bring EduKent under the Commercial Services umbrella as it was a customer-led company which did not operate in order to make money. Commercial Services, in contrast, was a customer-focussed operation. The only “Teckal” businesses operating would be those that could demonstrate value for money. In future, all monies would be accounted for in a single set of figures. The two companies would therefore account for the entire Commercial Services turnover.
(7) Mr Sweetland said that the new structure would enable Commercial Services to demonstrate that it was not being cross-subsidised by the County Council. This question had previously been blurred in the public mind. He added that although there were two companies which had consistently raised doubts about Commercial Services’ method of operation, there were more than 60 others which had been helped by its work. It was not only necessary to comply with all rules, laws and regulations, it was also essential to be able to clearly demonstrate this.
(8) RESOLVED to note the report on the re-alignment of the Commercial Services company structure following external review of its activities.