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The Board considered a report from the Strategic Director, Commercial and Place, inviting the Board to review the proposal recently approved by Cabinet for the creation of new commercial companies and a revised role for the Trading Board. The Board also had before it draft Terms of Reference for the Trading Board reflecting its new role which had been drafted by the Monitoring Officer. The Chief Executive, Adrian Pritchard, attended and presented the report to the Board.
Adrian explained that the proposals for the creation of the new Commercial Companies set out in the report and Business Case had been considered by the Scrutiny Panel and agreed by the Cabinet. The draft terms of reference submitted to the Board had not formed part of the decision making by Cabinet. They were based upon the functions identified at paragraph 4.4 of the Business Case and were put before the Board as a draft for consideration and discussion.
Members of the Board welcomed the proposals set out in the report and the considered that they reflected the right direction of travel for the Council. However, the Board considered that the draft terms of reference did not fully encapsulate the new role for the Trading Board. It was considered that the role of the Board was to act as the shareholder’s representative and this needed further emphasis.
In addition, there was some ambiguity around the meaning of the word “review” and further work needed to be done to define this and to consider the inter-relationship between the work of the Trading Board in respect of the companies and the Council’s scrutiny function. It was the view of the Board that it needed to be supportive of the companies and to ensure a constructive working relationship whilst providing challenge and encouraging innovation.
The Board was of the view that the terms of reference should be taken forward via a meeting of the Chairman and Group Spokespersons with the relevant officers. This would enable revised terms of reference to be brought forward to the next meeting of the Board for consideration.
In terms of reviewing the proposals for the commercial companies, the Board noted the recommendation of the Scrutiny Panel, agreed by Cabinet, about the political make up of the Board of Colchester Commercial. However it stressed the importance of ensuring the appointment of those with the necessary skills and ensuring that they had access to appropriate professional advice and expertise.
Further clarification was sought over the proposals that the commercial companies would be able to recruit staff on different terms and conditions from those employed in local government. There was some concern that this could lead to a two tier workforce. Adrian explained that existing staff transferring to the companies would do so under the TUPE regulations on their existing contractual arrangements and terms of conditions. However, in order to enable the companies to compete with the private sector, it was vital that they have a more flexible approach and be able would be able to recruit on different terms and conditions. This was not just a case of offering larger salaries: it may be reflected in more flexible contracts and a wider use of other non-financial benefits. This would help address some of the skills gaps in areas such as Estates Management.
In response to questions from the Board, Adrian also reassured members that the Section 151 Officer had identified those costs that were appropriate to be charged to Colchester Commercial and was satisfied that the proposed level of recharges was realistic. Professional advice had been sought on the taxation implications, and members of the Board had been provided with the advice from Pinsent Mason and Grant Thornton. In particular further work on the VAT and NNDR issues relating to the Sport and Leisure Service would be undertaken, with a view to transferring the service into the commercial structures.
The Board also stressed that Colchester Commercial and its subsidiaries needed to be able to respond quickly to commercial opportunities and explored how they would be able to raise finance. Ultimately the companies were backed by the Council which could borrow money at preferential rates and loan it to the companies, although this would be at commercial rates in of the regulations on State Aid.
Adrian stressed that it would be open to the Board to look at these issues in more depth as part of its work in monitoring and reviewing the work of Colchester Commercial and it’s subsidiaries.
Some concern was expressed that in the SWOT (Strengths, Weakness, Opportunities and Threats) analysis a culture of complacency had been identified as a potential weakness. Adrian explained that whilst most areas of the Council had fully embraced the programme of change that the Council had followed in recent years, there were some small pockets where this was not the case. A small budget of 10K had been set aside to support staff through the transition: however the culture and ethos of the companies would remain public sector.
Members of the Board emphasised that this was a fundamental shift for the Council in how it delivered services. It was important that this was effectively communicated to residents. In this regard the naming of the companies was important and it was suggested that the Leader of the Council and other Group Leaders be involved in the naming of the companies.
RESOLVED that:-
(a)
The proposal for new commercial companies and the revised role for Trading Board as set out in the Business Case for the Creation of Colchester Commercial (Holdings) Limited approved by Cabinet on 14 June 2017, be noted.
(b)
The Terms of Reference to be subject to further discussion between the Chairman and the Group Spokespersons and revised Terms of Reference be submitted to the next meeting of the Board.