Agenda item

This report advises the Committee of two notices of call-in received from six Members of the Council of the Cabinet’s decisions 176–179/2017.

Discussion:

Members considered a report regarding a call-in received from six Members of the Council of Cabinet’s decisions 176-179/2017 in relation to the creation of traded services for the delivery of category management services and also a staffing agency. The Committee was requested to consider the Cabinet decisions and decide either to take no further action, refer the decisions back to Cabinet or to refer the decisions to Council for reconsideration.

Councillor Maple, the Lead Member for the call-ins, explained the reasons for the call-ins as outlined in paragraph 2.2 of the report. The decisions had been called in out of concerns about the practicalities rather than an objection in principle to delivering services through an alternative service delivery model. He suggested that the decisions would have benefited from pre-decision scrutiny, which had not been possible due to timing issues. Regarding the category management decisions he questioned whether the proposals would generate the revenues projected due to doubts about whether there was sufficient business in the market. He asked whether the staff who would be transferred in both services would be part of the Local Government Pension Scheme and also where they would be physically based.

The Chief Legal Officer replied that the category management proposals had been tested for two years on a shadow basis. Time had been taken to develop the proposals and a modest assessment had been made of the initial market share. Whilst the procurement market was shrinking he felt there was still a reasonably sized market in the south east. In the short term the staff would be based in Gun Wharf but at some point alternative premises would be looked at.

The Chief People Officer added that Medway Commercial Group was a scheduled body in relation to the Local Government Pension Scheme (LGPS) so staff transferred over would be able to retain membership. New staff employed by MCG and agency staff would not be able to opt into the LGPS.

In terms of the relationship between MCG and the Council, it was queried how the Council would deal with MCG performance issues. The Chief Legal Officer advised that the Council was the only shareholder of MCG. Responsibility would still rest with the Council and MCG would be held to account for service delivery based on the contract.

In terms of the staffing agency he asked for clarification on the following points:

·         What would be the practical arrangements when the Council engaged staff supplied by the staffing agency in terms of the Council being both client and employer?

·         What would the ratios be in respect of the Council’s charge for agency staff?

·         Would the fostering service be part of the staffing agency?

·         Would there be any areas where the staffing agency would not accept work (i.e. an organisation with whom the Council was in dispute)?

·         How could overview and scrutiny engage and have an influence on draft budget decisions in a timely manner?

The Chief People Officer advised that the MCG model meant there would be the freedom to pay a higher overall salary and lower pension contributions but the overall package would be comparable to the total spend for permanent staff. The current rates paid to agency staff would not be reduced and there would be a significant reduction in the charge the Council paid for agency staff.

Foster carers were not council employees and not part of the arrangements. In terms of areas where the staffing agency would not accept work, there were measures in place to deal with this difficult issue and more detail could be provided. The Council would be able to insist on a better service and have a tighter control on quality than at present.

A Member queried whether the business case for the staffing agency acknowledged that it was a crowded market and there was a need to attract quality staff. The Chief People Officer acknowledged it was a competitive market. At present temporary staff were not offered training opportunities but this would be possible in the new arrangements. The Council would not have to pay the current 20% agency fee.

A Member asked whether MCG directors would decide on how to divide any surpluses and what responsibilities individual directors would have in the event of substantial losses. The Chief Legal Officer replied that the Council would decide on surpluses. There were personal responsibilities involved for directors but the Council would probably grant indemnities.

In order to discuss the detail of the business plan contained in a confidential appendix to the report it was agreed that the press and public be excluded from the meeting during consideration of  the exempt material contained within appendices B and D to agenda item 8 (Category Management Traded Services and Staffing Traded Services).

Referring to the category management income projections, a Member expressed concern at the feasibility of the projected doubling of income in three years which suggested a 50% increase in external business. This appeared to be a very risky approach.

A Member also commented that there could well be very significant risks not accounted for in the business plan around how pensions liabilities were accounted for and it would be prudent to seek advice from the external auditor on that point. The issue was that each year an evaluation would be needed and if there was a deficit in the valuations of pensions then the ongoing deficits would sit with MCG and this could have a devastating effect on the business. The Chief Finance Officer advised that the LGPS liabilities remained with the Council and a written agreement from Kent pensions to that effect had been received. Legal advice given at the meeting confirmed that there was no pensions deficit in MCG’s accounts as at day one of the company as the historic pensions liabilities and any deficit was not transferred to the company. If the existing pensions deficit increased then the risks would ultimately sit with the Council upon MCG exiting the scheme. A Member responded that the key concern was about how the external auditor expected MCG to account for any pensions liabilities in their accounts and not the views of Kent pensions.

The Chief Finance Officer commented that increasing the staffing in category management would allow the multipliers necessary to generate the projected external income. The Chief Legal Officer added that market testing showed that it would be possible to operate competitively in the market and retain reasonable margins. The service had a good relationship with SMEs and would be able to take advantage of those opportunities. He considered the income projection figures were achievable.

A Member then moved that the decisions be referred back to Cabinet for reconsideration at their 7 February meeting taking into account urgent advice from the external auditor on the LGPS implications, risks and liabilities of transferring staff to MCG from the Council. Upon being put to the vote this was not carried.

It was then moved that no further action be taken in respect of the Cabinet’s decisions and officers be asked to seek clarification from external audit on the LGPS implications for MCG when staff were transferred from the Council. This was carried.

Decision:

The Committee agreed that no further action be taken in respect of the Cabinet’s decisions and requested that officers be asked to seek clarification from external audit on the LGPS implications for MCG when staff were transferred from the Council.