Local Authority Trading Company (LATCo) Briefing Paper
- Meeting of Commercial Services Cabinet Committee, Monday, 8 July 2019 7.30 pm (Item 4.)
- View the background to item 4.
To provide Members with a briefing paper to
provide background to the formation of a Local Authority Trading
Company (LATCo) and the council’s potential approach to
formation of such as company.
The Director (Corporate Services) informed the Committee that given the financial pressures that had been placed on Councils in recent years there had been a drive for local authorities to consider the way in which they operate and provide their services. This had resulted in Councils exploring other options for income generation such as purchasing of commercial properties and the formation of trading entities to deliver Council services such as private repairs and maintenance, house clearance and vehicle repairs.
There were two key pieces of legislation which allowed for a local authority to trade in the services it provides:-
· The Local Government Act 2003 which allows local authorities to trade in the ordinary day to day functions of the Council; and
· The Localism Act 2011 which allows local authorities to trade in any area (unless expressly prohibited or limited by statute).
A recent report by Grant Thornton in September 2018 stated that it had identified 743 LATCos in Great Britain and that 59.2% of local authorities owned at least one. These figures included commercial property companies which made up 23.2% of all LATCos.
The Council’s Medium-term Financial Strategy 2016-17 to 2019-20, set out an initial funding gap by 2019-20 of £2.9m. Whilst considerable action had been undertaken to date to ‘bridge the gap’ in term of identifying savings and new income streams, a further £1.3m of savings had been agreed in the autumn of 2018 as a result of further central government austerity measures and commercialisation would be a key step to delivering these additional actions to close the funding gap.
The Director (Corporate Services) provided Members with a detailed overview on the process of forming a LATCo and the Council’s potential approach to the formation of such a company.
Members highlighted the following:-
· Which services would be progressed and would a business case for each of those services be submitted to the Committee for consideration.
The Director (Corporate Services) advised that there were currently three areas being explored and that further work needed to be undertaken. The Committee would be informed of those areas and the order in which they would be progressed once the above work had been completed.
· If the LATCo was to become successful, would TUPE need to be considered?
The Director (Corporate Services) advised that the creation of a LATCo was in no way intended to result in the transference of existing Council functions or the erosion of staff terms and conditions.
· The Council will need to adequately protect those Members and Officers that will sit as Directors on the LATCo as they will become personally liable i.e. the Council will need to indemnify those appointed.
· Consideration will need to be given to how the Council will manage expectations when providing services for both the public and private sector.
· Could a LATCo offer services that are outside of the Council’s ordinary day to day functions.
The Director (Corporate Services) advised that this was possible however there was no intention to do so at this moment in time.
As it was the Council’s intention to establish a LATCo, the Committee was informed that approval would need to be obtained from Full Council therefore appendix four to the report set out an indicative timeline for establishing a trading company by 1 April 2020. Regular updates on progress would be provided to the Committee over the course of the year.
- Local Authority Trading Company (LATCo) Briefing Paper, item 4. PDF 125 KB
- 2. Appendix Two - Examples of LATCos.docx, item 4. PDF 447 KB
- 3. Appendix Three - Summary of Statutory responsibilities.docx, item 4. PDF 154 KB
- 4. Appendix Four - Indicative Timeline for establising LATCo.doc, item 4. PDF 162 KB