A company jointly owned by Cheshire West and Chester Council and Cheshire East Council which was set up with the aim of saving millions of pounds for Cheshire's council taxpayers, instead reported an overall loss of £2.6m for 2015-16.
CoSocius Ltd was launched in April 2014 to deliver essential business services to both local authorities and market services to outside organisations.
In May 2014 contracts and over 300 members of council staff from East and West who were formerly working in Cheshire Shared Services providing payroll, payments and IT functions were transferred to the new limited company.
At the time the Councils said "Once established the company is expected to generate savings in excess of £5m after the first five years, rising to £1.6m annually."
A statement issued on Friday 27th May, on behalf of both Councils, Councillor David Armstrong, Cheshire West and Chester Council's Cabinet Member for Legal and Finance, and Councillor Peter Groves, Cheshire East Council's Cabinet Member for Finance and Assets, said:
"CoSocius reported an overall loss of £2.6m for 2015-16. As owners of the company, these costs will be met by Cheshire West and Chester and Cheshire East Councils.
"While CoSocius itself ran at a loss, the two Councils generated £1m of savings on ICT and transactional services, reducing the net additional cost from such services to £1.6m across both Councils.
"Both Councils have met their share of these costs from their 2015-16 budgets. Thanks to savings and efficiencies delivered elsewhere, the two authorities have still delivered an overall underspend against planned expenditure for the year.
"All costs associated with CoSocius have therefore been contained without further impact on the finances of either Council or any new costs to the tax payer."
Councillors Armstrong and Groves continued: "Both Cheshire West and Chester and Cheshire East Councils are committed to working innovatively to deliver quality services and value for money for local taxpayers.
"As a business, CoSocius was able to trade with other organisations in addition to providing Council services, and was designed to reduce costs by eliminating waste and improving efficiency.
"Unfortunately, the fast-evolving nature of the ICT market meant that CoSocius experienced higher than expected running costs and fewer opportunities to grow its business commercially beyond the services provided to both local authorities. Sadly, this meant that CoSocius was not the success we hoped it would be.
"In October 2015 the Councils made the decision to bring the services back 'in house' and close down CoSocius. As part of this process steps have already been implemented to address the current overspend and bring costs back into line with budgeted levels for 2016-17.
"This decision was made for sound financial and practical reasons, and at the earliest practical opportunity, to best protect the interests of local Council Tax payers as well as to ensure ICT and transactional service continuity to both authorities."
Comments
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You couldn't make this up.....
I don't know whether to laugh or cry.
but I'm sure Vic Barlow will say it with much more feeling. How about it Vic.?
I'm often suspicious of the use of 'therefore' as it is often used to imply one logical consequential conclusion that is actually one of many possible outcomes about which the reader could infer. It could be accurate in this case if what is meant is that the councils' underspend in 2015-6 covered ALL of the related costs incurred by both councils and company. This may indeed be true, but it is not specifically stated and is somewhat muddied by the sentence further down that says 'steps have already been implemented to address the current overspend and bring costs back into line with budgeted levels for 2016-17'. So there was an underspend in 2015-2016 but 2016-2017 is already in an overspend that will be addressed by existing plans?
As that's all a bit muddy, as I said, so what have I (therefore) learned?:
1. The councils are liable for company losses of 2.6 million, in spite of already paying the company 1.6 million themselves for the company's services
2. The councils used to pay 2.6 million for transactional services
3. The councils now 'saved' 1 million on these services through its use of a limited company (for which they are liable for 2.6 million -see 1 above) by paying only 1.6 million
4. Thus, transactional services for councils cost 2.6 million for company liabilities (see 1 above) plus 1.6 million for services (see 3 above) for 2015-2016
5. So 2015-2016's services cost 4.2 million, or 1.6 million more than usual to fund this failed experiment
6. Whether this 'overspend has already been addressed' or plans are in place to address the 'current overspend', the financial loss of the scheme will be/is/was paid for by a reduction of public services or public sector workers
Despite their reshuffling, to their credit I have to say that my dealings with council staff have been superb in every instance. In that spirit I am prepared to give the benefit of the doubt to the councillors involved in this scheme, that they thought it would be good value for money (hopefully not by the reduction of pensioned public sector staff expenses). It didn't work, fair enough, own it by your actions and unambiguous language and you will add respect for that to what you've already earned as public servants.