Trading and charging case studies

A flexible ‘shell company trading model’ Gateshead Council

Victoria Beattie, head of construction services, explains Gateshead Trading Company model and why she believes this route will help sustain the future of council services and generate income. Gateshead is situated in Tyne and Wear and sits on the southern bank of the River Tyne, opposite Newcastle upon Tyne. In recent years we have become known for some exciting works such as The Sage Gateshead, the Angel of the North and the Baltic Centre for Contemporary Art. However like all councils we are constantly striving to make sure we have not just great iconic architecture but a substantial and sustainable future for our local economy and local public services. In the current economic climate we wanted to develop an innovative and entrepreneurial approach to in-house services. Read more

A flexible charging arrangements that supports the local economy – South Gloucestershire Council

Owen Jenkins, of South Gloucestershire Council, explains how a review of fees and charges has provided a catalyst for income generation and helped support the local economy. South Gloucestershire started with a review of charging mechanisms. It was surprising how many fees and charges had remained unaltered for many years and we had not implemented inflation only rises to our prices for works and services. For example the cost of a skip licence was at £30 but that had not kept pace with the cost of providing the service. This was raised to £45. In other areas we quickly realised that the charging mechanisms we had in place did not even recover the costs, for example the labour costs associated with street furniture ‘knock down’ teams, following road traffic incidents. Read More

Stockport Council: Solutions SK - A Section 95 Trading Company Model

On 1st November 2006, Stockport Direct Services, Stockport Council’s in-house direct service provider, became Solutions SK – a limited company wholly owned by Stockport Council. Over 1000 employees TUPE transferred into the company with the full support of the Council, employees and the trade unions. Two years later - the company is going from strength to strength. Solutions SK commenced trading with a turnover of £28 million and is now at £40 million, with an ambitious vision for the future. Read more

Norfolk property services – a Non S. 95 trading company model

NPS Property Consultants is one of the earliest examples of local authority trading in a commercial context. Originally as a business unit within Norfolk County Council the company originally utilised powers under the Local Authorities (Goods and Services) Act 1970, to establish itself as a trading arm of the council. Flexibility, in being able to trade as a commercial venture led to the formation of a company circa 1992 with NPS becoming a limited company in 2002. This was all in advance of new powers under the Local Government Act 2003. Read more

A simply charging model to support local not for profit organisations

One London Borough Council has a Transport Unit which operates with around 18 staff and provides effective transport and fleet maintenance solutions for the local authority through servicing a range of vehicles under a repairs and maintenance work stream. Included within the operation is the maintenance of vehicles that have been specially adapted for disabled peoples transport operations.

The Transport Unit undertakes work valued at around £50,000 per annum for a range of local service providers for hospitals trusts and charities to repair and maintain vehicles. This has provided a very innovative local solution for clients. Read more

Examples of activities by local authorities

The following examples illustrate some of the activity undertaken at present, which would be broadly classified under the banner of municipal trading. They are intended to stimulate ideas and promote discussion rather than to demonstrate definitive case studies.

Public Sector Working

An authority is carrying out Building Cleaning and Catering work for a number if public bodies. These include another local authorities (£100,000) the police authority (£120,000)and public utilities such as Scottish Water (£50,000) and Scottish Heritage (£10,000). In total the value of this work equates to approximately 5% turnover. They have been carrying out this work for the last 8 years.

The power used to carry out the work is the Goods and Services Act. The external auditor has not identified any problems with its service. It has not involved any new equipment or vehicles or any other investment and no staff are dedicated totally to this work. The activity is carried out on the basis of a Serves Level Agreement (SLA). Charges are calculated to cover operational costs plus central overhead charges. Each piece of work is prices individually and looked at on merit, taking account of the market conditions.

Photographic Identity Cards

A large city council in Scotland has been providing a photographic identity card service to a number of bodies for over a year. The equipment was initially purchased to provide identity cards for all city council staff, however the service has been undertaken for Fire and Police personnel; as well as taxi drivers and window cleaners. It is currently being expanded to further education colleagues and health trusts.

At the outset a business case was examined and presented to the authorities corporate management team. This service delivers a benefit to the community and was therefore in line with council corporate objectives. It was viewed as a useful method of recovering costs on authority assets, with any surplus being reinvested. The service is delivered by two members of the administrative staff and generated £20,000 of income in the last year. Costs are recovered on the basis of £2 per card. The external auditor has raised no objections to this activity.

Tree Inspections

Many insurers insist on an annual inspection of trees within policyholder’s premises. This is to safeguard owners against trees being blown over or collapsing. A large city council is undertaking these inspections as part of its arboriculture work. The inspections have been carried out for council premises, private householders, private companies and health trusts. This service has been undertaken for approximately one year.

The work is undertaken by the council’s arboriculture team and equates to around 25% of their workload or £30,000 of income. The external auditor has raised no objections to this work being carried out. Following analysis of the local area it was found that an extreme skills shortage existed in this service and therefore the council decided to utilise the expertise and equipment it possessed to the benefit of the local community. A charge of approximately £100 per tree is made for the inspection process with additional works incurring supplementary fees.

Building Cleaning and Catering

This authority undertakes Building Cleaning to organisations who “rent” office or workshop space from the council. They also carry our cleaning services to Housing Associations. In the catering service they operate a central production unit and sell Halal meat to other authorities and bodies. They also offer buffet catering to private individuals who may be renting public rooms. The total value of the work is £2,000,000 with other local authorities and £200,000 with the private sector.

This has been in operation since approximately 1990. The service managers sought specific member approval at the outset. Additionally they also sought legal advice to carry out the work and have used this in making all operational decisions.

The powers that are relied upon for undertaking the catering work is the Civic Restaurants Act 1947. For the Building Cleaning operations they have utilised the Goods and Services Act. The external auditor has never given a negative reaction on the activity. It has not involved any new equipment, vehicles, or any other investment and no staff are dedicated totally to this work. Decisions on what work to tender for are made on a business by business case based on market intelligence gathered. Charges for the work are based on the calculated operational cost with an apportionment to overheads.

Library Transcription Services

This large metropolitan authority operates a number of services, which supplement the traditional functions. These include a transcription service for the blind, which provides information of all kinds in an accessible form to people who have difficulty reading print. This unique service offers a comprehensive transcription service to outside bodies such banks and utility companies so they can send out bills and statements in tape format. This indirectly helps to fund its other services such as the daily talking newspaper which is free to local residents.

Vehicle Maintenance

This authority currently provides maintenance for hire companies who supply the authority with vehicles and horticultural equipment such as grass mowers. They have been carrying out the work for only three months but are keen to expand this service. They hope to utilise any funding generated to limit rates to internal customers. Therefore they are looking at other markets and opportunities to diversify the business. The current value of the work is small at present.

The Director of Direct Services has given approval for the work to be carried and has also sought member approval. The charges are levied on the basis of costs plus overhead apportionment.

Highways Maintenance – Dropped Kerbs

This large authority provides a service to residents who want to create driveways from the roadway through the verge to the edge of their property. This is offered via powers contained within the Highways Act 1980. The council provides both a quotations and construction service if residents need to drop the kerb from outside their property to make a driveway. The kerbs will be replaced with usually 3 low units and a splay kerb at each side. Generally the surface will be rebuilt in tarmac for the full width of the footpath. Only where all other crossings in the street are in concrete flag will the flags be reused on a new foundation and the first tarmac layer, followed some days later by the final tarmac layer.

Permission is required from the council in order to construct this. Residents are free to use their own contractors to carry out the work but they must be accredited. Residents will be sent a list of suitable accredited contractors including the council’s own direct labour organisation when requesting the work.

Building Services

This authority carries our various forms of building maintenance for eight different Housing Associations. The largest of these maintenance contracts is for £400,000 per annum. This work also covers day-to-day maintenance, planned maintenance and out of hours repairs. They are also currently tendering for new build work.

Building Cleaning

This authority has been carrying out Building Cleaning to Further Education Colleges and other public bodies such as the Probation Service and Fire Brigade. They have been carrying out this work since local government reorganisation in Wales in 1996. Whilst the work has not had specific member approval it has been reported to members. The authority has relied on the power from the Goods and Services Act and the use of spare capacity (Section 111). The authority keeps separate trading accounts for the work. In terms of tendering for the work they look at commercial and marketing opportunities together and make a decision on the level of charges.

Commercial Waste Collection

The nature of the activity is Commercial Waste collection. The direct service organisation act as a sub contractor to private sector waste collectors who do not want to collect small quantities or from rural areas. Often this is for contracts where they have lost an overall tender, but the main contractor is not interested in collecting from remote areas. They have been carrying this out for 7 years. The authority relies on the powers in the Environmental Protection Act 1990 in that they have a statutory obligation to provide a commercial waste operation. They believe that it still applies even though through a third party. Additionally, they believe rural customers could incur excessively high costs, especially where the amounts collected are small. The external auditor has not questioned the operation. Currently the work equates to around 1% of turnover.

They use a sophisticated costing method, which breaks down charges to component parts. Additionally the collections are based on mixed domestic and commercial rounds and note a separate collection method or operation. The level of charge therefore depends on market conditions and circumstances.