Setting up Buckinghamshire Care, a local authority trading company

16 Sep 15

Buckinghamshire County Council set up a wholly owned company in 2013 to help it cut the cost of care provision while creating new revenue opportunities

The world of social care is undergoing a period of unprecedented change, driven by a fundamental reform programme, challenging economics and a re-alignment of commissioning routes, decision makers and procurement methodology.

As a result, councils are being challenged to re-examine their ‘modus operandi’ and think about new ways to generate income, unlock opportunities to develop solutions and meet increased expectations from tomorrow’s commissioners – clients and their circle of support – who are either funding services themselves or in receipt of direct payments.

Buckinghamshire County Council has responded by adopting a commercially minded approach, which includes the outsourcing of traditionally in-house services to generate new income, focused on performance as well as quality and safety.

Part of that approach involved setting up a local authority trading company (LATC). Buckinghamshire Care was launched in October 2013 and the journey to that point was key to giving it the best chance of success.

The first thing Buckinghamshire County Council did was to develop a business case that set out a clear rationale for the establishment of Buckinghamshire Care. This was a vital step as it not only enabled us to determine whether the business was likely to be a success, but also gave us clear direction, so that we could make headway on our objectives in the first year of trading.

The council had a number of imperatives. These included delivering required savings in the medium-term financial plan without having to cut services, to grow commercially to generate more income and share benefits with the council – and to support the creation of a more commercial service that was able to compete with other providers, enabling a future market test.

The business case forecasts that the company will secure savings of at least £2.24 million over five years, which are delivered through a reduced contract price. There is the potential to exceed this through dividend payments as the company is 100% owned by the local authority.

Through the first phase of establishing the LATC, the council concentrated on undertaking due diligence, defining the strategic position of the new entity, developing company governance and management arrangements and specifying the support services required by the company.

Critically, they made the decision to retain a 100% shareholding, which allowed them to retain a role in scrutiny and give a level of control.

In establishing the governance structure, it was important to give Buckinghamshire Care directors sufficient space and control to drive the growth and develop the company. We wanted to maintain strong links with the company – through the shareholders’ scrutiny group – ensuring the company’s direction remains in line with the council’s objectives. We also wanted to have the flexibility to incorporate additional services in the future.

To achieve this, Buckinghamshire Care’s shareholder scrutiny group includes two council members, the section 151 officer, the director of adult services, the commissioning director and contracts manager.

The group meets quarterly and aims to hold the company directors to account for the quality and value of the services provided to the council.

This group is an essential component for the council to exert influence over the company and therefore meet the requirements of the Teckal exemption. The structure aims to balance the Council’s need for control with the space the company needs to achieve the Council’s aims.

Fast forward to 2015, and Buckinghamshire Care has made an impressive start over its short 18-month life.

For more about building LATCs, see Grant Thornton’s recent report, part of a series on alternative service delivery models.

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