05 December 2003
The first joint public-private partnership between local authorities has ended after 18 months of negotiations, with Northamptonshire County Council walking away citing an 'unbridgeable funding gap' and Milton Keynes Council pressing ahead alone.
Milton Keynes is now expected to conclude a £300m, 12-year PPP deal with Hyder Business Services by the end of this year. The council said that the benefits of the partnership remain unchanged, despite Northamptonshire's decision.
The county council announced it was to pull out of the £800m PPP last week. It was originally the keener of the two authorities to proceed and remains coy about the exact details of why it ended the deal. 'Despite the best efforts of everyone involved, it is now clear that there is an unbridgeable financial gap between the expectations of the two organisations,' a statement said.
Northamptonshire is yet to make a decision on the services it had planned to outsource but they look likely to remain in-house, with council leader Mick Young stating that it now has a 'greater capacity to initiate change itself'.
The original deal, announced in 2001, would have meant around 2,300 staff transferring to the private sector in a PPP that could have topped £800m over ten years.
The two councils, a county and a unitary, were expecting economies of scale in sharing functions such as information technology, finance and human resources of between 10% and 15%. But that idea soon hit the buffers, with both councils opting to conduct separate negotiations with HBS. The second preferred bidder, Amey, dropped out several months ago.
Isobel Wilson, leader of Milton Keynes, said the deal was highly complex, with the authorities having different functions and services to outsource. 'There have been too many negotiations and there have been times when they haven't gone too well and we have thought of pulling out,' she told Public Finance.
However, Wilson said there had been some economies, with the councils sharing legal and consultancy fees of £1.2m each. 'As an individual council the costs of this sort of project would have been prohibitive,' she added.
Unison, which had been campaigning against the PPP in Northamptonshire, said it was delighted by the council's decision. 'We have always said if the council decided to stay with the workforce we would pledge to work with them and make sure services are delivered as efficiently as possible.'
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