Q&A with Cheshire East’s Peter Bates

Peter Bates Cheshire East Council’s chief operating officer and section 151 talks about his council’s hybrid approach to service delivery mechanisms.

Room151: Why are you creating so many standalone companies to run council services?

Peter Bates: We aren’t wedded to a particular philosophy and published a document outlining a hybrid approach to best meet the needs of our residents. We are exploring a plethora of delivery models – wholly owned companies, in-house delivery, trusts, social enterprises, outsourcing.

R151: What are the outsourced companies you have created?

PB: We have one for environmental services – Ansa – and another called Orbitas which runs bereavement services. We have also created a new trust called ESAR to run our leisure services. More are in the pipeline including transport and planning services. We are also reviewing our schools catering and cleaning arrangements, possibly though a staff mutual model. All of them report into a holding company also owned by the council.

R151: What are the advantages of running standalone companies?

PB: Firstly, just preparing for transfer of services requires a targeted focus on understanding the cost base and to define, with absolutely clarity, the purpose of the business and measures of success. Secondly, they can be more tax efficient and productive. There have been some concerns from unions about the terms and conditions of staff through the traditional outsourcing route. However, we have a constructive dialogue with them, and they are happier with the model of effectively keeping staff in house through a standalone company. We have seen greater empowerment of staff, increased innovation and creativity which is leading to greater productivity and lower absence rates.

It is not just about saving money – it is about providing the best mechanism to meet the needs of our residents but at a lower overall cost. We have been careful to create arrangements that mean we are being as tax efficient as possible.

R151: What have your set-up costs been?

PB: We have not had to start every company from scratch. Once we made the decision to be a strategic commissioning council, we took advice as to the best configuration across the whole of the service range. That process cost tens of thousands of pounds but we have only had to do that once. The next waves we do will not face that scale of costs and we are learning all the time.

R151: What are the savings you are expecting?

PB: We have not put an exact number on it, but it is certainly many millions of pounds. The companies are also competing in the open market for contracts with other councils and private firms so we will get more benefits as we win more of those deals.

R151: Does the trading company model preclude shared services with other authorities?

PB: No not at all – we have recently created a shared service company – CoSocius – with Cheshire West and Chester Council covering ICT, human resources and transactional services. Following local government review in 2009 this shared service arrangement has saved about £30 million between the two of us. We are now looking at commercialising that model and offering services to other councils. We are also exploring the possibility of getting another major council on board as a partner to enhance the size and scale of the operation.

R151: What are the current general challenges to your council’s finances?

PB: Obviously the austerity challenge is difficult. The size of the public state is shrinking and we have to be more innovative and creative – this comes with ensuring the public understand what is an essential service, rather than something they would just like. Outside of austerity, it is great that people are living longer but some have complex needs. The challenge is to deliver innovative solutions to support them as best you can from a lower cost base. We are doing a lot of work to enhance service accessibility – many services are being reviewed through a digital lens to give greater control and choice for the customer.

R151: Can you summarise your Treasury Management Strategy?

PB: I was previously section 151 officer at Stoke-on-Trent City Council which was a different environment in that it had more areas of deprivation and was more dependent on central government grant support. However, the treasury strategy I have adopted is very similar. In both authorities we are using our cash balances and avoiding external borrowing where we can to finance capital investment programmes. I am now examining a greater appetite for risk with our politicians, without getting ridiculous – seeing if we can be more innovative to seek better but still safe investment returns. We are looking at options with our treasury adviser to model some new opportunities.

R151: Will you be participating in the proposed new bonds agency?

PB: I am aware of the opportunity. At this time we may be a follower rather than a leader. I am keeping an eye on how it develops. We are interested but I wouldn’t say any more than that. I think we wouldn’t invest as an equity partner at this stage. But we are not ruling anything in or out.

R151: What’s next?

PB: We are still looking at areas where there is room for improvement. We have created a rolling programme to critically review every service area. The council is still quite immature – it was only created as a unitary authority in 2009, and there is still some county and some district council mentality in places.

But we don’t want to rush things. Adopting the hybrid approach means we have to have a strong commercial focus and be very good at contract management in order to get an arrangement that is right from day one and then gets better going forwards. Creating this capability has to be done in a measured way – the last thing I want is to do too much too quickly and damage the success of our ‘putting residents first’ major change programme.