Over recent years many councils have established wholly or partly owned companies, covering a diverse range of services and obligations. It is fair to say that results have been mixed.
We have seen an increasing need from councils for assurance that the governance structures and processes for managing risk are sufficiently robust and that their companies are meeting expectations, delivering real benefits, and providing value for money. Many of these issues have been brought into sharp relief by the COVID-19 pandemic which has revealed areas where councils are exposed to significant risk.
In the rapid review of Nottingham City Council, commissioned by the Ministry of Housing, Communities and Local Government and led by Max Caller in 2020, it was recommended that guidance should be commissioned to aid local authorities and their entities.
Local Partnerships has therefore produced guidance to help councils review their existing companies and learn lessons from others’ experiences. This guidance is freely available on our website [www.localpartnerships.org.uk/ourresources]
We have observed that governance arrangements may often be weak and also that there can be a limited client function. Our guidance provides a framework for council oversight and engagement with companies to ensure that councils’ interests are safeguarded and the scope for conflicts of interest is minimised. It also focuses on the internal governance arrangements of companies, including effective Board composition, and recruiting a diverse blend of skills and expertise.
Many councils are thinking about establishing new companies or rethinking the future of their existing companies. The guidance also describes the process that councils should follow in deciding whether establishing a company is the right approach and in considering the range of alternative options available to them. It highlights the need for a well-defined business case and the key issues a council needs to address before agreeing to establish a company relating to strategic, legal, risk, financial, people, skills and local market considerations.
In addition to producing this guidance we continue to provide direct support to a range of councils to help strike the optimal balance between establishing effective oversight of a company and ensuring it has the tools and freedom to manage its activities.
David Crowe is strategic director of Local Partnerships
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