John Knight

1. John Knight CIPFA C.Co Programme Director

2. CIPFA C.CO • Created by CIPFA in 2016 to support Local Authorities with their commercial agenda. • Practitioners from the public and private sector. • Conversations / research with over 100 councils on their commercial agenda. • Supporting numerous Councils to; • Share best practise • Develop commercial strategies/plans to increase revenue • Insource/outsource services. • Creating new trading entities / Improve existing ones • Create Shared Services / Improve existing Shared Services • Improve Shareholder, Commissioning and Contract Management arrangements • Conversations with over 150 portfolio holders on new commercial models • Developed the best practise guidance on behalf of the LGA – ‘Enterprising Councils’ and ‘Profit with a Purpose’ • Asked along today, to share some thoughts/insights into what works well and what does not.

3. We see a broad Interpretation of Commercialism • More commercial approach to Internal Charging – not just blanket increases in fees and charges. More nuanced approached which takes account of outcomes being sought, consumer behaviours and local competition. • Trading for profit. Often through a separate legal entity / Trading Company. Profits reinvested in service delivery or returned to the council. Majority of these are trading services the council currently provides but we are seeing increasing diversification into new areas or areas which the Local Authority has not done for a long time (homes, energy, residential care) • More commercial approach to managing external expenditure. Better Procurement and Contract Management. Developing ethical sustainable markets. Focus on outcomes and Social Value. • Investments – in area, and out of area. Regen or purely for profit. • Strategic Commissioning (with commercial discipline) – Greater Cost benefit analysis. More market shaping. Cost of Care Calculations etc. • Taking a more ‘business savvy’ approach to operating models. Digitisation / Organisation Development, Perf Mgt etc.

4. Some Points Worth Noting • There are no definitive datasets to assess success / failure of Local Authority Trading Companies. • Companies House is of limited use due how ‘value’ is created/extracted. • People don’t advertise failure. This means insights need to be gathered elsewhere. • C.Co have run training courses with the LGA on new delivery models and have spoken to over 200 finance portfolio-holders, deputy leaders and leaders. This provides valuable contextual insight on what is working well and what is not working well. • We have also interviewed councils across the UK when researching best practise advice on behalf of the LGA. • We have analysed all top tier authorities accounts examining their trading companies in conjunction with a leading business school / university. • We have worked with Councils across the UK supporting them to create, improve and sometimes insource trading companies.

5. Adult Social Care LATCs • A wave of Adult Social Care companies established after the ‘open services’ white paper in 2011 and the coalition governments public service mutual agenda promoted the ‘spinning out of services’. • Circa 20 Adult Social Care Trading Companies – behind the trend with LATCs, not seen as a ‘commercial’ venture. • Direct Payment (and the councils inability to trade with direct payment customers) was a big driver. • No definitive numbers on commercial success. We know of companies which are significantly larger than when they spun out with new business not from the host authority. Likewise, we know of companies which are stagnating. • Over the last two years, a combination of factors is driving councils to explore new delivery models in Social Care again. The market is experiencing ‘issues’ with many choosing not to do business with local authorities or others with unsustainable models. This is triggering a new wave of conversations around trading which appears to be more commercial in nature and increasing looking at the role of residential provision. • Virtually all Teckal companies – ASC considered to needs ‘control’

6. Some Enablers Some Benefits • Focus on the social outcomes you are trying to achieve. Improving local residents lives. This provides a clear, coherent, rational and purpose. • Political Leadership essential to ensure • there is an effective strategy that balances risk and financial returns, and ensures accountability. • Ensure a focus on outcomes to improve peoples lives. • builds a relationship with residents to open dialogue about these issues. • Commercial Activity requires different skillsets. This is one of the biggest factors which determines success or failure. The new enterprise needs commercial acumen but also political ‘nouse’. These are not the preserves of the public or private sector. We see public and private sector individuals both succeed/fail in these roles. • Be clear on the ambition, purpose and outcomes which you are seeking. • Adopt the correct commercial model to deliver the ambition. Cannot compete without being competitive with a clear USP. This means having the ability to control the companies cost base is important (i.e. terms and conditions of staff) • Understand a long term solution and resources/investment is required. • Care needed not to distort market / manage risks of subsidisation / state aid. • Governance is important. See it as an enabler. Have clear roles for shareholder, company board and the • Create jobs and improve peoples lives. • Potentially shape markets and local economy • Make services more responsive to resident needs • Ensure the focus is on outcomes rather than the narrow cost of service delivery • Increase productivity • Deliver surplus to maintain services which residents value • Potential to be more responsive to service users / customers / increasing the quality of services delivered

7. Key points • Do it for the right business reasons • Understand setting up is just the start not the end • Be realistic • Start with building on your brand (and understand it’s limitations) • Accept and understand the risk of failure • Understand everything before you start • Chance of Success, Real costs, Competition • Develop a robust/realistic Business Plan • Get the right people to run it • After Implementation – test the benefits are being achieved and don’t ignore a problem • Get the governance right. Understand your red lines and cement these into the governance. Proportionate level of control/flexibility.

8. When it can work - NorseCare • Norfolk’s largest care home provider, managing residential Homes and Housing with Care schemes across Norfolk. • Care Homes provide care and support within a homely residential setting. We also manage Housing with Care schemes providing people with care and support when needed, along with the independence of living in their own flat under a tenancy agreement with a housing provider. • Employing more than 10,000 staff across the country and offering a wide range of services. • Built on an existing brand and set of companies. Start small, take your time.

9. Watch your step – Essex Cares • Essex Cares became England’s first adult social care local authority trading company (LATC) when it was launched in 2009. Wholly owned by Essex county council, it employs 900 staff and supports more than 50,000 mainly older or disabled people at home and in activity centres. • 98% satisfaction rates and a similar proportion saying they would recommend them to others. And the flexibility of the organisation has allowed it to find savings, while ensuring services are sensitive to people’s needs. • In the early years, made significant surpluses. In 2010-11, made a profit of £3.5m enabling it to pass on a dividend to its sole shareholder, the county council. In 2012-13, the profit had dropped to £1.5m and last year the company made a pre-tax loss of £828,000 – with alarm bells beginning to sound. • Led to a “reshaping” of the organisation with new multi-skilled community teams and cuts in administration and management.

10. Remember why you’re here – Your Choice Barnet • Your Choice Barnet, set up in 2012 • It projected to make a surplus of £500,000 by 2015-16, but ran into trouble. • Staff salaries were recently slashed by 9.5% • A damning CQC report branded the company’s supported living services “inadequate”. • Be realistic – Know what you can deliver and can achieve.

11. New Kids on the block - Tricuro • Tricuro, launched in July 2019, is the first cross-boundary social care LATC. - Dorset, Bournemouth and Poole. • Its services include residential care, day services and catering and it is also the largest social care LATC, with a budget of more than £38m and 1,200 staff. • Steering group chair says the council chose the option because of the huge financial pressures it was under – and the unpalatability of the alternatives. • The original plan was to set up a single company for the Dorset authority, but it was quickly realised that a county-wide company, taking in Bournemouth and Poole, would offer significant economies of scale.  • The company is currently forecast to make a surplus of nearly £9m by 2020. (watch this space).

12. John Knight07491688057john.knight@wearec.co Programme Director C.Co, The Quadrant, Sealand Road, Chester, CH1 4QR 07422 509007