Councils line up to transfer care staff to trading companies

Momentum is building behind local authority moves to hive off adult care services and staff to council-owned trading companies in order to save money.

Wokingham and Northamptonshire councils could be ready to set up local authority trading companies (LATCs) within three months while Barnet is among five authorities conducting business cases.

Many more are expressing interest in the idea.

Wholly owned by the council but operating as a commercial enterprise, a trading company represents a compromise between keeping services in house and outsourcing them to the independent sector.

This allows the company to seek business from self-funders and direct payment users, while moving into other areas such as health provision.

The move has been spurred by the high costs of keeping services in house and government pressure on councils to cease providing adult care other than in exceptional circumstances.

Local authorities are working with auditing giant Ernst & Young UK, which has signed a strategic partnership with consultancy Care and Health Solutions, whose directors founded Essex Cares, the first trading company in adult care.

Care and Health Solutions director Mark Lloyd, who is also managing director of Essex Cares, said he receives at least one phone call a week from councils interested in setting up a trading company.

Ernst & Young executive director John Baker said interest was increasing to such an extent that 70 councils are likely to attend two conferences on trading companies to be held in May, in London and Birmingham.

Interest in LATCs crossed political and country borders, coming from Scottish National Party, Conservative and Labour councils, he said.

“Local authority trading companies offer a huge opportunity for local authorities but they won’t necessarily deliver the level of efficiencies that a wholly outsourced service would,” Baker said. “This is a question of balancing the advantages you get from an LATC, particularly control and presence in the market, with a level of efficiencies.”

However, he said LATCs would deliver greater efficiencies than a social enterprise or staff-run mutual.

Mike Walsh, co-director of Care and Health Solutions, said staff in a trading company can remain members of the local government pension scheme if the company applies for “admitted body status”.

This comes amid fears that social workers who set up independent practices or social care staff who work for outsourced services may be barred from receiving pensions comparable to those in local government.

The review of public sector pensions released by Lord Hutton last week said their continued membership of the Local Government Pension Scheme represented a long-term financial risk to the government and taxpayers.

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