Cabinet members at the London Borough of Enfield have approved proposals to bring a trading company created to deliver social-care services back in-house after the venture failed to generate the envisaged profits.
Independence and Well Being Enfield (IWE) was set up in 2016 to provide a selection of existing adult social care services for residents – including day services, community transport, equipment services and run a residential and nursing care home – and also find new opportunities outside the borough.
3rd LATIF NORTH
March 25th, 2020, Manchester
Council treasury investment & borrowing
Before it was spun out, a report to cabinet members said the business would mean the council continued delivering high-quality services to residents and also allow it to sell services to other organisations “for the purposes of making a surplus”.
But senior councillors at the north London authority this week agreed to dissolve IWE and transfer its services back to the council after acknowledging that the business could not compete with rates offered in the area by private-sector providers.
IWE’s most recent accounts – for the year to 31 March 2019 – showed a turnover of £15.36m, up from £13.11 the previous year. However the business declared nil profit before tax. The figure for 2018 had been £182,827.
A commentary by IWE managing director Marc Gadsby – formerly Enfield’s director of health, housing and adult social care – noted: “The directors consider the performance for the year and the financial position at the year end to be satisfactory”.
But Gadsby also reported key business risks and uncertainties affecting the company related to “government funding in the current economic climate”.
A 2015 report in favour of creating the trading company, written by Gadsby, said modelling conducted in partnership with consultant Ernst & Young suggested that the move could deliver £1.04m of “identified benefits” and potentially up to £1.38m by its third year if new opportunities were realised.
“The LATC has the potential to provide longer-term benefits through additional revenue and growth as the business develops into new services and a greater client base,” it said.
Gadsby’s report also proposed that the company be subjected to a “comprehensive review of performance” after its first three years of trading.
A report to cabinet members this week, written by Enfield’s executive director of people Tony Theodoulou, said IWE was facing a £1.5m overspend on its 2019/20 budget, reflecting a total projected spend of £16.07m for the year
The report said that while IWE had continued to deliver social care provision to vulnerable adults, and three of its core services were rated as “good” by the Care Quality Commission, the business had “not enabled the delivery of commercial growth originally envisaged”.
Theodoulou also said that the Bridgewood House Residential and Nursing Care Home was rated by the CQC as “requiring improvement” and was now the subject of a warning notice, which he said was “matter of profound concern to the council”.
His report said the social care market had become “more competitive than it was four years ago” and that administrative issues faced by IWE, which included its commitment to pay staff council rates, meant competing with the independent sector on price was “not a viable option”.
Theodoulou added that bringing IWE back in house would “simplify the arrangements required to deliver the current services” but he did not rule out the option of working with other councils or organisations to deliver “services of joint benefit”.
Cabinet members were told that the council’s decision to in-source IWE’s services was no reflection on the quality and professionalism of its 300 full-time equivalent staff, and that the issues the business faced should be viewed in context.
“The current social care market is extremely challenged by many years of austerity,” the report said.
“Unit costs of services in Enfield are low. We also suffer from a large number of providers in Enfield who provide services to other councils and the NHS driven by low property prices.
“It is therefore only the opportunity of taking on business from other councils or NHS bodies that would deliver commercial growth.
“These organisations themselves are having to find cost savings and make reductions so are more likely to focus on cost rather than quality and good staff terms and conditions which would be IWE’s selling point.”
Theodoulou’s report said that while Enfield was looking to bring IWE staff back onto the council payroll under TUPE regulations, a review of posts and structures within IWE would be completed post-transfer.
After last night’s decision, a council spokesperson said: “IWE ltd has continued to provide social care provision to some of the most vulnerable people in the borough.
“In the context of a challenging financial environment for councils over the last few years and difficult commercial environment for social care providers, this decision makes good sense at this time.
“Bringing this service back in-house will simplify governance arrangements and structures and is in line with the current administration’s policy of in-sourcing services where it makes sense to do so.”
Enfield has been Labour-run since 2010, however the council was under different leadership when the decision to create IWE was taken.
The cabinet’s decision to wind up the business’ operations is subject to a call-in period for further scrutiny.
The Room151 Weekly Newsletter covers local government treasury and pension investment, funding, development, resources and technical finance. Register here.
The LGPS Quarterly Briefing focuses purely on pension fund investment. Register here.
