Meeting documents

The PAG considered a business case (appendix A) for the setting up of a local authority trading company, focussing on property development and management. The Director of Services recommended Member attendance at an upcoming presentation by Savills to the Overview & Scrutiny Committee, who undertook a strategic review of the Council’s property assets and would provide Members with additional context. Further, The Director of Services advised Members that the two missing appendices (B and C) were to be circulated separately via email, following review by the Legal Advisor. These appendices will set out the constitution and the framework in which the company can act, how the company will operate and matters reserved to the shareholder to ensure that the Council has appropriate influence and control over the company.

The report proposed that South Bucks District Council be the sole shareholder (appendix D), and that two directors be appointed, neither of which should be the Council’s Director of Resources so as to avoid a conflict of interest as the Director Resources will be required to advise the Council on the company’s business plan. It was heard that schemes would be brought to the Council as shareholder as they emerged and formed part of the business plan. Any initial developments would be in the South Bucks area, but ultimately the company would able to operate outside of South Bucks if appropriate and there was a sound business case. Members noted that for section 9 of the report regarding the holding of affordable housing properties for rent, an appropriate governance structure was yet to be resolved. Wokingham Council was noted to have a commercial local trading company and a subsidiary company for social housing; this model was being looked into as an option.

The Legal Advisor explained that Councils have legal powers to set up this kind of company in order to generate income for other Council activities, and that South Bucks Officers were taking legal advice on matters, for instance, the appropriate appointments for directors. The Head of Finance stressed the importance of having a sound business case, and the fact that each individual scheme needs to be robust to deliver a return to the Council. In response to a Member question regarding the conservative return figure, it was advised that although the company would aim for a higher return, to note that a return above the Council’s borrowing rate is still profitable.

The Director of Resources informed the PAG that enough work had been done to give the company its first project, and be confident enough to know the returns would be satisfactory. The company was planned to be established and produce its first business plan in the autumn.  The company’s business plan would need to be in harmony with the Council’s aims and objectives and what the Council wants to achieve in terms of income generation with regards to its future projects. It was noted that in regard to the Council’s Strategic Asset Review some potential schemes that would emerge would not become projects of the company and that this would be assessed on a case by case basis. Members were informed that in the autumn, the Council’s Audit Committee will look at the business plan and the Council’s relationship with the company. Further, that the Council would not be involved in the operation of the company, but can, along with the Director of Resources, hold the company to account through scrutiny and approval of its business plan, and receiving its annual accounts at the annual shareholders meeting. Questions were asked surrounding auditing and book keeping for the company, to which the Head of Finance advised that company would procure its own audit services, and may wish to use council officers or external accountants with specialised knowledge to undertake its accounting and tax arrangements, and that other local authorities have found getting specialist external financial support the best approach.

Members of the PAG agreed that revenue generated would help to compensate for the reduction of government grant.