Barnet DRS - When is a Guarantee not a Guarantee?

The Barnet DRS contract will be considered at the Budget & Performance Overview & Scrutiny committee on Tuesday 11 June. You can see the papers here. This week I have been flagging up major areas of concern that I hope someone from the Council can address. Today I want to look in more detail at the so called "Guaranteed Benefits".

In the DRS Business Case much has been made about the guarantees that will be provided to Barnet around the £39.1 million financial benefits. However, this guarantee appears to be between the Joint Venture and Barnet Council which is fine until you realise that Barnet Council will be a major shareholder in the Joint Venture. The council shares will be held by a wholly owned council company one step away from the council but still 100% owned by the council. In the DRS business case (page 38) where it identifies all of the financial benefits it states:

"The description of benefits sets out the expected activities that will achieve the total benefits. However, should any of these activities prove to be unviable, the joint venture is obliged to develop alternative proposals to meet the guaranteed financial benefit rather than it being reduced."

My reading of this very subtle caveat is as follows: Capita put in an ambitious budget which gets everyone excited. They then lock in Barnet to the Joint Venture through the council owned standalone company. When it transpires that  they can't make the budget for some reason (such as when residents kick up a massive stink when cremation charges sky rocket to generate the additional £4.3 million net profit), Capita say to their joint venture partner (who is the council) "Right partner, you have to agree to other ways to make up this £4.3 million so we are going to have to push through a lot more commercial development in the borough or double planning charges. Take your pick". It will be the Barnet directors of their wholly owned company sitting on the Joint Venture Board who will have to make that decision. Failure to do so could possibly lead to the situation faced by Somerset Council where they ended up being sued by the joint venture, Southwest One, of which they were a shareholder.

When the decision to have a joint venture was first tabled, I expressed my concern that the council didn't fully understand what they were getting into. They talked about sharing the upside but no one talked about the risk they would be assuming. The Council will, I am sure, argue that the money to Barnet is guaranteed. Yes, but their representatives on the Joint Venture will have to collude in any decisions which may be against the wishes and best interests of the community to deliver that guarantee.

I would advise anyone who isn't familiar with Southwest One to read this most informative article.

I just hope the councillors who will be scrutinising this decision can provide some clear answers to these concerns on Tuesday but sadly I suspect they will vote on party lines meaning that this gets nodded through to be rubber stamped by the Cabinet on 24 June.