There are no nice things to say about these types of partnerships. The basic principles, which always conclude in this manner, are the following:
the public end up paying
the private end up profiting
That’s it.
The endless depth of the public purse is why corporations love them. Whenever something goes wrong with a project, the public sector will bail out the corporation. It’s basically a blank cheque.
The public need to be wary of them. There is little chance of stopping one as residents but at least we don’t have to accept what we are told. Let’s explore the mechanisms that allow the above to happen.
There are four main components to these enterprises:
Narrative,
Governance,
Scrutiny, and
Ownership.
The common factor for all components is risk, which is why the appropriate register will encompass risk for all of these.
1. The Narrative
First will come the narrative. Politicians will provide justification for why a partnership (blank cheque) is necessary. They will claim there is unprecedented urgency or lack of public money regardless of whether it is true or not.
For City Leap, Bristol City Council proclaimed that the urgency of decarbonising the city outweighed any risks.
For Coventry’s version of City Leap, the justification was energy cost and decarbonising: “the city’s energy bill for 2023 will be £635 million” and decarbonising will potentially save “up to £185 million a year” (link), and it will stop the city contributing to climate change as much as it has been.
Bristol Energy was proposed in order to earn up to 35% profit for the council. It ended up costing the city £43m in losses. This narrative, in particular, came from a consultant’s report. The name of the consultant, and any possibility of accountability, are long gone.
Governance
Governance is about who gets to decide how the project will work and who determines what happens.
The City Leap partnership was set up as a joint venture (JV) owned equally between BCC and the strategic partners (50%/50%). “City Leap JVCo is not a body governed by public law and is not subject to the same scrutiny as the council (Risk Register).”
The business plan goes to cabinet only if there is a need for money that has not already been approved. Other than that, the public do not know what is being done with their money and in their names.
The City Leap partners only need to update the council once a year, for reassurance.
Will any scrutiny members or the public have any idea of what is going on? Will Cabinet? The Chair of the Overview and Scrutiny Management Board does now attend the meetings of the board, I believe, so we do not just have one shareholder representative. See the following example about Bristol Energy.
In 2019, when the Bristol Energy business plan was set to be approved by cabinet again, only one person sat on the board as the shareholder representative — Craig Cheney, cabinet member for governance and finance. He was advised by the independent advisor to not approve the business plan.
“Cabinet was not formally made aware of concerns raised at the Shareholder Group, including the fact that the Independent Shareholder Advisor was recorded as being unable to support the business plan;”
The following extract from the External Auditor’s report on what went wrong at Bristol Energy exemplifies how information can be hidden and lead to erroneous and very expensive decisions. Craig Cheney hid the deteriorating finances and the company basically collapsed six days after the business plan had been approved.
In January 2020 Cabinet approved BE’s 2020/21 business plan. However, six days after this decision BE experienced a significant cash flow crisis and stated that it was no longer able to meet its business plan objectives and immediate action was required to ensure it could meet its financial objectives and prevent a negative cash position.
It took six months for the council to agree to wind it down and in that time, around £500k was paid to EY for reports on Bristol Energy’s viability and City Leap. The business plan was only approved because cabinet were misled.
Scrutiny
Scrutiny is vital. However, as chief executive of Bristol City Council said about City Leap, these huge companies will only do these jobs to make a lot of money.
They don’t want to be scrutinised and they don’t want restrictive governance.
Important things to note are the following:
Where does scrutiny happen? Can scrutiny of the partnership come to a council meeting or does it only happen behind closed doors?
Who can attend? With Bristol Energy, only one person from the council could attend the board meetings. This meant that when the company’s finances deteriorated, and that person, the cabinet member for finance, did not disclose the information to the Cabinet or the public, no one else knew. The secrecy caused the public millions.
Ownership
We need to know who owns what during the partnership and who will own how much by the end.
For City Leap, the heat networks that the Bristol public paid for were given to the private partners at cost. This means that our creation and ownership of them added no value, which seems highly unlikely.
Also, check the length of the contract.
Thanks for sharing Joanna much appreciated 🙏
Thanks for Sharing Joanna much appreciated keep up the good work 🙏