Councillors back plans to continue outsourcing leisure services

Anthony Lewis – Local democracy reporter

A council has backed plans to continue outsourcing leisure services in the area.

At a full council meeting on Wednesday, October 8, Councillor Jamie Scriven said: “We can’t end up in the situation we were before with the previous leisure trust.

“It’s just not acceptable. We can’t do that to the public and to these services.”

His comments came before councillors approved a recommendation from officers to continue to outsource Merthyr Tydfil’s leisure services and assets.

The Merthyr Tydfil Leisure Trust Ltd, established in 2014, went into administration in 2023 and then the council terminated its contract with the trust.

Options

The management of leisure services on behalf of the council was then transferred to Halo Leisure under an interim contract.

Full council previously asked officers to explore all options for the future running of leisure services and assets in Merthyr Tydfil and officers have looked at the pros and cons of running the services in house and outsourcing them.

They’ve also considered progress being made under the current interim service provision contract and have spoken to a number of professionals about which option is deemed best for Merthyr Tydfil.

After agreement by full council officers have authority to conduct a full procurement exercise to outsource the council’s leisure services and assets.

The strengths of insourcing are said to be closer strategic control with council objectives, full VAT recovery potential, retention of surplus (leisure services do not generate a surplus), and enhanced transparency and democratic accountability.

But the challenges include high transition costs, significant operational, financial, and reputational risks, and increased operational, overhead, and staffing costs needing extra funding.

Costs

The strengths of outsourcing were said to be proven operational performance and sector expertise, cost efficiencies through economies of scale and charitable status, access to external funding, business rate relief, strong customer engagement/experience and satisfaction metric, risk transfer and operational resilience, alignment with broader public health and wellbeing goal, and potential income share.

The challenges of outsourcing are limited VAT recovery unless an agency model is adopted and that it requires ongoing contract management for strategic oversight.

The report says that the full long-term procurement process to bring in an external provider will take approximately 15-18 months.

Officers will need to agree a further extension to the current interim contract with Halo Leisure because the timescale to finalise each option will not be complete by the end of the current interim contract.

In terms of insourcing costs the report says that transition costs, which include the implementation and procurement of ICT infrastructure, leisure operating systems, staff development, and recruitment costs, would be in the region of £500,000-800,000 drawn from the experiences of other local authorities.

Ongoing costs related to staff will be around £2m per year and although there will be some savings in relation to existing management fees and irrecoverable VAT these are offset against business rates and employer costs.

For outsourcing, based on the current interim contract, there is the existing annual cost which is made up of a management fee of £91,000 with 3% incentive charge and £1.2m for the deficit payment totalling around £1.3m.

Contract

It is anticipated that a longer-term contract will include a negotiated reduced
single management fee per year and one-off procurement costs for a long-term contract would be in the region of £65,000.

But leader of the opposition Independent group Councillor Geraint Thomas said that given the improvements under Halo’s management it’s striking that the Labour administration is now open to the idea of continuing outsourcing to the private sector.

He said it raises questions about competency and the rationale behind policy decisions and there is concern about the amount of officer time devoted to researching and producing the report.

Cllr Thomas said it’s felt that such efforts would’ve been better spent on exploring and securing long-term outsourcing solutions rather than revisiting options that have previously proven unsuccessful.

The council doesn’t have the “necessary infrastructure, capacity or expertise” to have leisure services in house

But council leader Councillor Brent Carter, Labour, said they’ve had a full costing exercise now which is what was requested.

He said bringing leisure services back into local authority control was something that they always wanted to do “because we felt that it was the right thing to do and that’s where it indeed belonged”.

He acknowledged it was a manifesto pledge by the Labour group at a moment in time but he said he had to ensure they have the right balance going forward.

“Looking back I’m sure we all agree that things could and should have been differently with the leisure trust.”

Scars

But he said they are in a much better situation now with better knowledge, experience, and even the scars to ensure the correct outcome going forward.

“We must all acknowledge as a local authority that at present we don’t have the necessary infrastructure, capacity or expertise to have leisure services in house.”

Councillor Anna Williams-Price, Labour, said she remained committed in principle to the insourcing of services because “I firmly believe that services are strongest when they are accountable to the public”.

But given the financial pressures they face as a council, the costs outlined in the report, and the budget gap it is “regrettable” that they cannot progress with insourcing at this moment in time.

She said the report gives them full insight into the options available and she hopes that will give assurance to the public that there’s a continued focus on leisure services.

Concerns

Councillor Lisa Mytton, Independent group, pointed to 2012, 2013, and 2014 when Labour was the lead administration and  when it wasn’t financially viable to have leisure services in house.

She said they still weren’t financially viable to have in house when they faced all the issues with the leisure trust.

She mentioned the significant officer time in producing the report talking about bringing the services back in house and “that was never going to be a viable option”.

Councillor Andrew Barry, Reform UK, said in terms of lessons learned they haven’t had a public inquiry and they haven’t eked out all of the issues because it’s not been independently assessed.

Chief executive Ellis Cooper said the council would go out to a full procurement for outsourcing leisure services so it’s not a fait accompli.

Councillor Jamie Scriven, independent cabinet member for economy, regeneration, leisure, and tourism said: “The public are up in arms over the fact that the leisure trust failed as it did and the issues that we faced.”

And he said as much as he wasn’t part of the council at the time as the cabinet member he wants to bring everyone on board with him and have an holistic, all-inclusive approach.

He said: “I would rather put everything in front of you and I don’t see that as a waste of officers’ time to say that I brought everyone on board.

Cllr Scriven said Halo are doing fantastic work but he said a full procurement exercise would take place as they’ve got to look at all the options moving forward now.

“We can’t end up in the situation we were before with the previous leisure trust. It’s just not acceptable. We can’t do that to the public and to these services.”