Agenda item

The Leader presented the report and asked Cabinet to consider this as a first report as part of a process to develop a commercialisation strategy for the council.

The report outlined the reasons for such a strategy, namely:

·        Funding isn’t keeping pace with the increase in the Council’s costs – and there is very little evidence this will change in the near future.

·        The demand for services is growing which is a consequence of Newport growing.

·        The focus to date has been on finding savings.  Whilst this has been successful, it creates ever growing pressure on the organisation and this approach isn’t sustainable in the future.

Commercialisation activity has been ongoing for some time in the big English authorities, Birmingham, Manchester and the London Boroughs.  Many authorities are looking at increasing income as part of a financial strategy to help deal with the impact of austerity, therefore this is a path well-travelled and Newport is able to learn from the experience of other councils.

The Leader appraised Cabinet of the challenge/risks ahead and highlighted:

·        Generating income is not easy and there is a need to be very clear about attitude to risk.

·        Investment will be required in developing the skills needed as this approach will require a different organisational approach.

·        This report is the first step in the process and many more reports will be required to be considered by Cabinet in the future as the details emerge for this strategy.

·        Cabinet are required to keep firmly in mind the very clear principles to guide their approach as the next steps in this process are considered.

Essentially, today’s report outlines three strands to provide the foundations for future work:

1)     Current services that could be provided on a more commercial basis;

2)     New services that could be provided, e.g., energy services;

3)     Property investment – commercial and/or residential.

Cabinet is asked to consider two main actions:

1)     To undertake a feasibility study into the establishment of a Trading Company through which to manage this commercial activity;

2)     Newport is becoming an even more attractive place to invest and there is a need to be able to explore the opportunity of commercial investment.  The report proposes the establishment of an Investment Panel to undertake this work.  No investment would be made without extensive due diligence and Council would be required to amend the Capital Strategy before proceeding further.  However it is important we make a start and the report sets out how that can be done.

The Leader recognised there may be concerns about exposure to risk, hence the need to tread carefully.

However, the concern is that if a more commercial approach is not adopted, as part of the overall financial strategy, the choices being faced will be even more difficult with further cuts to jobs and services.

The Leader asked Cabinet colleagues to support taking this initial step and confirmed there will be regular progress reports as this approach develops further.

Cabinet understood the need to look at different ways to fund services as in future years further cuts to budgets/staffing levels is unsustainable. The administration is keen to ensure that any investment will be predicated on the social value associated with individual projects. It was noted this approach would have a positive multiplier effect on investment in the local economy and is about generating surplus that can be used to provide core services to the people of Newport.  This approach again emphasises the Council’s innovative approach and emphasises the Leader’s comment that ‘Newport is open for business’

The Chief Executive did not suggest that this will fund the budget gap completely but will, hopefully, give a more balanced approach.  He also emphasised this is Step 1 of a long process and the need to tread carefully, and whilst there are risks associated with this, nothing inappropriate will be suggested to the Board.  He also confirmed there are opportunities for generating income and a mechanism needs to be in place to consider the opportunities as they arise. 

The Chief Executive confirmed the Capital strategy will need to be amended and subject to Cabinet’s agreement today, a report will be taken to Council on the 30^th April.

Cabinet was asked to consider the following proposals:

·        Agree the outline approach set out in the report.

·        Delegate operational decision making regarding the Commercialisation Strategy to the Chief Executive.

·        Establish the Investment Board, as outlined in the report, with immediate effect to manage the property investment portfolio.

·        Agree the principle of a Commercial Property Fund to be taken to the Council for approval within the Capital Strategy, including the approval of £50m for this purpose, noting that detailed terms of reference and investment guidelines and parameters for the Investment Board will be agreed by the Cabinet before any activity commences.

·        Ask the Chief Executive to progress a Feasibility Study on the establishment of a Local Authority Company to manage the Council’s commercialisation activity and approve up to £100k from the Council’s Invest to Save Fund for this purpose.        

Following consideration of the above proposals, Cabinet further considered the following options: 

Option 1 – Agree the recommendations and framework set out in the report and work towards developing a detailed Commercialisation Strategy. 

Option 2 – Reject the recommendations and retain our current approach to financial sustainability

Decision:

Cabinet agreed to approve Option 1 and to recommend to Council the proposed £50m investment fund and the commercialisation approach as an integral part of agreeing to the establishment of the fund which will be included in the revised Capital Strategy.