Agenda item

(Finance, Qualis Client and Economic Development) To consider and agree the attached report regarding the Qualis 4 Year Business Plan.

The Finance, Qualis Client and Economic Portfolio Holder, Councillor J Philip introduced the 4 Year Qualis Business Plan. He noted that this had also been keenly debated at the previous Overview and Scrutiny Committee meeting and Cabinet on the 12 July and no amendments had been considered necessary.

He emphasised that nowhere in the 4 Year Business Plan was there any mention of handing over the Council’s housing stock to Qualis as this was not part of the 4 Year Business Plan and should be made clear to members.

This report presented the 4 Year Qualis Business Plan and sought the Council’s permission to approve this as its direction and focus.  As a four year business plan it would inevitably change every year according to circumstances but there would be a one year interim plan submitted each year.

The Council were asking Qualis to look at potentially regenerating areas of the district,  to do this, they would require an additional loan potentially up to £35 million and that led to the recommendation (2). To vary the Council’s Capital Programme which was brought forward in February 2021 to include the £35 million loan. The loan was not expected to be taken as one tranche and would not necessarily be taken all in this municipal year. The Audit and Governance Committee are requested to review the operational boundaries and the approved limits in the Treasury Management and Investment Strategies and to give approval to these being increased up to the requested £35 million, if they consider it necessary.

He stated that he was happy to take questions but as it had been thoroughly debated at Overview and Scrutiny and Cabinet he would therefore ask members to support the recommendations.

Councillor S Murray stated that he had three points:

(a)             Could Councillor Philip give assurance that no other service of this Council will be transferred to Qualis without proper scrutiny;

(b)             Did Councillor Philip have any comment on the news that broke on Everything Epping Forest on 26 July regarding the confirmation of the third property acquisition of an office space by Qualis in Coventry for £9 million. Did Councillor Philip know about that prior to the purchase or was that not how it worked at Qualis, as an independent organisation; and

(c)             Regarding the 4 Year Business Plan one of the issues I have with Qualis is their day to day influence on particular services that used to be with the Council that have now been transferred to Qualis, what was the mechanism of accountability for these services to be transferred. I received an email from an unhappy tenant who said ‘they would be interested to know who the Qualis repair team answered to as they felt they needed a bit of retraining’. Normally, as a Councillor, I would have been able to answer that but on this occasion, I had to reply that I did not know and would have to find out. Councillors need to be made aware of where and who that accountability lies with so that we are able to answer our residents.

Councillor J Philip reassured Councillor Murray on service transfer and referred to page 141 of the agenda where there was a Service Review Framework which would be the approach that would be taken to look at any proposals that the Council want Qualis to be taking on for the Council. Essentially what the Council were looking at was a service that could be done better by Qualis than the Council could do not necessarily better than the Council are doing. The Council are in no different situation now than when Mears was running the housing repair service, it was the same responsibility within the Council, the Council had a responsibility for the repairs and maintenance, the actual carrying out of that service was contracted out to Qualis which would be exactly the same approach as if we had continued contracting out to Mears. There was still the scrutiny within the Council and the Council still had the responsibility for the service. Therefore, you could still go through the Housing Team or the Housing Portfolio Holder.

With regard to the third property acquisition I was aware that there was a new acquisition, but that he did not have any details and did not know it had completed. The Managing Director of Qualis was currently on annual leave so my regular Thursday meeting with her this week was cancelled.

Councillor M Owen referred to page 118 of the agenda and stated that on the balance sheet of Qualis the debt was going up by quite a lot and it looked like they were just sitting on the money going up to £126 million and then up to £132 million. Therefore, my question was, why do they need the £35 million loan if they already have so much money that they are sitting on.

Councillor Philip advised that the loans were what was generating the money and was also to do with the status of the work and when it goes from being pre-planning to going into work in progress and you can change things on the account sheet by that point.

Mr N Dawe, Chief Operating Officer stated that in the paperwork an illustration was done in that some more of the loan was aid off rather than reapplied the money to the projects that would then be in subsequent years, so there was an understanding that it did show that but what we would do with the cash bounce was either reinvest it on further projects or paying down the loans, that decision has yet to be made.

Councillor J M Whitehouse stated that it was clear that this report was created some time ago as it had been around for some time, things do change so were there any other post-publication events that members should be aware of which would potentially have an impact on the business plan. The crux of the recommendations includes the £35 million additional loan and what conditions would be attached to the loan in the terms of how that money was spent and ensuring that money was spent in line with the overall objectives and aspirations of the Council. Also the service transfer issue to Qualis, there were some quite big assumptions in the 4 Year Business Plan both about what might happen and the benefits as seen by Qualis of how that would happen. Members would need very clear evidence to justify and understand any transfer proposals. It was important that members had a lot of clarity on those issues.

Councillor J Philip advised in terms of the £35 million loan it had been covered before at Overview and Scrutiny and Cabinet. The Council would be looking for a sensible proposal coming from Qualis as to what they intend to do with the money, given that the Council would be funding through the Public Works Loan and can clearly only be allocated if it was to do with regeneration and the Council would want to see clear evidence that what was being proposed was for regeneration policies within the district. In terms of the service transfer at Overview and Scrutiny one of the things that was looked at was the asset management side of the Council and a proper view of what could be done and what could be improved if it were to transfer to Qualis and that is the reason why the Council are doing a secondment before any form of transfer and hopefully a very strong business case would show the benefits to the Council of transferring the service to Qualis.

Councillor S Heap highlighted that the report stated that all profits are to be retained for 4 to 5 years to build equity and asked when EFDC could expect to see any return on these loans.

Councillor Philip advised that EFDC were getting a return at the moment because they were providing the loan at a commercial rate which is a higher interest rate than the Council were borrowing at. Also discussed at Overview and Scrutiny there was a balance between at what point EFDC start taking dividend money out of Qualis rather than allowing them to reinvest the money to improve the profitability of the company. That is something that has no yet been decided this was an indication of where we are going over the next 4 years. The important thing to remember was that EFDC were the sole owners of Qualis and therefore whether the money is put into the general account or whether it stays within Qualis, the money still belongs to EFDC and it has to be decided year on year where that money goes.

            RESOLVED:

            (1)        That the Qualis 2021/22 to 2024/25 4 Year Business Plan be approved;

(2)             That a variation to its approved Capital Programme so as to include £35 million for a regeneration loan as requested by Qualis in 2021/22 be approved; and

(3)             That as requested the Audit and Governance Committee review both the Operational Boundary and the Approved Limit contained within the Treasury Management and Investment Strategies and approve these to being increased by up to the requested £35 million if the Committee considers this necessary.