The Scrutiny Support Officer presented a report to outline the purpose of the meeting which was to receive information provided by a representative from Legal and Democratic Services regarding Council-owned leisure facilities and the options of moving to Trust Status.
At the previous meeting the Executive Member for Public Health and Sport and the Health and Development Manager had given a presentation regarding some of the benefits to the Council of its leisure services converting to a Leisure Trust. It was highlighted to the Panel that there was a noticeable saving in terms of taxation that could be achieved by a Leisure Trust through it having charitable status. It appeared that the main advantage of converting to a Leisure Trust was financial.
It was noted however, that the taxation benefits were based on the current taxation position, which could be changed at any time by Central Government. In addition, any profit made by a Trust would be retained, whereas any losses would have to be underwritten by the Council.
The Principal Solicitor from Legal Services was in attendance at the meeting to provide further information as to the contractual liabilities, restrictions and benefits of converting the Councils existing leisure services to a Trust.
It was explained that a Trust was a situation whereby the owner of an asset, such as land or money, transferred that asset to a group of Trustees. In doing so, the owner gave up all rights to that asset and the Trustees, who could include the original owner, then operated the Trust in accordance with its objectives. The Trustees were governed by legislation under the Trustee Act 2000 and the overall supervision of the Charity Commission.
A Trust was a separate legal entity and did not form part of the Donors assets. However, it would be possible for the Donor to enter into arrangements with the Trustees with regard to guarantees, for example if the Trust fell into difficulties. A separate contract between the Donor and the Trust could be drawn up and that liability enforced by the Trustees. It was clarified that a Trust could not make a profit. Any profit would have to be retained and applied to the objectives of the Trust. Restrictions on a Trust were onerous and were policed by independent legislation.
The taxation situation depended on the nature of the Trust, its income and capital assets as to whether or not it was subject to taxation. Charities enjoyed various tax reliefs that were not available to ordinary individuals or companies. However, it might be the case that the Council already benefited from the same or similar tax reliefs. Whether such tax reliefs would produce any benefits depended entirely on the terms of the Trust. As far as liabilities were concerned, they would remain with the Trust, unless the Donor decided to offer the Trust some form of guarantee.
It was noted that a Trust operating a leisure facility was effectively in competition with the commercial world. Some considerable re-structuring of the current Leisure Service would need to take place to make it commercially viable. It had been suggested that converting to a Leisure Trust would provide savings to the Council, however, it was unlikely that any savings would be immediate. The Council would actually lose some income by transferring its assets to the Trust. Any income achieved would forthwith belong to the Trust and the assets would be removed from the Councils Asset Register.
Whilst existing staff would be transferred to a Trust under TUPE conditions, it was unlikely that a commercial organisation could maintain the same staffing levels as the public sector. It was more likely that staffing levels would be reduced in order to achieve commercial viability.
If a Leisure Trust was unsuccessful, whilst it would be possible for it to be brought back into the Council, it would need to be wound up with the permission of the Charity Commission. The same assets would have to be taken back on and used for the same purpose but there was a risk that they would not be returned in the same condition as when originally transferred.
Unless the Council acted as a Guarantor for the Trust, the Trust would have to deal with any debts incurred. This could potentially mean reducing the number of staff or premises. On a positive note, it was highlighted that the majority of grant providers were more likely to provide funding for a Trust than a Local Authority.
Whilst providing leisure facilities for Middlesbrough residents was not a statutory function of the Council, in terms of public health, Members felt it was a social responsibility. The Council could become a Trustee and effectively influence the way the Trust performed and behaved, but it would have to do so within the confines of the Trustee Act and Charity Commission.
The Panel was informed by the Legal Representative that work on the development of a Leisure Trust for Middlesbrough had currently been suspended and the proposals were under review.
Members agreed that it would be helpful for the Panel to receive detailed information on the Councils current leisure provision as well as local private sector provision. It was suggested that it would also be useful to receive a breakdown of income and expenditure for leisure services and details of staffing levels.
1. the information provided be received and noted.
2. arrangements would be made for the Panel to receive further detailed information in relation to the Councils current leisure provision and local private sector provision.