Midlands councils go into business to offset grant cuts

"For the first time in a generation, striving councils now have licence to go full steam ahead and grab a share of the wealth of their local areas and to seize the opportunities of enterprise, growth and prosperity."

Eric Pickles MP.

The local government secretary's blandishments to councils about embracing the enterprise culture represent the flip-side of his increasingly well-worn coin; that they must accept drastic reductions in their revenue support grants without burdening hard-working families with further increases in their council tax bills.

"Freeze, freeze, freeze!" This was his message in Monday's Daily Telegraph in which he told those authorities "who put up their stealth tax by 1.99% to avoid our 2% referendum threshold" that they need a reality check.

He warned those using "loopholes" that they would "lose out" out next year.

Shropshire Council has set up a company called Inspiring Partnerships and Enterprise

It is all calculated to pile yet more pressure on council leaders to devise their own resourceful responses to the ministerial mantra: "working smarter", "doing more for less" and, of course, thinking creatively about tapping in to their revenue-generating potential.

There is only so much you can do with parking charges and library fines.

So one Midland council is taking Mr Pickles at his word, thinking big and going into business.

Shropshire Council has set up a wholly-owned company called Inspiring Partnerships and Enterprise (IPE) into which they are hiving-off many of their services.

Ultimately, they hope most of the council's 6,000 staff will be transferred to the new venture.

According to the council's Conservative leader Keith Barrow: "We are in a better position than many other councils because we are getting on with things and looking to do things differently rather than cut services.

"The establishment of a new council-owned company to provide services at a public profit which can then be invested back into the council is just one of the ways we will do this."

Already they have started cooking school dinners for other local authorities. Among the services they plan to transfer to IPE, are information technology, human resources, property services, facilities management and finance.

If they have the expertise, why not see what it can fetch on the open market?

One obvious concern is the dilution of democratic accountability when services are delivered through arm's length companies rather than "in-house", under direct political control.

The profit motive has never been a comfortable bed fellow with government, either central or local, as the official blog of the University of Birmingham's Institute for Local Government Studies (INLOGOV) points out.

It said a relationship of suspicion and unease dates back to the days of the East India Company which, by 1830 "had become a government in all but name".

Will it work?

The blog goes on: "The power of the company was such that it has led to a deep-seated suspicion of the profit motive in the private sector and individuals that has remained in national and local government ever since - whichever political party has been in control."

Until now, in Shropshire that is.

The Local Government Association (LGA) describes the scale of the council's ambitions as "unprecedented".

But will it work?

Will it really deliver revenue streams sufficient to offset the effects of those cuts in government grants?

The council does not expect it do to so this year as initial set-up costs take their inevitable toll.

But unless, and until, it can prove it is paying dividends, the council will be vulnerable to accusations that they are gambling with taxpayers' money and with important local services.

This will be one of our big talking points on this weekend's Sunday Politics Midlands, when I will be joined by Caroline Spelman, the former Environment Secretary, the Conservative MP for Meriden and by Michael Cashman CBE, the Labour MEP for the West Midlands.

And I hope you will join me too, from 11:00 GMT on BBC One this Sunday 3 February 2013.