A trading company responsible for recycling and waste services has been forced to go cap in hand to its owners – East Cambridgeshire District Council – for a £500,000 ‘one off’ payment to bail it out.
East Cambs Street Scene (ECSS) says the £500,000 for the current year (2022/2023) is needed to tackle escalating costs.
A report by the council’s finance director Ian Smith says the “increase in management fee” is needed to meet additional costs faced by ECSS this year.
The amount needed to balance the books has surprised opposition councillors.
Cllr Charlotte Cane is deputy group leader of the Liberal Democrats on the council and sits on the audit committee.
Kept in the dark
She believes councillors have been kept in the dark about the losses incurred by the trading company.
Cllr Cane said the finance and assets committee was advised as recently as January 23 that the service was “forecast to come in £250,000 overspent when compared to its net budget. The main factor leading to this is a £300,000 overspend on waste collection”.
The committee was told that “while ECSS has not yet formally requested an increase in management fee from the council to fund the additional costs of resolving the recent issues at the company, this is expected to happen prior to the end of the financial year.”
Cllr Cane said: “So they had flagged an overspend on 23 January, although at £300k rather than £500k.
“On the one hand, which means they had flagged it to members slightly before full council.
“On the other hand, it makes it even more strange that they were still reporting to audit committee on 30 Jan that it was ‘unlikely’ that ECSS would fail to deliver on its budget.”
Mr Smith said the budget for ECSS has always been prepared with a minimal requirement for a profit margin in order that the costs of the service to the council are as low as possible.
“These arrangements have operated effectively in previous years, but with the unexpected and unplanned increases in inflation in 2022 and the consequential “cost of living crisis”, the company has been unable to hold cost within its approved budget during the year,” says Mr Smith.
Major areas of overspend by ECSS are listed by Mr Smith.:
He says the 2022/23 budget was prepared including a cost-of-living increase of 2%.
The NJC award was £1,925 for all full-time employees, which with the average pay for an ECSS operative being £22,000 per annum, equated to an increase of 8%.
He says there was then a further local agreement, to add a further 6% to pay from the 1st of April 2022 increasing to 10% from the 1st of November 2022.
“The net impact of these changes being an additional £152,000 of costs,” says the finance chief.
He said the changes were an essential element in implementing a waste improvement plan to “address changes in the working practices and terms and conditions of ECSS staff and recruitment and retention challenges”.
At the same time, additional overtime costs totalling £78,000 and agency staff costs of £94,000 were incurred to plug gaps caused by sickness and unfilled posts.
The trading company also altered refuse collection rounds – which led to widespread disruption.
Mr Smith says vehicle maintenance has also been a major issue.
The council had delayed buying new vehicles whilst they waited to see if the Government would fund them following a new nationwide waste strategy policy.
“As a consequence, some of the fleet is now beyond what is considered it’s useful life and instances of breakdown have increased,” Mr Smith says.
“This has resulted in additional maintenance costs and the need to hire additional vehicles when ECSS’s own fleet is off the road.”
He said the budget had included extra costs for this, but these have proved to be higher than forecast resulting in a further overspend of £113,000.
Rising cost of fuel
And ECSS was hit by rising fuel costs which led to a further £100,000 overspend.
On January 31, the ECSS board requested the extra £500,000 to keep the company stable.
The board blamed “external economic and labour market factors and delays in legislation”.
Mr Smith says the 2023/24 budget will result in a 21 per cent rise in the management fee paid by the council to its trading arm.
Cllr Cane said she was anxious not to be seen as being critical of the refuse crews at the trading company.
“They have worked their socks off,” she said. “They kept us going through Covid and through all weather.
“It is not their fault that their ability to do their job properly was botched by the re alignment of rounds which saw them having to work weekends to catch up.”
She said opposition councillors had many times asked questions informally and behind the scenes about the state of the refuse service “and we were continually getting fobbed off”.
She said pay awards were known throughout last year “and it was right and proper they should have been awarded. Clearly our crews were not being adequately paid and similarly fuel price increases have been known about for some time.
“Yet council officers still came to a recent audit committee and presented a ‘risk register’ which said everything was ok and there was no problem.
“Well clearly there was and either we have an audit committee that gets clear and transparent responses to our questions or what’s the point?
‘Savings reserve’ likely to be used
“The committee is there to ensure proper governance and control of funds and we should be getting full information.”
Cllr Cane said she “presumes the £500,000 will come from the council’s famous ‘savings reserve’.
“But the point is ECSS is a trading company, a separate trading company but how separate they are is not clear.
“And in addition, we are not getting information promptly because they are a wholly owned company without any democratic control.”
“My concern is coming just as a member of audit committee – I am meant to be helping to oversee our governance and financial management is being done well.”
Sunday morning and a good time to catch up with @EastCambs audit committee. Here’s Chief Executive John Hill pic.twitter.com/VS192ZQE47
— John Elworthy (@johnelworthy) February 12, 2023
She said the council was effectively being presented with a fait accompli “and in theory the council could say no but what happens then?”
ECCS provides
- a fortnightly recycling collection, alternating between food/garden waste and recyclables.
- a weekly black bag household waste collection.
- an assisted collection service for residents who are unable to present their bins or bags at the kerbside due to infirmity, serious long-term illness or disability and there are no other members of the household able to do so.
- a missed bin or bag collection by the end of the next working day if it has been correctly reported to the council.
- delivery of a new or replacement bin within 10 working days of the request.
- emptying of a full dog/litter bin by the end of the next working day if it has been correctly reported to the council.
- removal of non-offensive graffiti from public land within 2 working days of being correctly reported to the council.
- removal of offensive graffiti from public and private land within 1 working day of being correctly reported to the council.
- removal of non-hazardous fly-tipping within 3 working days of correctly being reported to the council.
- provision of a scheduled street cleansing service to the District according to the Environmental Protection Act 1990.
- carrying out of a street cleansing service request within 5 working days (excluding major road ways).
