Income received from LDL during Financial Year 2010/11

john smith made this Freedom of Information request to Liverpool City Council

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Dear Liverpool City Council,

Please provide details of all income received by the Council from its partnership with LDL during financial year 2010/11. I require the following information :

1. Total magnitude of income received by the Council through the LDL contract

2. Any costs to the Council associated with these revenue sources. For example, if LDL performed a service for another council and earned £10 million, of which, say, £2 million was paid to LCC, I wish to know what was the cost to LCC (if any) associated with delivering this service.

3. For any individual items of revenue with a magnitude greater than £100,000, please name the customer and provide a concise account of the work done

All of this information must be held by the Council as part of its financial monitoring of the LDL contract, so this should not be onerous. I appreciate that some contracts may have been gained by competitive tender or may be commercially sensitive, and therefore I would accept some redaction of detail with respect to question 3 - wouldn't want to put LDL at a competitive disadvantage.

At a time when the partnership is attracting such a lot of criticism, I feel that it would be helpful to remind the ungrateful taxpayers of the rich financial rewards which have accrued to the council from this arrangement. I have every expectation that the answers to these questions will silence the critics.

Yours faithfully,

John Smith

Kevin Symm, Liverpool City Council

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Please find attached acknowledgement letter
Regards,

Kevin Symm
Senior Information Officer
Legal Services
Liverpool City Council
Municipal Buildings
Dale Street
Liverpool
L2 2DH
TEL: 0151 225 3132
[1][email address]

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Dear Kevin,

I have been reviewing LCC's responses to FOI requests on LDL-related matters, and there appears to be a pattern of waiting until day 20 before issuing a response. In several cases, the response itself has not been satisfactory.

I do hope that you will buck the trend in this particular case, and will respond well within the 20 day deadline. You must be aware that people are beginning to wonder whether LCC is really committed to open government.

Go on, surprise us.

Yours sincerely,

John Smith

Symm, Kevin, Liverpool City Council

I am currently out of the office until 3 October 2011

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Kevin Symm, Liverpool City Council

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Please find attached response
Regards,

Kevin Symm
Senior Information Officer
Legal Services
Liverpool City Council
Municipal Buildings
Dale Street
Liverpool
L2 2DH
TEL: 0151 225 3132
[1][email address]

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Dear Kevin Symm,

For the benefit of visitors to this site I copy the relevant parts of your response below :

"Para 4.3 – Refers to a share of third party business to a value of £1m accruing to Liverpool City Council in the life of the Contract. LCC do not have the information as to the separate amount generated in 2010/2011"

"Share of third party business estimated at £1m – LDL already hold a reserve for the City Council of monies which it has generated from third party business. It is anticipated that through the remaining life of the Contract that share will amount to approximately £1m"

Could I clarify this, please, as I'm struggling to understand this information. I am a little unclear as to whether the estimated £1m revenue-sharing is over the remainder of the contract, or the entire lifetime of the contract.

I suppose the worst case is that over a 15 year lifecycle, with a contract costing LCC £75m pa, the council's share of external work is a mere £1m. The best case scenario is that there has been some previous revenue sharing which is not disclosed in your response, which is a little ambiguous.

Could you therefore clarify whether the £1m represents an estimate of LCC's revenue from ALL LDL activity since the contract started, or does it relate only to the contract extension which has just been signed (for 5 years, I think).

Yours sincerely,

John Smith

Jenny Griffin left an annotation ()

Could I just ask the question - why does LCC not know how much external income it should receive pertaining to a particular year? Surely this is a partnership with open-book accounting?

dh left an annotation ()

Surely if LDL is now a 40 % shareholder in LDL, why is this only talking about external LDL business and not ALL LDL business. If LDL make a profit from its core LCC business should not 40 % of this also be coming back to LCC ?

Katie M. left an annotation ()

But as we know from its accounts, in 10 years, LDL has never made a penny in profit - not a coincidence.

Jenny Griffin left an annotation ()

I suppose the question which I'm struggling with - and I'm not financially savvy, so please excuse any mistakes I might make - is WHY this company always reports precisely zero profit?

You'd expect any normal company to finish the year having made either a profit or a loss. To manage precisely balanced books on this volume of activity looks miraculous. A cynic might suppose that the zero-profit thing is a sign of something, and might begin to question how the charges to BT are calculated.

But I'm no cynic. I have faith in elves, the Tylwyth Teg and the healing powers of crystals. I believe that diluting poison until there's nothing left can cure the sick. I believe that Cliff Richard is gifted with good genes and has never needed surgical enhancement. And I am utterly satisfied that LDL's accounts are accurate.

Katie M. left an annotation ()

Maybe the real question is who benefits?
Why does the beneficiary do this - because it can, it's got away with it for 10 years, and with exactly the same thing at Customer Direct in Suffolk for around 6 years.
The clever bit is how they manage to convince the directors of these companies that it is in the interest of the companies themselves to prepare accounts in this way - because directors have a legal duty to make their decisions on this basis. They declare all this in every set of financial statements they submit.
It's all about avoiding filing proper accounts, preventing people getting at the detail:
if LDL (or CDS, for that matter) put the income it earns from third parties through its own books, acquired actual assets, made a profit, or employed people directly, it would have to file proper accounts, and provide a proper explanation for its operations, because it would no longer be able to use the small company exemption.
It would cost a bit more to do this(personnel time, auditors fees) - but nothing compared to the turnover of the company, and it would improve transparency enormously.
LCC now have 2 directors on the board, and should soon have a third, and while the company is run as a subsidiary of BT, there is joint control over some aspects - such as whether or not to accept third party business, which has to be agreed by the LCC directors, not just a majority of the board.
So LCC could change this if they wanted to.

Jenny Griffin left an annotation ()

Katie,

You seem much more knowledgeable than me on this sort of thing. 3 questions spring to mind :

1. Now that the incorrect categorisation of LDL's accounts (as a non-trading company) has been brought to the attention of Companies House, will they still be permitted to do this?

2. Why oh why haven't Liverpool councillors been asking these questions?

3. I don't understand the financial world, but I wonder how comfortable the accountants are with these practices? It's their professional reputations on the line.

Katie M. left an annotation ()

Jenny,

Answers:

Probably nothing - I think it's up to LCC as shareholder:
'A member of a company may apply to the court... for an order... on the ground that the company's affairs are being or have been conducted in a manner that is unfairly prejudicial to the interests of its members generally or of some part of its members...' [a 'member' is simply a shareholder]
As for the councillors, who knows? I wish at the very least someone wouyld get in touch with their colleagues in Rotherham to find out how they managed to end their joint venture - unscathed, apparently.
As for the auditors, when you earn the lion's share of your income from major multinationals, which the big audit firms all do, you're not going to put too much effort into small stuff, are you?

Symm, Kevin, Liverpool City Council

Dear Mr Smith

I will contact the appropriate departments and provide clarification as soon as possible.

Regards,

Kevin Symm
Senior Information Officer
Legal Services
Liverpool City Council
Municipal Buildings
Dale Street
Liverpool
L2 2DH
TEL: 0151 225 3132
[email address]

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Symm, Kevin, Liverpool City Council

Dear Mr Smith

After speaking to colleagues I can confirm the following:

The £1m is an estimate which may be exceeded. It should be noted that the additional, and significant, benefit to Liverpool of the third party work which is won by LDL is the creation of jobs, over 300 currently.

I trust this information satisfies your enquiry

Regards,

Kevin Symm
Senior Information Officer
Legal Services
Liverpool City Council
Municipal Buildings
Dale Street
Liverpool
L2 2DH
TEL: 0151 225 3132
[email address]

show quoted sections

Dear Mr Symm,

I'm sorry about this, but your clarification hasn't clarified matters. Perhaps I should have been more specific.

I wish to know whether the estimate of 1 million pounds relates to the whole lifecycle of the ldl contract, or just the remaining portion?

You mention 300 new jobs, which is really good news.However, I'm having some difficulty reconciling such a large economic impact with such a puny revenue stream for the Council. If this 1 million is over a 15 year period, and if we assume that the Council's share of revenue is based on 20%, then we're talking about an average revenue impact for LDL as a whole of 330k pa - relatively trivial in the context of 75m turnover, and certainly trivial when we think of 300 jobs - surely each worker contributes more than 1kpa?

Yours sincerely,

John Smith

dh left an annotation ()

While the 300 jobs is good, with the current financial position of LCC, the council s actually cutting jobs so the net effect is less jobs. If the financial returns to the council were better or the costs less then the net number of jobs lost would be better.

Jenny Griffin left an annotation ()

Is it me, or is £1 million really trivial? We're talking about a contract where the council is paying LDL well over £1 billion, yet it only expects to make 0.1% of that from 3rd party income over a 15/16 year period.

Could somebody remind me what the benefit of this partnership is supposed to be?

Joe Anderson - do you visit this site?