Minutes:
Councillor J Hart
I know all members will share my dismay and concern at plans announced by Bonds Foundry to cease production in Tow Law, ending more than 150 years of large scale metalwork in the town – something the company were very clear would be the likely outcome of a vote to leave the European Union in June’s referendum.
Will the Cabinet Member for Economic Regeneration detail efforts being made by this authority to support staff affected by the announcement and to encourage business growth in our rural communities – and does he share my concern that this could be just the start of an uncertain economic period for Durham and the wider region and take the opportunity to outline this county’s preparedness?
Councillor N Foster, Portfolio Holder for Economic Regeneration thanked Councillor Hart for his question and provided a response.
Through Business Durham, the Council was working closely with the management of Bonds Foundry and had offered the services of the Rapid Response Service including JobCentrePlus, National Careers Service and the Council to assist those at risk of redundancy with job search skills, c v writing, training towards updating qualifications, including self-employment as an option. The Council would be contacting employers to source vacancies for the employees at Bonds Foundry.
The restructure at Bonds Foundry was a result of the downturn in the oil and gas sector, and global downturn. The Council had supported other companies in the County similarly affected who had gone on to find new positions.
It was worth emphasising that there was positive news for the rural economy. Glaxo Smith Kline had announced a £92m investment for its site at Barnard Castle and other SMEs in their supply chain would benefit from this growth.
In addition through its outreach work outreach work Business Durham was supporting rural businesses to grow. In addition it had commissioned business workshops at the Durham Dales Centre, and was encouraging businesses to take part in rural economic development programmes such as the Rural Growth Network and Leader programmes.
Councillor O Temple
The loans which financed the building of Durham’s Private Finance Initiative (PFI) Schools were written at very high interest rates, rates which are commonly renegotiated sometime after the completion of construction.
Since the renegotiation of these financial arrangements currently taking place was therefore predictable from the outset:
1. Does the Portfolio Holder for Resources accept responsibility for the original contract for PFI Schools which contained such swingeing penalties for early redemption of loans (currently around £12 million on borrowings of just £43 million: 28%) that any savings available from current low interest rates will be almost swallowed up by them?
2. Was the Portfolio Holder aware that, upon renegotiation, the original contract provided a pre-set percentage of any gain (as much as 50% in some scenarios) to the financiers who arranged the original loan?
3. Does the Portfolio Holder now regret the position the council finds itself in in relation to this refinancing package?
Councillor A Napier, Portfolio Holder for Finance thanked Councillor Temple for his questions and provided a response.
1. Although the funding of PFI deals were complex it was important to note that the framework for the deals was driven by Government via Partnership for Schools or PfS. Via PfS, the Government ensured that terms for PFI deals were broadly standard and this approach was taken in terms of the funding of PFI deals. The Council’s PFI contract for its three schools in Sedgefield and Shotton were agreed in 2009 following a competitive procurement process, at the height of the financial crisis. Notwithstanding this the council worked with professional advisers and were successful in securing a fixed rate of interest across the 25-year deal. In terms of trying to secure a fixed interest rate for a mortgage, banks were reticent to agree any such arrangement beyond 3 to 5 years. If a bank was to agree to a fixed rate deal then the fee the bank would expect to be paid for breaking the deal would be excessive. Consider then the penalty the bank would expect you to pay if you were only 7 years into a 25 year fixed rate deal. On this basis I am satisfied that the redemption penalties represented the market position at the time the PFI contracts were agreed and reflected the Government standards that were in place. Other Council’s were in a similar position and were reviewing their PFI contracts in exactly the same way as in Durham. I am even more satisfied that the council is taking appropriate steps to further reduce costs and will benefit from refinancing at a time of historically low interest rates.
2. Early PFI deals did not include any sharing of benefit from PFI deals. 100% of the benefit went to the private sector.
After complaints from local authorities, the terms of contracts were changed with the arrangement in the council’s contract being standard. PFI was introduced to share risk between the public and private sectors and it was only fair and in line with the contracts that any benefit was similarly shared.
3. The council was in a strong position in this regard. In terms of outcomes, the schools in question were performing well and the Council shouldn’t lose sight that children’s education was always at the forefront. With reference to the PFI, the Council had identified that the deal could be refinanced to the council’s benefit. The original contract and funding were based upon a government driven standard approach and was little different to any PFI deal across the country. The council was again being pro-active and was now able to benefit and take advantage of historically low interest rates that were available.
Councillor A Hopgood
The current position this Council finds itself in with regards to our Teaching Assistants was said to be all about equality. Can the Portfolio Holder tell us how this can possibly continue to be justified when Teaching Assistants are now being offered different packages according to which union they belong to and even the option of exchanging unions in order to take up the alternative. Would the Portfolio Holder agree that this whole episode has left our children’s education in disarray?
Councillor J Brown, Portfolio Holder for Corporate Services thanked Councillor Hopgood for her question and responded on behalf of Councillor O Johnson, Portfolio Holder for Children and Young People’s Services.
Following the Council decision of 14 September GMB and UNISON conducted their respective consultative ballots on the revised offer that they had both agreed to at the ACAS meeting in July.
The majority of GMB members accepted the revised offer and therefore they would see their new contracts applied on 1 April 2017 and receive 2 years compensation.
The majority of UNISON members rejected the revised offer so therefore they would see their new contracts applied on 1 January 2017 and receive 1 year’s compensation.
All new contracts, no matter when they would be implemented would be the same in that they would see Teaching Assistants just being paid for the hours they worked and on a term time only basis.
In relation to Teaching Assistants exchanging unions that was a matter for the Trade Unions and unless evidence could be provided to the contrary assurance could be given that Durham County Council was not attempting to undermine any Trade Union position.
Colleagues in Children’s and Young Peoples Services had confirmed they were working closely with the Head Teachers to minimise the impact of any industrial action that may occur in schools. Therefore, given that the Council had not yet even been given notice of any forthcoming industrial action, never mind seen it take place it would be impossible and inconceivable to agree with Councillor Hopgood that this episode had left children’s education in disarray, which was a spurious and unfounded claim at this time.
Councillor Hopgood replied that there was evidence that members had left one Trade Union to join another and asked how the dispute could be said to be about equality when one set of workers was being set against another.
Councillor Brown replied that it was not for a politician to comment on which trade union anybody decided to choose and that all Teaching Assistants would be employed on the same contract.