The busy QLocal newsdesk received this interesting (to say the least) email from Aughton's John Bullock who represents Labour in Up Holland.

The experienced businessman defied the party whip to make a stand again the much lauded development company Tawd Vale Developments that's been set up by the Borough Council; here's his email in full:

On Wednesday 27 February, Full Council at West Lancashire Borough Council I - for the first time in my four years as a Councillor - elected not to vote with the whip of the Labour Group as did others.


That’s because of the decision by the Group as recommended by the Portfolio for Housing Cllr.Jenny Forshaw Skelmersdale North was simply a transfer of assets from the Council to a private limited entity with no Councillor control. It perhaps was put more succinctly by the portfolio holder herself, “I don’t have to be the cleverest in the class”, which was then supplanted by Cllr.Neil Fury again Skelmersdale North who went on say, “we don’t need to be clever we have Officers for that”. If they cannot run a private limited company with an anticipated turnover of £45M (Council funds over 5years) how can they run a complex organisation as a Council with a turnover in the tens of millions annually?

I wrote several reports regarding DEVCO and ensured it went through Scrutiny whom like me recommended Councillor representation which was subsequently denied.

Here is my last report to cabinet dated October 2018;

-REPORT-
Author: Cllr.John Bullock
Date: October 2018
Re: DevCo

Thank you for discussing with me the issues of DevCo after group.

I have written to you my three main HOLY TRINITY points for you to reflect upon and consider.

Just to recap I endorse the reasons why we are setting the development company up but not the how and here are my reasons why the how is not palatable;

We must never lose sight of not knowing the unknowables and hence a degree of caution as to the execution of a plan is always advisable. In other words an exit strategy in the event it does NOT work out or act as it was meant to do in practice and hence the objectives are not achieved. The old theory of practice & theory being two separate things applies. Theory assumes an outcome, while practice allows you to test the theory and see if it is accurate. That’s why I am using my experience (practise) to advise upon caution. Some people think practice makes perfect - it does not; it makes permanent. (The Monkey Test). Groups acting without questioning why? The group has to be careful we are not putting all our eggs in one basket and have no room for manoeuvring.

Test1) Land is the only real asset

(a) The entity acquiring the land is essentially passing the wealth of the Borough to a separate legal personality in which we may or may not have tools of control (to be tested - hopefully not in a court of law) [Think Beacon Golf Club]. At best we simply create a taxable event at worse you create another St Modwen (Skelmersdale), and lose complete control. Why take the chance?
(b) Land is the only real asset in a development company not development per se which is trading stock. To create wealth in a development company you need land. How is passing the land to the entity fulfilling your objectives? Why does the entity need control of the land? [Think St Modwen].
(c) Why generate a taxable event - each time the entity acquires the land SDLT will apply. Thus increasing cost to the entity to be passed to the buyer. This will impact affordability in housing as its cost plus pricing which the entity will have to absorb or risk losing money. Why go there?

Test2) Equity of £2M

There are two elements to capitalisation of shares called Up Share Capital & Uncalled Share Capital. They essentially work in the same way but one has been paid and the other is to be paid at some time in the future should the entity require it. Equity is risk capital and should the entity fail or be sued the equity capital is at risk. For that reason most Directors only capitalise £1 in risk capital thus not gambling on potentially losing funds. It’s a myth to state we need the equity to be capitalised to procure lending. Equity can be held in a reserve account and achieve the same. Understand this once capitalised it’s at risk and cannot be withdrawn - why take the risk with tax payers money?

Test3) Members on the Board

I am reminded of a quote - it’s not enough for law to happen it has to be seen to work. PERCEPTION! With no members on the Board you are essentially creating a Quango what would the electorate think. It is the biggest of insults to the members that the Officers think cabinet or members should not be on the Board sighting precarious statues often misinterpreted from a corporate perspective. The reasons being muted for members not being on the Board are applicable to the Officers equally. I know other entities that have no Officers and only members. Having no members on the Board is simply a chasm between control and no control. Don’t allow the Officers to remove control. [Think St Modwen].

Lastly, though this is not part of my Holy Trinity - Exit strategy. What is the life cycle of the entity and extraction of profits/surpluses? Have you seen a cash flow? It would take a minimum of two and a half to three years to make money in development. The effects to cash flow are simple; whilst profits/surpluses are posted most will be taken up in capital employed. (Building of houses). Therefore the extraction of the profits at 35% of the 9% profit is highly dubious and questionable. It is only at the end of life cycle one may want to extract that potentially problems may occur, in other words, at dissolution. However that money could be used to build affordable housing.

You should NOT dismiss a CIC or CLS without understanding cash flow - have you seen it?

I am available for discussion, evaluation & conclusion

-END-

At Full Council on 27 February after several speakers expressing concerns I had my opportunity to say as follows

-Rebuttal to proposal at Full Council 27/2/19 presented by Cllr.John Bullock-

“I too with a heavy heart decided, as others have, for the first time not to vote with the Party Whip. I am a Practising Accountant of near thirty years of experience and whilst I understand the reasons Why (Austerity), the administration needs to consider revenue raising strategies I do not accept the recommendation of the portfolio holder that Councillors should not serve on the Board.

It’s a complete dereliction of duty to our residents to say vote us in but we don’t want to represent you on a Council run private entity. What will the electorate think -
'Who needs Councillors when the Councillors themselves don't want to sit on the top table where the decisions are being made.'

It will become a master and lap dog relationship!

Sit - good boy - stay!

Why, I ask myself, is the portfolio holder making this recommendation;
is it because the Officers didn't trust the portfolio holder or was it perhaps the portfolio holder didn't trust the Officers or maybe simply the portfolio holder didn't trust herself to make the right decisions.

Who is the winner in all this I keep asking myself? Well, of course it's the Officers. If the development company is a success they will take the plaudits not the elected councillor because he is not there. If it's a failure the residents will blame the cabinet for not having their hand on the tiller when the ship went down.

Whatever political party you represent and regardless of your stature in this chamber you have a voice and if it's not heard you are voting as a politician to remove the politics from this chamber and in doing so you are rendering its purpose as impotent. I implore you to vote against and represent the people as a Councillor on the Board of their own company”.

-End-

I was threatened with deselection for raising this matter in group and that’s exactly what has happened but I stand proud in my decision for seeking representation on this Board being developed with Council Tax funds.

Cllr.John Bullock
Chair of Executive Overview & Scrutiny
Upholland

Cllr. John D Bullock
Chair of Scrutiny & Overview.
FFA Fellow of the Institute of Accountants
FPA Fellow of the Institute of Public Accountants

At last, a sensible and entirely reasonable perspective put forward by a fully credited Professional.
WLBC Residents should take heed of the warnings and implications highlighted by Cllr. John D Bullock before it is too late.
Congratulations to Cllr. Bullock for what must have been a personally difficult decision for him in deciding to defy the party whip to make a stand, as he (and others) did.
Let us hope common sense prevails to protect our interests.

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