Transition from Arch to new council company to take place next month

Northumberland County Council's headquarters in Morpeth.
Northumberland County Council's headquarters in Morpeth.

A date has been set for the transition from the county council’s troubled development company Arch to its successor, Advance Northumberland.

In June, the local authority’s cabinet approved the closure of Arch Corporate Holdings and the establishment of the replacement holding company, which ‘will not take unnecessary risks with taxpayers’ money’.

Now, a report to councillors has set out the the steps required to transfer the assets, liabilities and trading operations of Arch to Advance Northumberland, which is scheduled to take place on Tuesday, November 13.

‘The steps required are complex in order to comply with current tax legislation and involve the transfer of significant sums of money that will be reimbursed by a final dividend payment,’ the report explains.

The process, which the cabinet is being asked to approve next Tuesday (October 23), will see the council buy £3.3million of additional shares in Advance Northumberland, which will be used to buy Arch’s subsidiary companies.

The council will also buy a further £0.9million of additional Advance shares to enable the new company to buy Arch’s trade and assets ‘at a nominal value’.

Finally, the £4.2 million paid out will be returned to Northumberland County Council via a dividend payment upon the dissolution of Arch (Corporate Holdings) Ltd.

The amounts involved – £3.3million and £0.9million – ‘are the best estimates based on the current trading position’, so approval is also sought for any variation to be agreed by the chief executive and finance director in consultation with Coun Nick Oliver, cabinet member for corporate services.

Advance Northumberland will be a limited company with the council as sole shareholder, like Arch, and staff and assets are set to transfer to the new company. There will be no change to rents or agreements for tenants of Arch homes.

In June, it was reported that it will focus all its efforts within the county with key growth projects including developing investment zones in the south of the county, including Ashington, Blyth, Cramlington and Morpeth.

Advance Northumberland will also drive a growth network in the principal towns in the rural parts of the county – Alnwick, Amble, Berwick, Haltwhistle, Hexham, Ponteland and Prudhoe.

That report explained that revised governance arrangements would be required to address ‘a number of irregularities in the governance identified in the independent strategic review’.

Going forward, ‘a balance is needed between the council’s influence as the sole shareholder and the operational independence of the company’.

In their manifesto ahead of last May’s elections, Northumberland Conservatives pledged to scrap Arch – something which caused controversy in itself due to claims that leader Peter Jackson, as a director, potentially breached the Companies Act.

Since then, an investigation into Arch has been taking place, which has seen referrals made to Northumbria Police and a number of matters of concern discussed by the council’s audit committee.

In March, the audit committee heard about lavish spending on food and drink, hotels and first-class travel while at real-estate conferences in London and the south of France, as well as ‘a culture of entitlement to expensive trips and acceptance of hospitality being the norm’ at the council-owned company.

Further concerns about spending at Arch were aired at the May meeting, which heard that £246,000 was spent on several company credit cards between January 2013 and June 2017 with ‘work continuing to isolate the proportion of this spend which relates to hospitality’.

Northumbria Police previously said that while it is working with the council on matters ‘relating to finance and governance issues at Arch’, there is ‘currently no ongoing criminal police investigation’.

At last month’s full council meeting, Chief Constable of Northumbria Police, Winton Keenan, was shocked at suggestions by Coun Georgina Hill, chairman of the audit committee, that there may be political interference over inquiries into Arch, given that the issues arose under the previous Labour administration and the Police and Crime Commissioner (Dame Vera Baird) ‘is a prominent member of the same party’.

Chief Constable Keenan said: “First of all, I’m flabbergasted in truth by the latter suggestion. I’m not sure you should need me for Northumbria Police to say we will investigate it without fear or favour absolutely independently, but if you do need that assurance, I’m giving it to you personally now.”

Ben O'Connell, Local Democracy Reporting Service

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