With growing interest in the LATCo (Local Authority Trading Company) model, Norse Group CEO Justin Galliford explains how a trading company can succeed in waste services.
In my discussions with local government leaders, I have noticed that the LATCo model is back on the agenda.
This rising interest stems, I believe, from the continuing pressure on finances, and in particular the impact of devolution and local government reorganisation: this has led councils to consider service delivery, and which model offers the flexibility needed to make significant structural changes.
For those councils slated to form the new unitary authorities in 2027, the need to review their service delivery model is now pressing.
While the focus will inevitably be on adult social services and, in particular, children’s services, major cost savings will be achieved by amalgamating frontline services such as waste and recycling.
However, this will be far from easy. Merging councils will likely bring a range of existing delivery methods – some in-house, some outsourced – and arrangements that are not coterminous.
Procuring waste services – which will require major re-engineering to achieve economies of scale, and may happen over several years as existing contracts come to an end – will be extremely complex, and present significant risk, both financial and operational.
Many of the new authorities (and indeed those not involved in the first phase of LGR) will be considering bringing these services in-house: this offers the flexibility and direct control which will be necessary for a successful transition.
It also satisfies any ideological preference for insourcing. However, if this is the preferred route, it raises the question of the in-house set-up: DLO or LATCo?
The LATCo model offers a range of advantages over both outsourcing and traditional insourcing by a DLO:
- the combination of commercial knowhow and public service values can provide cost efficiency without diluting social value;
- profits are returned to the public purse rather than to private shareholders;
- the council has control over the company;
- and, perhaps most importantly, the flexibility to implement major changes to collection rounds without the need for contract re-negotiation, and without the risk of financial penalty in the form of variation charges.
But there is a further benefit, which is often overlooked when the focus is on operational activities and service re-engineering – the development of a commercial culture, and the revenue growth which can result.
At Norse, we have invested heavily over the years, particularly in our local authority partnerships, to drive external sales as well as the revenues from delivering partner councils’ services. Over the years, we have been able to develop a lucrative trade waste offer and win large numbers of contracts.
This has the effect of increasing turnover and boosting profit share for our partner councils; reinvesting to provide security; protecting jobs and creating employment opportunities; helping the local economy; and increasing social value.
Returning profits to our partner councils also means that vital local services can be maintained and improved.
This exposure to market forces is also a key component in developing a commercial culture in the organisation, and is one of the ways in which a LATCo has the advantage over a traditional DLO, whilst retaining the benefits of insourcing.
But in my experience, it’s not enough on its own. At Norse, we have identified other factors which drive success:
- Empowering management teams.
- Investing in innovation.
- Hiring from the private sector.
- Service diversification.
- Cost control and operational efficiency.
- Support from the board and the council shareholders.
- Strong governance.
I believe that this combination of factors can make a LATCo truly effective, able to reach its full potential and make a significant contribution to local government in tough times.
Norse Group is the UK’s leading local authority trading company. Wholly owned by Norfolk County Council, Norse has developed a radical alternative to traditional outsourcing and in-house delivery – the joint venture partnership model.
The company has formed LATCos with over twenty local authorities, providing a wide range of services, including waste and environmental services.
