Cabinet Scrutiny Committee on 17th October
The main item on the Agenda was the failure of Chelsea Care, set up by Cabinet at their meeting in September 2008. Chelsea Care is currently in liquidation.
left: everybody pointing fingers
Two reports were tabled. A liquidation report by the Director of Finance and a report by a special Working Group, Chaired by Cllr Palmer, to report on the reasons for failure. Amazingly, Cllr Palmer did not even turn up to the meeting. A clear dereliction of duty. But there was a huge and impassioned discussion, characterised by participants mostly out of their depth and/or trying to cover themselves. Sad for a Scrutiny Committee. But a picture did emerge through the fog for the finely tuned antenna…..
Cllr Lightfoot mentioned that the Cabinet were keen to set up Chelsea Care but the officers were not keen for politicians to get involved in business. There was quite a bit of arm twisting. Cllr Blakeman said that she opposed the second tranche of equity, £150k, but was overridden by the project champions Cllrs Ahern and Palmer. Cllr Blakeman also said that there are substantial and unreported hidden costs.
Cllr Lindsay said that the special report by Cllr Palmer into the failure of the venture left out one vital point. The business plan was predicated on an operating margin of 16% but the industry works on a margin of 3%: something that any venture capitalist worth his salt would have known.
Cllr Forman made a number of contributions that showed he understands business. But the heavies (led by Cllr Molylan) quickly silenced him. Cllr Forman needs to try harder.
Finally there was quite an extraordinary contribution from Mr Myers, the Chief Executive, who said that the objective for Chelsea Care was to encourage competition in the market and lower costs. This was successful and the council is now buying care at a lower cost! And councillors should take comfort that even some of the big boys like Southern Cross get into trouble. Can this really be a Chief Executive?? And who is he trying to please? Does he know so little about the business that he can really think the problems of the two companies have any relativity? Southern Cross went down because it was loaded up with debt by financial engineers: Chelsea Care went down because, as Cllr Lindsay wisely pointed out,the business plan was based on wrong assumptions. For Myers to ingratiate himself with councillors by pretending that the business plan was un-flawed is not worthy of him.
The full Cabinet will discuss Chelsea Care on Thursday this week.Time to hold our breath.