Lancashire County Council has ended its controversial partnership with BT One Connect Limited.
County Hall functions including human resources are set to be brought back in-house by the council’s Labour administration.
But some services, including IT and payroll will still operate under a subsidiary of BT.
One Connect Limited (OCL) was set up in May 2011 to run various County Hall functions, with the aim of saving the council around £400m over 10 years.
It has around 800 staff seconded to it from Lancashire County Council (LCC) and BT, with a 40 per cent shareholding held by LCC and 60 per cent held by BT.
But it has been plagued by controversy since its inception and is a major source of dispute between the council’s ruling Labour group and the previous Tory administration, which instigated the venture.
Last August the chief executive of the county council, Phil Halsall, was suspended over allegations “favouritism” was shown to OCL, in the awarding of a £5m fleet maintenance contract.
The deal was approved in April, days before the county elections, by the former Conservative council leader, County Coun Geoff Driver.
A subsequent disciplinary investigation into Mr Halsall’s conduct was dropped when he left the authority “by mutual consent” in October. Meanwhile, payments of more than £500,000 made to the former chief executive of OCL continue to be investigated by police, as part of an inquiry into “financial irregularities” at LCC.
David McElhinney was paid £507,597 by the county council, split into two separate payments of £231,709 and £275,888, in the space of a month last summer.
It covered his two-and-a-half days work a week between May 2011 and March 2013 as the head of the partnership.
Mr McElhinney resigned at the end of August, before the payments were discovered during a routine check of finances by County Hall’s treasurer.
The council then began an investigation and made a complaint to Lancashire Police.
In November, a further County Hall probe into a community alarm services contract revealed OCL intended to charge the authority a 20 per cent mark-up on services – costing taxpayers £1.4m.
The scrapping of the current agreement was confirmed at an LCC cabinet meeting yesterday, with leader Jennifer Mein heralding it “a really good news day” for staff, service users and taxpayers.
Now OCL is to become a wholly owned BT company, renamed as BT Lancashire Services Limited (BT LSL).
The majority of its functions, like welfare rights, human resources and procurement, will return to being delivered in-house by the council.
BT will continue being responsible for the county’s IT and payroll, and West Lancashire Council’s revenue and benefits services.
Coun Mein said: “OCL was a big area of concern following the debacle with the fleet services contract and the telecare contract and the fact there had been guaranteed savings of £5m a year from procurement, which have never materialised.
“Our partnership with BT is carrying on for the same duration, a further seven years, with an option to add another five years at the end of it. However, as part of this agreement, there is also an option for either side to step away at any time.” She said she couldn’t yet put a figure on the total savings the partnership would deliver, but that the £400m projected was “totally unrealistic” and “events have proven that”.
Hundreds of council staff seconded to OCL will return to the council, with the remainder continuing their secondments. The changes will take effect from March 31.
As BT LSL will be wholly owned by BT, the partnership’s governance will no longer involve a joint board of directors.
Senior figures from both parties will review its progress every three months.
Former council leader Geoff Driver said: “I am sure everyone will be amazed to see that after months of accusing the Conservatives of ‘outsourcing’ council services by seconding council staff to a joint venture between LCC and BT, the Labour administration is actually seconding staff to a company that is wholly owned by BT and in which the county council has absolutely no involvement.
“That is more than ‘outsourcing’, it is privatisation, no more no less. So not only have Labour allowed their political vindictiveness to cost Lancashire taxpayers millions, they have demonstrated a total disregard for the future wellbeing and welfare of their staff.”
But Coun Mein said that assertion was “preposterous”.