Lancashire County Council’s controversial partnership with BT, One Connect Limited, is set to be scrapped.
County Hall functions such as procurement and human resources are to be brought back in-house by the council’s Labour administration.
But some services, thought to include IT and payroll, will still operate under a new subsidiary of BT, as the telecommunications giant is not willing to walk away from the partnership completely.
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.
BT has incurred significant costs in the first three years of the partnership and it is believed it would have cost too much money for the parties to sever all ties at this stage.
Instead a compromise will see some County Hall functions brought back in-house, and others operating under a new subsidiary of BT, as the two organisations’ ‘strategic partnership’ continues.
The new subsidiary will be managed differently to OCL, but it is not thought the employment status of workers at OCL will be affected. It is understood it will be largely staffed and performance managed by the council.
Council leader County Coun Jennifer Mein said: “All I can say at this stage is we are having positive conversations with BT and there will be hopefully an announcement after the cabinet meeting on Friday.”
BT declined to comment on the developments.
However, Unite union representative Les Parker said: “I think that this is the beginning of the end of the use of privatisation in public services, because this is the worst example that I have known in my experience of the private sector exploiting public need.
“The private sector put profits before people and public services should put people before profits.”
OCL has been plagued by controversy since its launch, 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.
Council leader Jennifer Mein said the authority had been “ripped off”, after it decided to pull out of a deal to transfer telecare functions run by housing providers to OCL and BT - again provisionally agreed by the Conservatives.
But Coun Driver and bosses at BT hit back, by insisting the scrapped contract would have saved the authority £21m.
BT labelled the LCC report “incomplete”, “inaccurate”, “unbalanced” and “potentially misleading” - sparking off months of top level talks between the firm and the council.