How Much Are We Paying Serco Leisure For Nothing?

It comes as no surprise that there are WLBC leisure centre losses during the coronavirus pandemic. But who should pay for them? Should taxpayers foot the bill for Serco? What’s in the WLBC/Serco leisure contract for the risk of closure?

There has already been a legal case about the impact of Covid-19 on council-owned leisure centres operated under contract by leisure services providers. A particular complication arises where the contract in question allocates the risk (and cost) of certain changes in law to local authorities.

This was the case in Westminster City Council v Sports and Leisure Management [2021] EWHC 98 (TCC) where the closure of leisure centres by government regulations responding to the Covid 19 pandemic meant that the contract became loss-making for Sports and Leisure Management (SLM).

It was common ground between the parties that the regulations that imposed restrictions on leisure centre operation were a “Specific Change in Law” as defined in the contract meaning the council accepted some of the risk. This accords with the position generally accepted by the industry (including by the Local Government Association and Sport England). The question in this case was how the contract allocated the “Specific Change in Law” risk and how much this risk could cost the council.

SLM argued that the contract required the council to bear the full cost of the Specific Change in Law meaning that “the Contractor should not be worse off”than it would have been if the regulations had not been imposed. The council argued that its maximum exposure to the Specific Change in Law was that the concession payment (“Management Fee”) it ordinarily receives from SLM is reduced to zero and it was not required to make any further payment to SLM.

The Court found as follows “A Specific Change in Law requires the parties to operate the “Authority Change” process, adapted so that it addresses the Specific Change in Law and cannot be withdrawn.

“The outcome of that process is determined by agreement between the parties acting reasonably or as determined under the dispute resolution procedure; the outcome is not necessarily that the Contractor is “no worse off”; nor that the Contractor bears all the losses from the Specific Change in Law.

“The financial consequences of a Specific Change in Law cannot include Management Fee becoming payable to the Contractor instead of vice versa; the Management Fee cannot be less than zero for any contract year.

“The financial consequences of a Specific Change in Law can include reduction of the Management Fee as far as (but not below) zero and can include payment of a lump sum by the Council to the Contractor”.

In West Lancashire, are council tax payers unreasonably funding Serco Leisure Operating Ltd regardless of no service provision? We should be told. It’s bad enough that parts of the Beacon Park Golf Course lie in ruins. It’s worse that WLBC hasn’t enforced the Breach of Planning Conditions already imposed. How long will the Serco influence dictate our leisure services?

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