Northumberland County Council’s troubled development company Arch is set to be scrapped and a replacement established next week.
At next Thursday’s meeting of the cabinet, councillors are being asked to approve the closure of Arch Corporate Holdings and the establishment of a replacement holding company to be known as Advance Northumberland, which ‘will not take unnecessary risks with taxpayers’ money’.
It will focus all its efforts within the county with key growth projects including developing investment zones in the south of the county, including Ashington, Blyth, Cramlington and Morpeth.
Advance Northumberland will also drive a growth network in the principal towns in the rural parts of the county – Alnwick, Amble, Berwick, Haltwhistle, Hexham, Ponteland and Prudhoe.
A report explains that revised governance arrangements will be required to address ‘a number of irregularities in the governance identified in the independent strategic review’.
Going forward, ‘a balance is needed between the council’s influence as the sole shareholder and the operational independence of the company.’
It adds: ‘The Arch Corporate Holdings company has been deemed not appropriate to remain as the Northumberland Development Company vehicle for the council for the following reasons: reputational impact; its history and constitutional format have had poor governance arrangements; the subsidiary format and joint ventures have been developed unilaterally and not on the basis of strategic requirements of the council’s Corporate Plan.’
The board of the Arch group and the council ‘recognise that there are significant elements which are aligned to the Corporate Plan and offer a positive contribution to Northumberland’s economic development’, which is why it is recommended to establish the new company rather than get rid of Arch and bring the work in-house.
Advance Northumberland is proposed to be a limited company with the council as sole shareholder and the timetable suggests that staff and assets would transfer to the new company next month.
Coun Nick Oliver, cabinet member for corporate services, said: “This is a very exciting time and a landmark moment for the future prosperity of the county.
“We’re taking everything that was good about Arch while ensuring all new governance and performance management arrangements are in place, and reviewed on a regular basis.
“People can also be assured that all regeneration projects will be subject to a robust business case and funding appraisal, and take account of commercial return, regeneration impact and risk. This will not be a company that takes unnecessary risks with taxpayers’ money.”
But the Labour opposition, which claims that a ‘witch-hunt’ has been taking place in relation to Arch, says that this decision should be taken by the full council, allowing all councillors to vote on the proposals, as was the case when the company was set up, rather than what is ‘essentially a small committee of nine Tory members’.
Labour leader Grant Davey, a former director of Arch, said: “The indecent haste from this Tory administration over the scrapping of Arch and the removal of the core strategy should be halted until an independent investigation has looked at the actions surrounding decisions taken since May 2017.”
In their manifesto ahead of last May’s elections, Northumberland Conservatives said they would scrap Arch – something which has caused controversy in itself due to claims that leader Peter Jackson, as a director, potentially breached the Companies Act.
Since then, an investigation into Arch has been taking place, which has seen referrals made to Northumbria Police and a number of matters of concern discussed by the council’s audit committee.
In March, the meeting heard about lavish spending on food and drink, hotels and first-class travel while at real-estate conferences in London and the south of France, as well as ‘a culture of entitlement to expensive trips and acceptance of hospitality being the norm’ at the council-owned company.
Further concerns about spending at Arch were aired at the May meeting, which heard that £246,000 was spent on several company credit cards between January 2013 and June 2017 with ‘work continuing to isolate the proportion of this spend which relates to hospitality’.
A report to that meeting also explained that Arch’s assets have now been valued at £9million less than previously estimated (the total portfolio is around £300 million), and that a further formal referral has been made to the police, the details of which were not revealed, but it relates to ‘the potential misuse of public funds’.
After that meeting, a Northumbria Police spokesman said: “We have received further correspondence from Northumberland County Council and will continue to work with them as part of our ongoing inquiries.”
A previous statement, which still stands, reads: “A number of matters have been raised relating to finance and governance issues at Arch. Police are working with Northumberland County Council concerning these matters and reviewing documentation. There is currently no ongoing criminal police investigation.”
Ben O'Connell, Local Democracy Reporting Service