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Council IT supplier Service Birmingham to be wound up to save taxpayers' money

Controversial joint-venture company dissolved by 2018 and 200 staff moved back to the city council

The controversial Service Birmingham IT company set up by Birmingham City Council and Capita is set to be wound up three years early in a bid to save £43 million of taxpayers' money.

The joint venture, under which Capita ran the city's information and communication technology (ICT) systems, council tax collection services and formerly ran its call centre, was set up in 2006.

The contract was condemned as being far too expensive at its peak in 2011, costing the council £120 million a year at a time of cuts. It currently costs £70 million a year.

Now, the council and Capita have agreed to end it by March 2018 and its 200 staff will be transferred back to the city council workforce.

The council will continue to receive IT services from Capita until the scheduled end of the contract in 2021.

In future, smaller contracts for new systems, maintenance and upgrades will be offered, allowing local suppliers to bid alongside Capita.

Labour council leader John Clancy said the move would mean savings of £11.5 million this year and could save services like libraries, social care and parks from more cuts.

Before he became leader, Coun Clancy was a strong critic of the deal, which he called a "Rolls-Royce contract" in a time of austerity.

City leader Coun John Clancy
City leader Coun John Clancy

He said: "I made it clear upon becoming council leader we could not continue to spend a vast amount of money on ICT given the tough decisions that have to be taken about cutting spending in other departments.

"This agreement means that Birmingham City Council will have more to spend on frontline services and to deliver key policy priority pledges on inclusive growth, housing and social services.

"It is intended to bring about 200 Capita employees back to the city council and we are also committed to putting future ICT projects out to the market so that Birmingham and West Midlands companies can bid for the work."

He said he would also look to make further savings through IT systems.

The opposition Conservative leader Robert Alden backed the decision which he said was included in their alternative council budget.

Darren Quinton Tory leader Coun Robert Alden
Tory leader Coun Robert Alden

He said: "We were clear that the best way to deliver at least £80 million of savings over four years, that can and should be got from IT, is to adopt our proposals.

"The Labour council must ensure they do not tie themselves into costly contract changes that don't deliver the possible savings."

Capita insisted the move was a re-arrangement of the contract, much of which will run until 2021.

A spokesman said: "Over the past ten years, the partnership has successfully delivered significant savings.

"To enable Capita to support the council's further cost savings objectives, we have jointly worked up a proposal to reshape our commercial arrangements to allow greater flexibility to better cater for the future needs of the council and its residents.

"The proposal, although keeping the core services contract in place until 2021, allows for the joint venture arrangement, which has some commercial restrictions, to be dissolved."

She added that the new deal includes a mix of the core IT services contract and some additional projects, as well as implementation of the council's new digital strategy.

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