Transfer of Services by Local Authorities
In 2007 there was a complaint made to the European Commission about Glasgow City Council (GCC) and the transfer of its culture and leisure services to a new body. However, DG Competition came to the conclusion that there was no convincing evidence for the existence of State aid for the following reasons:
“The GCC, following an administrative reorganisation, established a new body, “Culture and Sport Glasgow”, to allow it to continue the delivery of its statutory functions in relation to cultural and leisure services in a more effective and cost-efficient manner. The new body is a company limited by guarantee, and its sole member is the Glasgow City Council, which accordingly has the ultimate control of it. Furthermore, the UK authorities stated that the contractual framework between the Council and the new body is set in a way which ensures that the Council retains control over the services by the imposition of detailed service requirements, that financial transparency is maintained, that the new body adheres to the cultural strategy of GCC in the delivery of services, and that the new body adheres to the EC procurement requirements for the award of public contracts”.
D G Competition viewed that the transfer of cultural and leisure facilities by the GCC to an administrative body therefore had the character of a public sector reorganisation, and since the assets remain in the ownership of the Council, which retains control over the services, it found that there was no indication that a selective advantage would be granted to an undertaking through the transfer of resources.
It follows that if Local authorities wish to transfer some of their services they need to apply the same principles i.e.
· The new company practises financial transparency;
· The assets remain in the ownership of the council;
· The council retains a central control over the services; and
· The new company complies with the same EU procurement rules
as the Council would