Bolsover council anticipates no job losses as it agrees to bring controversial development company back in-house

Bolsover District Council’s Executive formally approved the decision during a meeting on July 28 after a Local Partnerships’ review criticised the authority’s relationship with Dragonfly with its findings including a conflict of interest between the roles of the organisations, a lack of good governance and a lack of a business plan.

Council leader, Coun Jane Yates, who agreed Dragonfly was originally set up for the right reasons, stressed its current projects will not be affected by the decision to bring both Dragonfly Development and Dragonfly Management companies back in-house under council control and that there are no anticipated job losses with the transition of services.

She has claimed independent advice was previously not followed when the council appointed councillors instead of non-executive independent directors to the board during its launch, including the former council leader Coun Stephen Fritchley as board chairperson, which she claims created a conflict of interest, left vital skills and experience off the board and affected planning meetings.

Referring to councillors serving on the Dragonfly Board, Cllr Yates said: “They put themselves forward but we do not think they should have been put in that position.”

Bolsover District Council’s Dragonfly was established by the former council leader Stephen Fritchley when Woodhead Construction fell into administration in 2022 while working on Elmton-with-Creswell Parish Council’s Creswell Heritage and Wellbeing Centre project which Dragonfly subsequently completed.

The Labour-controlled council has been operating with two wholly-owned Dragonfly companies – the Dragonfly Management company representing the services that used to be run by the authority and the Dragonfly Development company which is involved in construction like council properties and developments for external third parties.

But Dragonfly attracted concerns about possible conflicts of interest with the mixing of a commercial company with a public authority’s work and the review highlighted tensions between the council and the companies regarding ways of working during the past two years.

The council subsequently undertook some investigations which raised issues around governance, conflict of interest and reporting amidst claims councillors were not being kept fully informed.

Coun Yates told the recent meeting: “I do believe the company was set up for the right reasons at the time, but with most of the work completed being for Bolsover District Council and not externally, there hasn’t been much opportunity for profit from external projects. This has meant that most of the profit is simply the return of Bolsover District Council funds less tax.

“The issue therefore is not about the quality of the projects – Dragonfly Development have built some excellent social housing, and no one can dispute the quality of these.

“The issue is about value for money, and with Dragonfly being brought back in-house, we can continue to build at cost price which will save us money and in turn keep rents at a more affordable level for our residents.”

The review identified instances where good governance has been absent or not fit-for-purpose including; A lack of a clarity of purpose causing confusion and conflict between the council and companies; The lack of an up-to-date business plan; The lack of a suitably robust governance framework including the company board’s composition and skills; The shareholder board’s prominence and that it has not been part of the committee system; The clienting capacity and capability within the council and capability gaps in the companies and governance bodies; And finally, the presence of conflicts of interest between the companies and council roles and the different roles within the companies.

The report also identified issues with the working relationships between the companies and the council as a consequence of the governance difficulties despite both sharing the same objective of wanting the companies to be a success.

Risks to the council, according to the report, have also been compounded by the fact that the companies support council services but delivery of important aspects of the services lies with the companies.

The companies, according to the report, also manage third party funding on behalf of the council where responsibility for this rests with the council but spend and delivery lies with the companies and subsequently poor performance could pose a threat to future council funding.

Other concerns have been that, according to the report, a lack of clarity and weaknesses in reporting means the council is often unsighted on the companies’ corporate and operating risks and the perceptions of external stakeholders, including community stakeholders, have highlighted concerns relating to governance, conflict of interest and an ability to demonstrate value for money.

It also highlighted that a large proportion of the board has been formed of elected members presenting a risk of conflict of interest with some councillors having to withdraw from meetings to the detriment of their other responsibilities.

The report also stated there is little evidence that the current board has access to all of the skills required to run such a high-risk company.

And council leader, Coun Yates, has argued the council is not financially better off having Dragonfly but worse off.

However, councillors on the Dragonfly Board, who recently tendered their resignations in opposition to the council’s plans, accused the council of unacceptable and unbecoming behaviour while arguing there has not been a fair and full assessment of their success before making a decision.

Dragonfly Development’s board of directors – who have received no remuneration for their work and include four Independent councillors and a Reform UK councillor – have also suggested they are being made ‘scapegoats’ for the council’s own lack of governance and that Dragonfly has been profitable.

And Coun Watson claimed the council’s review posed ‘serious catastrophic, reputational and financial consequences’ for Dragonfly putting the company into disrepute by releasing the review and not preparing an action plan, and that it contained ‘inaccuracies’.

The board claimed that taking account of tax and additional council costs of £112,000, Dragonfly Development has made a clear profit of £2.6m, and that it is on target to make a profit of £1m this financial year, taking the total pre-tax profit for the company since becoming a wholly owned company to approximately £4.2m.

However, Coun John Ritchie told a previous meeting that by looking at profit from Dragonfly’s external schemes the cost to the council to generate income far exceeds the return and raises questions about value for money for the authority.

He stressed the Shareholder Board decided to have the review due to ongoing debates around conflict of interest, appropriate business planning, costs and value for money.

Coun Yates told the latest Executive meeting: “Before I became Leader I didn’t really know much about our Dragonfly companies, there hadn’t been much communication from the Dragonfly Board to backbench councillors, but I was aware that an independent review had been agreed.

“I decided that the best and most neutral approach for me to take would be to wait for the outcome of the independent review.”

Following the publication of the review, an Options Appraisal from Local Partnerships’ advisers highlighted the most favoured preference for the council would be to take services provided by Dragonfly Development and Dragonfly Management back in-house under complete council control.

Coun Yates claimed that a meeting had been arranged with Dragonfly board members when the report’s findings came in but that was when this relationship started to break down and ‘there was no more sitting around a table to work things out’.

She added: “It’s regretful but we have to move on. I wish it had not come to this and if there is any way we can restore relationships with these councillors, because they are good councillors, I would like to get relationships on a better footing but we have had to do what we have had to do and there is nothing more we could have done.”

Coun Yates has also stressed the majority of councillors have been fully behind the review and welcomed the findings.

She argued that the review found issues with governance with the Dragonfly companies and not on ‘our side’ and she claims the Dragonfly board has taken matters ‘very personally’ particularly over the review’s claims that they did not have the skills needed to be on the board of a construction company.

Coun Ritchie believes Dragonfly had developed a sense of being an independent company but they were wholly-owned by the council and the lack of transparency and working relationships became problematic.

He added that because Dragonfly operated with two separate companies the council also had to produce two sets of books at a greater cost and the council could not finish a recent audit because Dragonfly had not completed their books.

Coun Yates explained an external consultant has been appointed to oversee the transfer of the companies back in-house and the council will be working with unions to allow it to better prepare for Local Government Reorganisation which may see the abolition of district and borough councils with the introduction of single unitary councils for counties.

She told the meeting: “There are no anticipated job losses. It will simply be a case of moving the companies in-house in a managed way with the support of an external consultant and we will be working with the unions and we are meeting the unions today and we do not want staff to be worried.”

Both Coun Yates and Coun Ritchie stated that there will be a cost with the transition but they believe there has been no financial gain with Dragonfly and more money will be saved by bringing services back in-house.

They also argued the council will subsequently be able to produce social housing more cheaply, with better advantages that can be afforded directly to local authorities, and they will subsequently be able to make rent more affordable for tenants.

Coun Yates said: “Very soon there will be a better system with more information and we will be able to ask about the situation and councillors will have a better understanding after the Growth Scrutiny Committee had been asking questions and they had not been getting answers.”

Coun Ritchie also told the meeting that the benefits of bringing the companies back in-house will improve governance, increase efficiency, improve stakeholder confidence and accountability and better support the council’s strategic objectives.

Deputy council leader, Coun Donna Hales, who stressed the critical findings came from an independent review, said: “It’s been a difficult process and I think everyone has worked really hard to get the best outcome for our tenants.”

The executive councillors formally voted to approve the decision for the council to bring both companies’ services and staff back in-house within the authority with a comprehensive process for their managed transfer.

Council chief executive Karen Hanson said the authority is hoping to resolve the transition by March 31, next year, after consulting with all staff and unions.

East Midlands regional organiser Dave Ratchford said: “At a time when many local authorities are outsourcing problems, Bolsover District Council has chosen to tackle them head on.

“This is the right thing for residents and staff. It’ll help restore accountability, protect local jobs, and ensure vital construction and repair work is carried out for the community, not private profit.

“But there’s still work to do. Major changes like this can be unsettling for staff. It’s vital the council continues to work with unions every step of the way.”