Thurrock Council terminates Serco outsourcing contract five-years early

Council pays £10m to release itself early from £20m per year deal - but claims it will save £4m a year

Thurrock Council has ended its 15-year outsourcing contract with Serco five-years early, claiming that the deal, signed in 2004, was no longer serving the needs of the council.

"The original 15-year Strategic Services Partnership (SSP) contract began in 2004, at a time when the financing of local government was in a very different position with growing budgets and before the introduction of austerity savings and budget cuts," claimed the council in a statement.

It continued: "It is not an appropriate form of contract to meet the current requirements of Thurrock Council in respect of the available finances or best value and the needs of a private sector partner in the current economic climate."

The £18m-a-year contract was ended by "mutual agreement", according to the council, whose leader claims it will save as much as £4m annually as a result of the decision. However, in a statement, Councillor John Kent revealed that council tax-payers will have to pay £10m to Serco as a termination fee.

"As everyone will know, yesterday we announced that the contract with our strategic partner, Serco, will end in November... the negotiations to end such a large and complicated contract have been long and detailed; the negotiations also include what can and what should not be said publicly," said Kent.

He continued: "The contract costs Thurrock Council around £20m every year... We have agreed to pay just under £10m to end the contract - a lot of money, but only half what we have paid Serco - and before that Vertex - in the last few years, and would pay them each and every year for the next five years too."

While not elaborating on the savings that he believes the council will make as a result of bringing the functions in-house, he added: "It is clear that there will be major savings of between £3.5m and £4m every year... we are looking at all of our outsourced services and staff - Billfinger, for example - with a view to closely examining the advantages and disadvantages of bringing them back in house ... or not."

Some 350 staff working on a wide range of activities will return to council employment. It follows a decision to bring two services back in-house in 2013.

The contract was awarded to Vertex in 2004, starting in 2005, when Thurrock Council was under Conservative control. Vertex was subsequently acquired by Serco in June 2012.

Labour took over in 2012, since when councillors have complained that the claimed cost savings never emerged. Following elections in 2015, the council is currently under "no overall control", with Labour with 18 councillors, the Conservatives 17, and the balance of power held by 12 UKIP and two independent councillors.