How to exercise the people without stretching the budget

Local authorities are increasingly providing leisure services through charitable trusts. Roger Trapp reports

Britain may not have become a society of leisure to the extent predicted by pundits a few years ago, but the growing interest in sports is still putting some strain on local authorities. In particular, they are finding themselves caught between the increasing tightness of funds and such programmes as the Government's recent drive to improve the nation's health through exercise.

The obvious way to deal with this is to do with sport and leisure what has been done with many other services: sell them off to the private sector - either through an existing company, or a management-employee buyout. But increasing numbers of authorities are looking at the charitable trust approach.

Capital Strategies, a multi-disciplinary firm offering financial, legal and technical advice for such deals, is currently receiving about one inquiry a week - and as a result has published a guide on the subject.

Robert Postlethwaite, consultant at Capital Strategies, sees the guide, A Sporting Chance, as especially useful for local authority directors of leisure services and managers of direct service organisations that are considering their position in the run-up to the second round of compulsory competitive tendering.

Some of these managers have begun to see councils as "enabling authorities" - under which they would run small offices that obtain services from outside suppliers.

The advantage of the charitable trust, he says, is that it amounts to a transfer into "something like the private sector", though it retains a strong ethos of public service.

Mr Postlethwaite sees the need for the guide because there are misconceptions about what charitable trusts involve. For instance, they can make profits like conventional commercial entities; they just use those profits to improve the service rather than to repay investors. As a result, they can allow significant increases in capital investment and refurbishment of facilities without increasing the costs to the authority.

Among the other advantages he cites are the fact that a charitable trust can improve autonomy in the service without compromising local accountability and that it can attract investment to facilities that are outside the scope of a local authority's capital controls.

But - although there are also tax benefits, such as relief on business rates and avoidance of VAT - there are also several issues to be resolved for the concept to be a success. In particular, Mr Postlethwaite says that in transferring assets to the trust and awarding contracts councils have to be able to demonstrate that they are obtaining value for money. Moreover, local accountability is dependent on membership of the trusts.

"Every senior leisure manager should be aware of the potential of trusts and this is what our guide explains," he concludes.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

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