Because of the continued government squeezing of council budgets while still being required to deliver public services, councils have begun to venture into alternative delivery models, in part to attempt to earn money through the sale of their functions such as HR, Finance, IT services, or Property management services.

The way some councils have decided to do this is through the creation of commercial arms, Local Authority Trading Companies (LATCos). The Gov UK guidance describes a LATCo as being 100% owned by the parent council though can be designed for flexibility or autonomy. LATCos do require a council appointed board and service agreements and contracts with the parent council.

“LATCs are bodies that are free to operate as commercial companies but remain wholly owned and controlled by the parent council(s). As trading bodies, LATCs are in a position to provide their services to a wider market than a council department.” – Gov UK

The main idea with a LATCo is to push out core sections of the council services into a separated commercial entity. The LATCo will then provide the service back to the council they were already providing when they were in-house but are also free to begin offering services to other councils or organisations. In this way the council still gets some of their service, while also selling that service to others.

For example:

• Instead of having a property department that manages the creation and maintenance of council owned social housing, a council may instead set up a housing company which will buy the land, build, and manage the houses on behalf of the council.
• Instead of having an IT department that manages core systems used by the council and tech support functions, a council may instead set up an IT company that provides those same services back to the council (with exactly the same staff) but will contract to offer tech support to other organisations which will slowly reduce the resource availability for council use in exchange for money.

The relevant sections of The Public Sector Bodies (Websites and Mobile Applications) (No.2) Accessibility Regulations 2018 are as follows:

“These Regulations apply to a website or mobile application of a public sector body…” - Part 1 General – Application 4

“‘public sector body’ means—

1. the State;
2. regional or local authorities;
3. bodies governed by public law; or
4. associations formed by one or more of the authorities in paragraph (2) or one or more of the bodies in paragraph (3), if those associations are established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character;”

- Part 1 General – Interpretation 3

“‘bodies governed by public law’ means bodies that have all of the following characteristics—

1. they are established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character;

2. they have legal personality; and

3. they have any of the following characteristics—

   1. they are financed, for the most part, by the State, regional or local authorities, or by other bodies governed by public law;
   2. they are subject to management supervision by those authorities or bodies;
   3. they have an administrative, managerial or supervisory board, more than half of whose members are appointed by the State, regional or local authorities, or by other bodies governed by public law;”

- Part 1 General – Interpretation 3

Whether we take LATCos to be a body governed by public law, or associations formed by one or more authorities, both sections of the regulation make specific note of public sector bodies in scope of PSBAR not having an ‘industrial or commercial character’.

This is the important point with regards to LATCos, because even though they meet other requirements, for financing, management, and majority board control by a council, their commercial status exempts them from being directly in scope of PSBAR as an organisation.

However, services LATCos provide can still be within scope of PSBAR on an individual basis. LATCos often offer service back to the owning council or manage council services on behalf of the owning council. In these cases, it would not be the LATCo which is responsible under PSBAR, but the owning council, to ensure that council services delivered by the LATCo meet PSBAR requirements for which the owning council is responsible for.

In this way LATCos become just like any other 3rd party supplier, where it would be the council who must demonstrate that they have contracts or service provisions that require the LATCo to deliver accessible services in line with council legal responsibilities. There should be procurement evidence (apart from Teckal exemptions) or contract evidence that the council is choosing paid for services that comply with accessibility standards.

Given that the LATCo is now a commercial supplier, they must contend with other commercial entities to offer the most accessible services if they wish to sell to other councils.

Our 3rd party responsibilities guide gives more detail on these situations.

• CIPFA – Teckal the basics explained (2016)
• Gov UK – Alternative delivery models explained (2017)
• Legislation.gov.uk – The Public Sector Bodies (Websites and Mobile Applications) (No.2) Accessibility Regulations (2018)
• LocalGov – The LATCo model (2020)
• Local Partnerships – LATCo guidance 2023 edition (2023)