Wirral Council has agreed to pay £1.5m to prop up a company which supports children’s education.
Edsential, a community interest company (CIC) jointly owned by Wirral Council and Cheshire West and Chester Council, made a loss of £1.5m in 2020/21 and is predicted to make a similar loss this financial year.
This means the company needs £3m to plug the hole in its finances.
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Wirral Council believes the business is profitable in normal times and that the losses are mostly due to the pandemic.
Today’s meeting of the authority's Shareholder Board agreed to make up its share of the money, with £643,000 to be provided through a Covid-19 related support grant and £857,000 to be loaned to Edsential.
Peter Molyneux, Wirral Council's senior finance manager, said the grant of more than £600,000 was based on what the company would have got if it had been under the Covid-19 compensation scheme for services operated by the authority, while the loan was the remaining balance needed to meet Wirral’s £1.5m share of the burden.
Mr Molyneux acknowledged that the loan comes with risk, but said the council had its red lines which Edsential was aware of and had negotiated an agreement which gave the company time to pay the money back.
Cllr Jeff Green, who represents the Conservatives, asked if there was any way of reducing the loan given to Edsential if it turns out the company does not make a loss as big as £1.5m this year.
Cllr Janette Williamson, leader of Wirral Council, added to Cllr Green's question, by asking if there was a way for the money to be repaid earlier if Edsential was in a position to do so.
Mr Molyneux said it could be the case that the company’s losses are less than £1.5m this year if things such as schools using its residential sites more than expected happen.
He added that it costs Edsential money to repay the interest on the loan and so it was not in the company's interest to maximise it more than it needed to.
Cllr Green said it would be helpful if the company was able to repay the loan early and added that the council must make sure that the money is a fair use of Council Tax payers money.