A council-owned company that made £800,000 losses in its first year of operation has made an appearance in satirical magazine Private Eye.

CoSocius Ltd was only established in 2014 to provide payroll, payments and IT services to Cheshire East and Cheshire West and Chester councils, leading 300 council staff to transfer to the new organisation.

The idea was to share costs and win new business by winning external contracts.

But in its first 11 months CoSocius, based in Hamilton Place, Chester, had operating losses of £800,000 added to a pension deficit of £8.5m. That’s why Cheshire shared services joint committee recently agreed to bring the services currently provided by CoSocius back in-house following a review.

Private Eye, in its Rotten Boroughs section, wrote: “The latest councils to discover that going into business isn’t as easy as they thought are neighbouring Cheshire West (CWaC) and Cheshire East (CEC).

“Last year the two Tory authorities (CWaC went Labour in May this year) set up a jointly-owned company called CoSocius to run both councils’ IT and HR services.

“The councils reckoned they’d save money by sharing resources and make money by selling their expertise elsewhere. Oops! After 18 months the number of outside contracts won is, er, zero, and the company has notched up operating losses of more than £1m plus a pension deficit of £8.5m.”

An anonymous correspondent, in a letter to The Chronicle, wrote: “Cheshire West and East got original business case so wrong with flabbergasting insufficient due diligence on real investment that would be required for a commercial concern to succeed and eye-watering optimism.”

The writer referred to CoSocius’ inauspicious start when Wirral Council pulled out of the opportunity to be part of the company. The failed exercise cost a total of £787,000 and the loss of a third partner meant reduced economies of scale.

And hinting at internal tensions, they added: “Cheshire West and East can’t agree on most things or know how to share. No strategic direction or plan on who will host what and how shared.”

Former Cheshire West and Chester Council leader Mike Jones

Cllr Mike Jones, who was CWaC leader when CoSocius was created, told The SC Social blog: “CoSocius is not a scandal…we have tried an idea, because we had an organisation that was owned by Cheshire East/West we decided not to split it. It has done a great job in reducing costs.”

Mark Wynn, head of finance at CWaC, said: “It is important to recognise that, although CoSocius is reporting a loss of £800,000 in 2014-15, this does not represent an £800,000 loss to the public purse.

“Through CoSocius, Cheshire West and Chester Council and Cheshire East Council reduced their combined expenditure on ICT and transactional services by more than £500,000.

“The remaining net cost of £300,000 reflected the company’s investment in developing new technology and capacity. This upfront investment will help the councils deliver the originally targeted savings in the company’s business plan over the first five years, albeit by providing the service in-house.

“There is, therefore, no long-term impact on the public purse.”

What do you think of the CoSocius debacle? Let us know in the comments below