The Council’s Other Balance Sheet: Tracing the Firms It Owns

Why the town hall is not always the whole picture

When residents think of council spending, they usually picture the town hall itself: bin collections, social care, libraries, planning and road repairs. In practice, a growing share of local public activity is delivered through separate legal entities. A council may own a company outright, hold shares in a joint venture, or fund an arms-length body that manages housing, leisure, energy or regeneration.

These arrangements are not automatically improper. They can allow councils to trade, pool expertise or deliver long-term projects with partners. But they create a governance question that every resident has a stake in: who is accountable when public money, public services and public risk sit inside a company rather than a council department?

This guide sets out how to trace those entities and how to question them effectively. It is not a substitute for legal or financial advice. It is a route map for citizens who want the public interest to follow the public pound.

Start with the council’s group accounts

The first place to look is the council’s statement of accounts. Large councils usually publish group accounts alongside their single-entity accounts. The notes will often list subsidiaries, associates, joint ventures and other interests. Look for sections headed related party transactions, group accounts, interests in companies and joint arrangements.

Read the notes for three things. First, the purpose of each entity: what service or project is it delivering? Second, the council’s financial exposure: has it lent money, guaranteed borrowing, subscribed for shares or committed to future payments? Third, the governance route: who appoints the directors, and to whom are they accountable?

Group accounts can be technical, but they are not impenetrable. A useful discipline is to make a simple table with four columns: entity name, council role, public money involved and decision-making body. That table becomes the basis for scrutiny.

Use Companies House as a public register, not a mystery

For companies, Companies House is the next stop. Search the entity’s name and check its company number, registered office, directors, persons with significant control, filing history and charges. A charge can indicate borrowing secured against assets. Filing history can reveal late accounts, changes of name or periods when the company was dormant.

Do not assume that a council-owned company will be obvious from its name. Some use trading names or project titles. Cross-check the company number against council reports and the statement of accounts. If a company is wholly owned, the council is usually the sole shareholder or holds a controlling interest. If it is a joint venture, look for the other shareholders and the terms of the arrangement.

Companies House will not tell you whether the service is good or whether the council is getting value for money. It will tell you who is formally responsible and whether the company is meeting basic filing duties. Those are starting points for questions, not conclusions.

Find the shareholder and the scrutiny trail

Councils do not act as shareholders through a vague general will. There should be a constitutional route: cabinet decisions, shareholder reserved matters, director appointment reports, delegation schemes and committee terms of reference. Check the council’s constitution and search committee papers for the company name.

Scrutiny committees are the natural forum for residents’ questions. In many councils, an overview and scrutiny committee can request reports, call witnesses and make recommendations. The precise powers vary, so check the council’s constitution. A concise written question can be more effective than a long speech. Ask for the specific report, decision or financial note that explains the arrangement.

Residents can also use freedom of information requests for information not already published, though commercial confidentiality may limit some disclosures. A well-framed request should ask for the council’s shareholder agreement, director appointment records, loan agreements and any performance reports presented to the council. Where information is withheld, ask which exemption is being applied and whether a public interest test has been considered.

Put sharp questions to the committee

A scrutiny meeting is not a courtroom, and it is not a public audit. It is a place to test whether the council can explain its own arrangements. Useful questions include:

• What is the legal form of the entity, and what public service or project does it deliver?
• Who appoints the directors, what skills are required, and how are they held to account?
• How much public money has been invested, lent or guaranteed, and on what terms?
• What debts or liabilities sit in the company, and who ultimately bears the risk if it fails?
• What performance measures are reported to the council, and how often?
• Are directors’ remuneration and related-party transactions disclosed in line with the council’s policy?
• What is the exit strategy if the company underperforms or the policy changes?
• Has the council’s auditor or audit committee raised concerns, and what was the response?

These questions are not accusations. They are tests of transparency. A council that can answer them clearly is better placed to defend its choices and to correct problems early.

Follow the money beyond the main budget

Council budgets and company accounts do not always line up neatly. A payment from the council to a company may appear as a service fee, a loan, a grant or a capital contribution. Read the council’s revenue and capital outturn reports alongside the company’s accounts. Look for guarantees, indemnities and pension liabilities. Check whether the company is included in the council’s group accounts and whether the auditor’s opinion covers it.

Residents should also watch for the less visible risks: a company that depends entirely on council contracts, a joint venture with unclear decision-making, or an arms-length body whose board is appointed by the council but rarely appears before scrutiny. These are governance questions before they become financial ones.

Make the audit a habit, not a one-off

The most effective scrutiny is routine. Once a year, after the accounts are published, repeat the exercise: check the group accounts, search Companies House, read the scrutiny work programme and submit one focused question. Over time, patterns become visible. A council that publishes clear shareholder reports and sends directors to answer questions is demonstrating accountability. One that treats its companies as private matters is inviting distrust.

Local democracy is not only exercised at the ballot box. It is exercised in the reading of accounts, the filing of questions and the insistence that public risk be publicly explained. The council’s other balance sheet deserves the same attention as the main one.