A COUNCILLOR says Worcestershire "needlessly" handed £122,500 of taxpayers' money to central government instead of keeping the funds for local services, and called the situation an "utter mess".

County councillor Charlie Hotham vented his anger after Worcestershire Children First, the ‘arm’s length’ company which runs children’s services on behalf of Worcestershire County Council, made a profit of nearly £625,000 in 2019/20 which means £122,500 goes straight back to the government in corporation tax.

Cllr Hotham accused the authority of “unnecessarily” wasting taxpayers' money by handing Worcestershire Children First more than it needed to provide the service last year, resulting in the company having to pay tax.

But Phil Rook, director of resources at Worcestershire Children First, said the company making a surplus showed "good financial management".

The only income the ‘not-for-profit’ company receives is directly from the council to cover the cost of providing children’s social care and Worcestershire County Council sets the budget.

“Instead of reaching a break-even, Worcestershire Children First has made a profit,” Cllr Hotham said. “And the point is that they have needlessly paid over £120,000 in tax on six months trading.

“That is council tax money that is going back to the government for nothing. It is a complete and utter mess. “So, they are comfortable with paying £240,000 a year and it’s to be treated as another additional running cost of the company as this is seen as a good result? I can think of far better ways to spend the money."

Mr Rook responded: “For the six months to March 31, Worcestershire Children First made a small surplus – less than one per cent of total turnover.

“This shows good financial management as we have been very careful to manage within our resources since we went live on October 1 last year.

“The council has not wasted money or overspent as the surplus is still part of the Worcestershire County Council group and form part of its group accounts and the balances are included within their financial statements.

“The financial position of the company is taken through council’s democratic processes on a regular basis.

“Worcestershire Children First is a wholly owned company limited by guarantee and any surplus would be liable for corporation tax. The accounts have prepared on that basis.

“There is a fine balance on the financial position, the company’s going concern status as a legal entity, compliance with financial regulations, external audit inspection and interest from HMRC.

“There is an expectation about wholly owned companies that they will make a financial return and transactions should be at an arm’s length.

“As director of resources for the company I have to balance this and I am content we have done this well for the first six months.”

Worcestershire Children First officially took over children’s services in the county on October 1 last year.

Worcestershire County Council was instructed by the Department for Education to find a different way of running children’s services following an ‘inadequate’ judgement by watchdog Ofsted in 2016 in which several “serious” safety concerns were identified.

Children’s services moved out of its “inadequate” rating just months before Worcestershire Children First went ‘live’ in with a “requires improvement” rating from Ofsted last July.