Tory Barnet council – known as EasyJet council because of plans to permit residents to pay to jump queues for services  – will lose up to £6m as a result of an arbitration finding.

Catalyst Housing, partner of private carehome services provider Fremantle Trust, had demanded an extra £8m from the council to cover what it called a ‘care fees deficit’ in its income. The council disputed the demand and took Catalyst to arbitration.

Catalyst’s demands for more money have taken place over the same period that the Fremantle Trust has made vicious cuts to careworkers’ salaries, and terms and conditions to improve the Trust’s financial returns on its carehome contract. Barnet council outsourced its carehome contracts to the Trust in 2002.

Low paid careworkers have suffered under the Trust’s cuts regime. They lost weekend enhancement pay: Barnet Unison estimated that the takehome pay of some careworkers was reduced by 30% as a result. Workers’ wages were frozen at about £8 an hour, with new starters beginning at around £6. Leave allowances were cut by 11 days and sick leave reduced to the statutory minimum.

The careworkers had been promised their terms and conditions would be protected when they were transferred to Catalyst and Fremantle from the council’s employ. They launched a strike campaign, which lasted nearly two years. The Trust later admitted the cuts had failed to deliver the expected returns.

Barnet Unison has described Catalyst’s demand for an extra £8m and Fremantle’s attempt to improve financial returns at the expense of carehome staff and services as examples of private sector greed.

The total cost of the Catalyst award to March 2010 will be included in the council’s 2009/10 accounts prior to final signoff by auditors. The value of the award to March 2010 has not been finalised, but will be up to £6m which will be funded from the risk reserve.

The cost will be funded from the risk reserve (currently £17.7m), leaving a reduced balance to manage other risks – risks which include the council’s cover of problematic deposits in Icelandic banks. The council lost £27m in investments in Iceland when Icelandic banks collapsed in 2008.

Meanwhile, Barnet council must cut £4m from its in-year budget to meet coalition government demands for in-year savings from local government. Charities and other service providers are expected to be targeted for cuts.

The council is considering the future of the Catalyst contract. Papers discussing the care contract are exempt from public examination and discussion at council meetings.

The council report on the findings is here (Item 1.3).