26 NOVEMBER 1998 NOT EXEMPT CAR LOAN AND LEASING ARRANGEMENTS

Transcription

1 STIRLING COUNCIL THIS REPORT RELATES TO ITEM ON THE AGENDA RESOURCES COMMITTEE PERSONNEL & FINANCE AND INFORMATION SERVICES 26 NOVEMBER 1998 NOT EXEMPT CAR LOAN AND LEASING ARRANGEMENTS 1 PURPOSE 1.1 To update the Resources Committee with regard to the employee Car Loan and Leasing Schemes. 2 SUMMARY 2.1 This report brings forward proposals for: a subsidised Car Loan Scheme for authorised car users a Car Leasing Scheme. 3 RECOMMENDATION(S) 3.1 It is recommended that: Subsidised Car Loan Scheme - a subsidy be paid to authorised car users on car loans of up to 5,000 while the existing national Conditions of Service remain in force Car Leasing Scheme - a Personal Contract Hire Scheme be established which would be available to all employees and Elected Members. 4 CONSIDERATIONS 4.1 General Car Loan Scheme The General Car Loan Scheme, operated by the Bank of Scotland and available to all employees and Elected Members, came into operation on 1 July The rate of interest charged is 6%. This replaced a scheme operated by the Co-operative Bank.

2 Authorised Car Users Scheme The Resources Committee of 18 June 1998 noted that negotiations were continuing with Unison on the question of a subsidised Car Loan Scheme for authorised car users National Conditions of Service currently provide for car loans to be available for officers who use their private cars for official duties and that the interest charged be 4.45%. It is understood that this national condition is likely to be removed and left to local discretion Discussions have taken place with Unison on proposals for paying subsidies to authorised car users under the Bank of Scotland scheme. Unison have broadly agreed the proposals but there remains an outstanding question of whether the Bank of Scotland will advance loans on vehicles purchased other than from a bona fide dealer, if the vehicles were inspected by the Council s garage. This is being taken up with the Bank of Scotland It is recommended that subsidies be paid with salary to bring the interest charge down to 4.45% on loans of up to 5,000. The limit for subsidy has been set at 5,000 because unlike the position with the Co-operative Bank Scheme, the Bank of Scotland Scheme avoids the situation whereby borrowers with loans over 5,000 have to pay tax on a benefit in kind The subsidy would apply to any car loans taken out by authorised car users since 1 July The subsidy arrangement would continue only for so long as a subsidised rate of interest is contained in the National Conditions of Service but subsidy being paid at the time of any future withdrawal of the subsidy would continue to be payable until each loan was fully repaid. 4.3 Car Leasing Scheme The Resources Committee of 18 June 1998 noted that Tenders were being sought for a Car Leasing Scheme The local Conditions of Service provide for a no cost leasing scheme being available for essential car users only As agreed with Unison, Tenders were sought for both a Council Car Leasing Scheme and a Personal Contract Hire Scheme Nine quotations were received in response to the invitation to tender, and detailed evaluations were carried out on the basis of price, service provided and scheme management. This showed the most competitive 3 suppliers to be:- - Arnold Clark - Arriva - Lex The price comparisons were based on a 3 year lease for a Ford Escort 1.8 LXTD with a total annual mileage of 15,000 miles The quotations were as follows:

3 -3- Council Car Leasing Scheme Arriva Lex Arnold Clark Deposit Option Monthly Payment Number of Months Deposit 12 months 12 months 12 months No Deposit Option Monthly Payment Personal Contract Hire Scheme Arriva Lex Arnold Clark Deposit Option Monthly Payment Number of Months Deposit Nil 3 months 1 month No Deposit Option Monthly Payment Taxable Benefits - to establish what the cost would be to an employee at the end of the day, account has to be taken of the tax payable. Under a Council operated Car Leasing Scheme, a taxable benefit is imposed on the employee. This does not arise with a Personal Contract Hire Arrangement because the contract is directly between the employee and the supplier Taking the taxable benefit in kind into account, Personal Contract Hire turns out to be less costly from the employee s point of view, than a Council operated Car Leasing Scheme. It also means that the Council has less National Insurance to pay and less administration is required It is therefore recommended that the Council adopts Personal Contract Hire as the means of providing a Car Leasing Scheme, and that the Scheme be available through Arnold Clark, Arriva and Lex It is further recommended that, like the general Car Loan Scheme operated by the Bank of Scotland, Personal Contract Hire be available to all employees and Elected Members. It has to be recognised however that car leasing may not be as attractive an option for low mileage users since there will be minimal car allowance to set against the lease costs Discussions have taken place with Unison on the details of the Schemes and the taxable benefits and while Unison agree with the proposal to implement a Personal Contract Hire Scheme, they have concerns about accepting the standard terms and conditions of the suppliers schemes. It has therefore been agreed to undertake further discussions with each supplier with a view to exploring the potential for standardising the key features of their Personal Contract Hire Schemes The following protections were included in the Car Leasing Schemes of Stirling District Council and Central Regional Council:

4 -4- Early Termination Penalties - generally the employee had to pay a penalty on the early termination of a lease. However, no penalty was charged to the lessee in the event of their death, redundancy or retiral on the grounds of ill health in which cases the penalty was met by the Council. Long Term Sickness or Maternity Leave - if an employee was absent through long term sickness or maternity leave, the former Councils continued to make their full contributions to the leasing costs for 3 months; and a 50% contribution for the following 3 months. It is proposed that similar protections for essential car users be incorporated within the new Personal Contract Hire Scheme The Committee s approval is sought to conclude arrangements for a Personal Contract Hire Scheme with the three suppliers identified in this report, taking into account protections that were available in the former Councils Schemes for essential car users. 5 POLICY IMPLICATIONS 5.1 The provision of car loan and leasing facilities will help the Council deliver quality services. 6 CONSULTATIONS 6.1 The proposals have been the subject of detailed discussions with Unison and have been reported to the Management Team. 7 RESOURCE IMPLICATIONS 7.1 Subsidised Car Loans - it is estimated that the annual cost of paying a subsidy to authorised car users will be 18,000. At the same time 10,000 will be saved in credit guarantee insurance and arrangement fees with the Cooperative Bank as a result of the discontinuation of the Co-operative Car Loan Scheme. 7.2 Car Leasing - Personal Contract Hire will be less expensive than a Council operated Car Leasing Scheme for both the employees and the Councils. 8 BACKGROUND PAPERS 8.1 Reports to Resources Committee on 1 April 1998, 23 April 1998, 18 June, 1998.

5 -5- Author(s) Name Designation Tel No/Extension John Risk Head of Exchequer Services Approved by Name Designation Signature Bill Dickson Director of Finance & Information Services Date Reference