The relationship between Birmingham City Council and its private sector IT provider Capita has severely deteriorated with a lack of trust and understanding on both sides.

That’s the conclusion of an independent report into the joint venture company Service Birmingham which was ordered when the council’s new Labour administration took office in May.

The study by Best Practice Group, which cost the council £46,000, says that Capita-controlled Service Birmingham did provide value for money when delivering a business transformation programme, but that relationships between the company and the local authority have soured since then.

The report suggests that the two bodies are at a tipping point.

It states: “Given the fact that the commercial partnership has a further nine years to operate, there is an inherent risk that unless a core focus for both parties is re-established, the commercial trust between Birmingham City Council and Service Birmingham will continue to deteriorate.

“Neither party will benefit from the relationship if this situation is permitted to manifest itself.”

In what’s being described as a fresh start, Service Birmingham has agreed to identify £20 million annual savings in the cost of the IT services it delivers for the council.

The savings figure is about a third of the annual value of the £650 million core contract that Service Birmingham has with the council.

Best Practice Group’s report paints a picture of mutual suspicion between both council and Service Birmingham officials. It warns of “certain individuals” in the council who view employees of Service Birmingham as uncooperative, and managers at Service Birmingham who equally regard council staff as uncooperative.

The document singles out, but does not name, a small number of individuals on both sides who are “undermining the commercial trust element” of the relationship. The officials are accused of “creating noise” that is leading to uncertainty and “one-upmanship”.