Major surgery is underway at an underachieving council-owned company set up three years ago.

Heart of Cumbria Ltd was created in 2016 by the Conservative-controlled Eden District Council to buy residential and commercial property to generate a regular income stream to help fund services.

The council had previously given £100,000 to set it up and made a £1 million loan and access to a £5 million loan fund available.

But a confidential council review has now found a low level of achievement, with the company having only achieved one objective.

It was blamed on a lack of resources with Heart of Cumbria, having six of seven officers resign since its formation.

At a meeting in Penrith on Tuesday night, the council’s coalition executive, which ousted the Conservatives from power in the May elections, sanctioned a raft of changes.

At the council’s executive meeting on November, 5, it was agreed that the company board be strengthened to include at least five directors, all of whom should have relevant experience.

It was agreed to appoint Counillor Mary Robinson as the shareholder representative who will be permitted to attend the AGM.

Joining her will be new council director Les Clark, head of people and place.

A member of council staff is to be seconded to the company and its objectives strengthened. 

The company’s board will increase to five directors, although the roles will not be paid.

Council finance chiefs are also being allowed to make amendments to the loan fund offered.

Instead of coming from reserves, any cash drawn down by the company would have to come from borrowing.

There has been no suggestion of any wrongdoing and Tuesday’s meeting heard that Heart of Cumbria still has opportunities to succeed.

Alex Strickland, a council monitoring officer and solicitor, said the changes were aimed at strengthening governance and ensuring the company was fit for purpose.

However, Councillor Mike Eyles, a long-standing opponent, said the council had £5 million tied up in the company and he had concerns about accountability.

Coun Eyles, a Liberal Democrat, believes the council should focus on delivering services and leave profit-making to professionals.

He said: “It’s been going three years now and has been subject to a radical overhaul so something clearly hasn’t been right. I have yet to be convinced that it is doing what it set out to do in the first place.”

The council review was not fully disclosed for commercial sensitivity reasons and a request to debate the review at full council was denied.

Coun Kevin Beaty, the former Conservative leader and champion of Heart of Cumbria, said: “I am concerned they are moving away from the initial idea and its structure takes control away from members.”

He added that few business people would join as a director if the role was not remunerated.

The company has agreed to purchase 81 houses being built at Penrith by Persimmon Homes.

Coun Eyles said around ‘half a dozen’ had been rented out as affordable starter homes at reduced rents.

In September, council chief executive Rose Rouse postponed the company’s AGM and Tory councillors Gordon Nicholson OBE and John Owen MBE quit the board. 

The company has been left with just a single non-executive director in Gareth Owens.