A PRIVATE company drafted in by Cumbria County Council to help deliver a raft of services will not be made to pay an £800,000 penalty clause despite breaking the terms of its multi-million pound contract.

CCC's Labour group called for Capita to pay back £781,000 after it failed to meet job creation targets set when it was awarded a £12 million a year contract to provide business and design services in February 2001.

Under the terms of the contract, Capita was required to create 1,000 jobs in the county by January 2006 and would be forced to pay a penalty of £1,000 for each job short of the target.

So far Capita which provides services ranging from highways and human resources to property and construction has created just 219 jobs.

But the call from the Labour group was defeated at a meeting of the full council at County Hall, in Kendal, after the Conservative and Liberal Democrat alliance voted to defer the penalty payment until January 31, 2009.

Instead the council voted in favour of extending the current contract until January 2011.

CCC's Labour group leader councillor Stewart Young said job creation had been the main priority when the contract was first signed and that Capita's pledge to deliver jobs had been a major reason why many councillors had backed the deal. "We had a contract that was very clear," he said. There are back bench councillors sitting on both sides of this chamber who complain bitterly about some of the services we receive (from Capita) yet it seems that some are willing to give £800,000 of tax payers' money away.

"We are not a benevolent society."

Deputy leader of CCC, Liberal Democrat councillor Joan Stocker argued the penalty clause cash was not being given away. She said invoking the penalty clause in January would not give Capita an incentive to find the jobs and that, in future, they may choose to just "hand over" the money.

Coun Stocker added that the new contract, which came into force in April next year, would give Capita an added incentive to deliver the jobs and, more importantly, improved services. Coun Jack Richardson, cabinet member for the strategic partnership with Capita, said the company's current service agreements were "generally" being delivered.

The council also voted to change the priority of the Capita contract to focus on service delivery, with jobs taking second place. Existing commercial disputes between the council and Capita amounting to more than £250,000 are also to be written off.