Both sides have “proposed to radically restructure their 12-year contract that began in 2004.” covering the council’s operational and back office functions.

Milton Keynes officials said: “It has become evident in recent months that the nature of the original contract no longer allows the council sufficient flexibility to operate most effectively in what is a very different political and economic environment from when the contract was originally conceived.”

Services currently provided by Mouchel will be brought back in-house as the contract is converted into a framework that will run through to 2018.

Mouchel will continue to provide some services where it “provides value for money.”

David Hill, Milton Keynes Council’s Chief Executive said: “Mouchel has successfully delivered significant benefits to the council over the years.

“However, the political and economic environment has changed dramatically over the past nine years and both Mouchel and the council agree that, as a result, the flexibility of the existing contract is insufficient to meet the council’s future requirements.”

Michael Hodgson, Mouchel’s partnership director said: “We have worked closely with the council for many years to help them deliver excellent services to their residents.

“Over the past 18 months we have looked at ways to provide additional benefits and added value through the services we already provide, in order to meet their changing requirements.

“Under the new framework, we would be in a position to provide the council with greater flexibility to respond to new and changing requirements.”

The plan needs to be rubber-stamped by by Council members and Mouchel’s Board before Mouchel staff move back under council control.

The council would make a compensation payment to Mouchel then stop paying the annual fee.