Mid Devon Council: Financial Settlement

Tuesday 19th December 2023 Westminster Hall

16:00

[Mr Ian Liddell-Grainger (Bridgwater and West Somerset) (Con)]

I beg to move,

That this House has considered the Mid Devon Council financial settlement.

May I say what a pleasure it is to serve under your leadership, Dame Angela? It is also wonderful to see my near neighbour, the Minister, in his place; I am very grateful that he is here to respond. I am afraid that the subject of local government finances lacks any sort of excitement; it is always necessary, but is also obviously crushingly dull, as we can see from the attendance today.

I am grateful for the chance to bring the financial affairs of Mid Devon District Council to the attention of this Chamber and the House, but I apologise in advance if eyelids are already starting to droop, as night begins to fall on this very last day before the Christmas recess—and aren’t we looking forward to it? I will try to keep my speech as interesting and relevant as possible, and will also inject some seasonal flavour into the mix.

The story that I am about to tell is a modern morality tale in the manner of Charles Dickens, whom we all remember and love. Those familiar with Dickens’s—in my view—most famous novel, “A Christmas Carol”, will hardly need reminding that the narrative centres around the character of Ebenezer Scrooge. Anybody familiar with local government in Mid Devon will instantly recognise good old Ebenezer. Every town hall has one: painstaking with the money, ridiculously risk averse, totally resistant to any change and usually in charge of all the finances. Ebenezer Scrooge was, in Charles Dickens’s own words,

“a squeezing, wrenching, grasping, scraping, clutching, covetous, old sinner!”

Gosh, does that not fill a few gaps around here? They are perhaps all the qualities of a typical 151 officer, just rather more interesting, I suspect. In real life, we would not ever expect Scrooge’s character to be capable of falling for a scam—not normally, anyway. We would not believe that this ultra-cautious animal could possibly give in to the dangerous habit of gambling with public money.

But that is just one possible conclusion of my perplexing story, which started life about a dozen years ago, in 2011. I hope you are sitting comfortably, Dame Angela. Those with long memories will recognise the date: it was when the Localism Bill came before Parliament, as we well remember. Localism was meant to cure so many of the complaints that we used to have. It established the principle of elected Mayors and conferred power on local councils to take investment decisions on their own. It arrived with the dawn of austerity, when Whitehall budgets were trimmed back to the bone. The impact at the coalface of local government would take time to be felt. We all remember ’08.

The new right to make commercial investments sounded like a lifeline to many normal, sensible officers in local government. Across the United Kingdom, they reached out and grabbed it with both hands. In fact, the enthusiasm for spending public money was, at times, quite unseemly: chief executives started jumping in with both feet, and their pockets were laden with taxpayers’ money—our money. They bought office blocks, shopping centres, business parks and hotels in the mistaken belief that there was a guarantee written into their financial forecasts for commercial investment. Well, there never is, and I am sorry: as the adverts say, the value of our investments can go down as well as up.

Localism may have answered the cry for freedom, but freedom, as we know, is riddled with hidden dangers. In many local councils it was rather like handing out fireworks and matches to the kindergarten. More often than not, senior officers of councils who should have known better did not have a clue about the cut and thrust of running any business. Why should they? They are seen as civil servants. Most of them, to be frank, had never handled any real money, let alone tackled the balance sheet of a fast moving company, organisation or commercial asset. They did not understand the difference between a board of directors and the cabinet decisions of elected local politicians.

As we know, companies need to react fast; their shareholders do not forgive very readily. Most of the time local governments can only go very slowly, and in the slow lane. They have very little in common with companies, and often do not even speak the same language between commercial rhetoric and Whitehall. They do not even understand who is in charge of business investments. After eager councils jumped on this, it all turned sour. Time and time again we have seen it fail.

Moody’s most recent report into the pitfalls of local investment decision recently highlighted 20 local authorities from across the political divide at a serious risk of going broke. Almost all of them, without exception—the Minister is aware of this—tried investing in business ventures that collapsed. The report blames serious “governance failures” and says that as a backlog of audits for 2022 is cleared,

“more and more failures are likely to be uncovered.”

It says:

“Only 12% of 2022 audits were completed by the statutory deadline; with prolonged delays meaning that major accounting misstatements”

—I am afraid—

“can be undetected for a number of years.”

The Public Accounts Committee, which we all know and love, estimates that local authorities have spent £7.6 billion on commercial investments since 2016. Let us be crude about this: this is a story of town hall greenhorns—totally inexperienced operators in charge of substantial sums of public money who were, if I may put it crudely, trying to make a fast buck. As a result, many councils spent far too much time on projects that were way outside their or anybody else’s comfort zone.

The women and men who allowed that to happen were mollycoddled by their own limited experience and totally out of touch with the way commerce works. I think this saga probably has less to do with criminality or any other naughtiness, and much more to do with the fact that the perpetrators—I say that in the loosest way—were chronically naive, and that is an awful thing to say.

The Localism Act became law in 2011, but in Mid Devon the council managed its affairs and carried on without recourse to any risky investments—they did not make any. The then chief executive felt no need to follow the lemmings of local government; he managed to keep the council on a reasonably even keel until his retirement. Yes, Mid Devon did need more money, but there was no need to take rash decisions and nor did they—good.

Then in 2015, the old chief executive retired honourably. His successor was the younger, brasher and arguably less scrupulous Stephen Walford, who was appointed to the top job in 2016. This is his own self-description:

“Prior to my current role, I worked as a Director of Growth & Strategy in the South East and also spent time in a range of place-based functions across county, unitary and district forms of local government having started my career in transport policy and strategy.”

Mr Walford came to rely on his loyal deputy, Andrew Jarrett, who said:

“I began my local government career back in 1992, spending my first 10 years with East Devon Council,”

—a neighbour to the Minister here, my hon. Friend the Member for North Dorset (Simon Hoare)—

“rising up through the finance ranks to the position of Finance Manager. In 2008 I joined Mid Devon DC as its Head of Finance, I was then promoted to Director of Finance, Assets & Resources in 2016, before taking on the role of Deputy Chief Executive in 2018.”

Those are their words.

When Walford and Jarrett moved into their jobs as top officers, I think they probably wanted to make their mark. But neither of them, from that description I just gave, had any experience at all in any other trade or profession; I do not think either of them had ever actually even done a paper round. There should have been alarm bells ringing at every level, but Mr Walford and his number-crunching colleague were a convincing double act like Laurel and Hardy—and many others I can think of.

I do not know whether the two men came up with the vision of the company mid Devon was to own. Its name is 3 Rivers, presumably named after the main River Exe that runs through Tiverton itself, ironically right outside the council building. Which two other rivers were chosen we may never know, as mid Devon has no fewer than 11 rivers gurgling through it. The other big rivers are the Culm and the Creedy, which would had given them a name of sorts, would it not? Three Creedys or three Culms would have been an interesting name for a company. Exe, Culm and Creedy sounds more like a firm of undertakers, which we will come on to in a minute.

Messrs Walford and Jarrett stuck to the name of 3 Rivers Developments. They went off to look at similar council investments. They enlisted the support of the Local Government Association, well known to all Members of Parliament. They came back convinced, and sold that conviction to elected councillors. 3 Rivers Developments became a company wholly owned by Mid Devon District Council, with a remit to build better, and

“In order to see enhanced quality of build, more affordable housing and a financial return to the Council to mitigate some of the difficulties of the national public sector austerity programme, as an alternative would have meant significant reductions in services, delivery and standards.”

It all sounds frightfully plausible—and squeaky clean. These words, however, were composed just the other day as senior officers tried to explain away their latest recommendation, which is to keep this company going. Strangely, Mid Devon District Council remains incredibly coy about revealing any pertinent details about anything to do with this company. There are now serious questions.

I have searched in vain—and I really mean, in vain—for any documents that were issued at the very start. They are mysteriously absent. The council archive system draws a blank if someone tries to view the original or any subsequent business plans. It was rather odd that the deputy chief executive was placed on the board of 3 Rivers. Conflicts of interest were bound to crop up—that is the way of the world. We have only just recently received confirmation that the council was prepared to lend 3 Rivers £21.3 million. This is a district council—not a unitary or county authority. That is seriously big money for a council of that size.

The current leader of the council is a Liberal Democrat called Luke somebody or other; I cannot remember his name—a complete non-entity. I know he has the job of pumping perfume into little bottles—that is his day job—which must be quite a talking point at parties and in the pub. His name escapes me; let’s call him Mr Thingamabob, because that is about all he deserves.

Anyway, the Liberal Democrats, who are now refusing to shut down this loss-making white elephant, never objected to its creation in the first place. If they did, they did it so quietly that nobody noticed. Mr Thingamabob may well have been won over by his smooth-talking chief exec; after all, it would be perfectly normal for him to trust his officers. Elected members never get paid enough to justify full-time work on council business. They are dedicated amateurs, no matter the party. They are obliged to listen to their officers—especially the most senior, who is the chief executive.

If elected members smell a rat, however, it is a different story. It is crystal clear to me that the level of trust a number of different political leaders—there have been four—had in senior officers fell to rock bottom during the lifetime of 3 Rivers Developments. The rats may have been smelled, and quite a few councillors became suspicious. The chief executive and his deputy tended to communicate by email and text message, which should tell us something. I am told that some of those exchanges make for very fruity reading indeed—we should have a look at the covid-19 inquiry at the moment to know what that is like.

One reason I am highlighting this sorry tale is that the so-called scrutiny committee—as we know, Dame Angela, the clue is in the word “scrutiny”; it does not always happen out there, especially in Mid Devon, which seems to have a mystery over scrutiny—has decided to make its own limp-wristed effort to get some of the truth, although not very much. It is lip service. The committee did not launch a proper searching inquiry; it never attempted to find the rats or name the guilty; it failed to perform a forensic examination of all the evidence; and it was told not to interview everybody.

In the event, it is a miracle that the committee was able to produce any kind of report, no matter how cack-handed and useless it is now. The committee was ordered by its party-throwing, good-time-girl supremo head of scrutiny to do a lessons learned exercise, and to do it quickly. What a pathetic disgrace! The chairman of scrutiny is meant to scrutinise. The only problem is that she is from the same party, which has done a terrible job.

The lady who heads the not-so-much scrutiny committee seems to prefer a feather-bedded view of the world that does not set the springs of her legendary mattress twanging. From the comfort of her rented house in the village of Bampton, she can daily cast her eye over one of the remaining 3 Rivers projects: a small estate of nine quite fancy executive homes with built-in garages and an absurd price tag.

The homes are on the market for silly prices. One, which is currently advertised for £675,000, has been on the market since January, 11 months ago. That says something about local councils and their lack of knowledge. When we called the estate agent to express a tiny bit of interest—you know what I am like for getting to the bottom of things, Dame Angela—the lady on the phone sounded surprised. She nearly fell off her chair. She confided that any offer would be considered: “Please, yes! I would be happy—delighted—just tell me what you would like to pay.” I am thinking of cheese, since the rats are looking for it. The 3 Rivers development has some flashy executive houses, but it cannot shift them.

The officers at Mid Devon District Council have known all about this situation. It is not new or clever. It is unlikely that this subject was discussed at the party on Sunday that Mrs Not-So-Much Scrutiny had at her house, thanks to the taxpayer. She was probably doing what she does best—polishing the egos of her party colleagues and doling out her famous dainties to be washed down with the very finest of wines. The Mid Devon extra responsibility bonus enables her to keep up this lavish lifestyle, even if she struggles to pay the rent on her accommodation.

I digress, however, from the Scrutiny Committee’s lessons learned inquiry. If hon. Members would like a flavour of the kind of evidence that it deliberately missed, I will ask them to bend their ears back and quote some of the following statements. This is a letter written by the chief exec to the former council leader, inviting him to submit some answers to a few questions:

“Can I highlight that the District Solicitor will be reviewing all information provided in order to ensure it meets the standards of accuracy and integrity that befits the worthiness of the scrutiny committee's consideration.”

It is obvious to me that the chief exec and the former leader lose no love on one another. This is the ex-council leader’s response:

“The fact that the District Solicitor ‘will be reviewing information provided [by me] to ensure it meets the standards of accuracy and integrity that befits the worthiness of the scrutiny committee’s consideration’ is nothing short of a deliberate insult and attack on my integrity. It could also be construed as potential censorship and manipulation of facts. Some may see it as attempted intimidation and as a veiled threat of legal action. I regard your letter as an attempt to restrict and control the activity of the Scrutiny Committee.”

That is the former council leader. In other words, it is “scratch your eyes out” time—and there is a whole lot more where that came from.

At least three former leaders do not trust the officers, and the whole council developed a tendency to disbelieve anything that they were told. Above all, the lessons learned report says:

“The tone of Council debate was not always as respectful as members may have liked. The feedback from almost all members of that time was that the whole thing as a subject became toxic; members complained of the abusive and disrespectful language used in debate, and individual members complained of bullying language and tactics. This resulted in support being brought in from the Local Government Association. There is ample evidence of the poor relationship which developed from 2019 onwards between the company and the Members. The aggressive critique which some members levelled against the company and those who were striving to improve its financial performance, undoubtedly increased the reputational damage suffered by the company leading to difficulty in maintaining contractors, and resulted in a degree of professional trauma. It cannot have favoured open discussion in Cabinet to improve management and performance”.

3 Rivers Developments bled money in ’19. The houses it had completed were not flying off the shelves; the country was about to suffer covid. It was pretty obvious that high-risk investments did not fit. One previous council leader was so convinced that he tried to persuade the two officers to recommend a closure; he tried to convince them in ’19, ’20 and ’21, but they refused. In fact, in ’21 the chief exec’s deputy broke with all council traditions and made a statement:

“3RDL is there to make money and recycle profit back to the council to protect from service cuts that would have had to have been made. Over the last three and a half years the council has benefited to the tune of £1.2 million by its transactions with 3RDL. That’s the annual cost of running our three leisure centres. It is a significant amount of financial reward or profit back into the council to underpin some very important services. If you look at the company’s business plan, it is due to grow over the next few years significantly.”

What is interesting about that intervention is the fact that Mr Jarrett went on the record at all—he has preferred to say as little as possible on the record. However, short months ago there was another pitfall: the Government changed the rules and said that in the future companies such as 3 Rivers Developments must source their work inside council boundaries. Why, then, did Mid Devon Council not go directly to the Treasury and ask to be cut a bit of slack? It does not matter if the work is half a mile outside the boundary—the chances are that it would be given clearance—but it did not even ask.

This is a saga of wasted opportunity, of council officials wielding enormous influence over councillors, letting them down, then falling out with the whole council. It is a disgrace. Those are all distressing situations, but there have been well-sourced stories in the press recently of real anger from members of the public who tried to obtain simple information about 3 Rivers Developments but were rebuffed. People complained that Mid Devon Council thinks that the whole business is far too complicated for ordinary people to understand, so information is deliberately withheld. When complaints are made at full council meetings, the chairman of the council brutally suppresses any debate. The chairman’s name, incidentally, is Councillor Frank Letch—a man with a short fuse. Perhaps it is a struggle—the naming of a person like Letch. Mainly, the posh dwellings designed for some spare land next to the council buildings are being converted for the use of over-60s, even though the location is completely unsuitable. I could, but will not, go on and on. This is a saga of cockups and blunder, and it is very expensive indeed. I would rather risk public money with Ebenezer Scrooge than with those responsible in Mid Devon, and especially the chairman of scrutiny, who is quite ridiculously incompetent.

16:25

[The Parliamentary Under-Secretary of State for Levelling Up, Housing and Communities (Simon Hoare)]

It is a pleasure to serve under your chairmanship, Dame Angela. I am more than grateful to my hon. Friend the Member for Bridgwater and West Somerset (Mr Liddell-Grainger) for bringing this topic before us this afternoon. At the start, I want to strike down the ludicrous assertion made by my hon. Friend that local government finance lacks any sort of excitement—he obviously has incredibly low standards. I find local government finance is the apogee of excitement; we can roll blockbuster films and west end musicals into one and we do not even begin to scrape the surface of the excitement of local government finance. As the Minister with responsibility for local government finance, I am afraid hon. Members just have to take my word for that.

My hon. Friend has raised some very serious allegations. I want to make a few points, but I shall try to do so with care. My door is open to my hon. Friend to come into the Department to meet officials to discuss this still further. Let me just make a few points, if I may. Mid Devon District Council is not on my departmental radar as a council causing concern in terms of its finances. Financial management is a different thing. In terms of its basic finances, it is not on the radar. I hope that gives my hon. Friend some comfort.

My hon. Friend is absolutely right that many councils buy properties; I declare that, as the cabinet member for resources on West Oxfordshire District Council back in the day, we did exactly the same. We went and bought, as many councils did, properties of a whole variety in order to help the council meet its expenditure. The key thing is, and he makes the valid point, that our officer corps are of a dedicated calibre. The world of commercial property is a very complex one, and I know my hon. Friend knows that from his own family experience all too well. He was right to say, “What goes up can also go down.” It was always going to be imperative that professional, dispassionate and external advice was sought, and not just sought but taken. Where there is a tension between the adoption of the buccaneering principle and the precautionary principle, when using public moneys, almost by definition the precautionary principle should always come to the fore.

I hear what my hon. Friend says with regards to 3 Rivers Developments. I do not know the gentleman to whom he refers with regard to the senior officers, and I can only speak from experience of my exposure and interaction with local government officers over very many years. My experience is that they are women and men of integrity who, day in and day out, devote themselves to the public service of their communities and always strive to do their best. Sometimes the best is not good enough, and sometimes the wrong decisions are taken. I think that the motivations of people in public service are usually strong and beyond challenge. I say gently to my hon. Friend that he may not like some of the things that the council has done, and he may have done things differently, but I repeat that the council is not currently on our radar.

My hon. Friend is also absolutely right to raise the importance of scrutiny. Scrutiny is a key function of local government. It works very well here with our Select Committees, and we know that. It is particularly important when any party has a very large majority, as the Liberal Democrats do in Mid Devon at the moment. One almost needs to double up and double down on scrutiny in order to prove beyond peradventure that that job is being done. I am about to run out of time. I am grateful to my hon. Friend for raising this issue. As I say, I am happy to continue our conversation in order to ensure that the good folk of Mid Devon receive the service and services to which are they entitled and deserve.

Motion lapsed (Standing Order No. 10(6)).