Local Government Stewardship Update

Thursday 22nd February 2024 Written Statements

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

All hon. Members will recognise the critical role local councils play in providing essential statutory services to their residents and being accountable to the communities they serve. Where councils do not meet the high standards that we set for local government, it is right that the Government intervene in order to protect the interests of residents. Today I am informing the House of a best value inspection of the London Borough of Tower Hamlets, confirming the final decision to appoint commissioners to Nottingham City Council and providing an update on the existing statutory interventions in Slough Borough Council and Birmingham City Council.

London Borough of Tower Hamlets

It is a matter of public record that the London Borough of Tower Hamlets was subject to statutory intervention under section 15 of the Local Government Act 1999 between December 2014 and September 2018. This followed an inspection by PricewaterhouseCoopers LLP, and an inspection report published in November 2014, which identified best value failure, particularly in relation to grant making, property disposal and publicity spending. As the then Secretary of State, my noble friend Lord Pickles, noted when initiating that intervention on 4 November 2014:

“The abuse of taxpayers’ money and the culture of cronyism reflects a partisan community politics that seeks to trade favours and spread division on the rates. Such behaviour is to the detriment of integration and community cohesion in Tower Hamlets and in our capital city.”—[Official Report, 4 November 2014; Vol. 587, c. 666.]

It is also a matter of public record that Mayor Rahman and his agent, who was also the cabinet member for resources, were found to have been guilty of election offences by an election court in 2015 and were banned from standing for elected office for five years, and that the conduct of making grants amounted to the corrupt practice of bribery under section 113 of the Representation of the People Act 1983.

Commissioners were withdrawn and functions returned in March 2017 on the condition that the council continued to achieve against its best value plans and report regularly to the Secretary of State on its ongoing compliance with the best value duty. In June 2018 a Local Government Association (LGA) corporate peer review concluded the authority was now “on a positive trajectory” but that to continue to improve, it must

“be forward looking and learn the lessons of the past”.

Following that peer review and recognising the role of the then Mayor and chief executive in providing leadership to drive change, Ministers took the decision to end the intervention in September 2018.

It is clear to me that the council has made significant progress in the past years to improve governance and assurance processes. A recent corporate peer challenge by the LGA highlighted a range of areas in which the council does very well. These include strong relationships with statutory partners and that the council knows its places well. However, some recent changes have the potential to undermine the improvements that allowed the previous intervention to end. These changes include significant churn at the senior management level, which has resulted in a number of interims in the senior management of the council; the use of policy advisers and expansion of the mayoral office, which has reportedly resulted in the creation of a “two council culture”; the review of the constitution; changes to the grant regime, given the election court judgment of 23 April 2015 and the improvements put in place by commissioners previously; weaknesses in the scrutiny function; the decision to bring some services in house and the need to realise substantive savings in the short term. While the Mayor has a clear democratic mandate, and change to the way the council is organised to deliver priorities is not itself a cause for concern, given the history of the council, changes made to arrangements that were necessary to ensure compliance with the best value duty could mean that compliance is now at risk.

To support the council to continue to make arrangements to secure improvement in its governance arrangements and other areas linked to the past intervention, I am clear that the Government require direct independent assurance that the London Borough of Tower Hamlets is compliant with its best value duty. Therefore, I am today informing the House that the Secretary of State has exercised the powers granted to him by Parliament under section 10 of the 1999 Act, to appoint Kim Bromley-Derry CBE DL as lead inspector and Suki Binjal, Sir John Jenkins and Philip Simpkins as assistant inspectors to carry out an inspection of the council’s compliance with its best value duty.

The inspection will occur in relation to specified functions where we have concerns. This includes the council’s functions under part 1 of the Local Government and Housing Act 1989, section 151 of the Local Government Act 1972, and the strength of associated audit and scrutiny arrangements, with particular attention to potential changes to constitutional arrangements, budgetary proposals and medium-term financial planning, the appointment of senior management posts, the use of policy advisers, the expansion of the mayoral office, the policy and practice of grant making, functions that relate to the appointment and removal of an electoral registration officer and returning officer, the funding of electoral registration and local elections work, the use of resources for elections and the maintenance of the independence of the returning officer, and the arrangements to bring services in house, such as Tower Hamlets Homes and leisure services. Given that our concerns also relate to wider decision-making functions, and whether expectations for effective and convenient local government are being met, the inspection will also consider decision-making in relation to those functions, encompassing leadership, governance, organisational culture, use of resources and impact on service delivery.

The lead inspector has been asked to report findings by 31 May 2024, or such later date as may be agreed.

Once the inspection is complete, we will carefully consider the inspection report. If it shows that the council is in breach of its best value duty, we will then consider whether or not to exercise powers under section 15 of the 1999 Act.

This action is not undertaken lightly, and my Department is committed to providing the council with whatever support it may need to support compliance with its best value duty. I will update the House in due course.

Nottingham City Council

On 13 December 2023, I announced to the House that the Secretary of State was “minded to” appoint commissioners to take over certain functions at Nottingham City Council. Commissioners would replace the existing improvement and assurance board, chaired by Sir Tony Redmond, with immediate effect. I also announced that the commissioner team, if appointed, would consist of three appointments: a lead commissioner, a commissioner for finance, and a commissioner for transformation.

These proposals followed the evidence provided in Nottingham City Council improvement and assurance board’s latest reports, also published on 13 December, which included the board’s assessment that the council is still not acting at the required pace to make the necessary improvements; and the council issuing, on 29 November 2023, a section 114 notice due to an inability to balance the budget for 2023-24. The Secretary of State concluded that the council is continuing to fail to comply with its best value duty. He was minded to escalate the current intervention arrangements in order to secure compliance with that duty and to ensure that the necessary improvements are made at pace for the benefit of the local community.

I invited representations by 2 January 2024 on the intervention package proposed in December from the council, and any other interested parties, especially the residents of Nottingham. The Secretary of State and I have now received the representations on his proposals, which we have considered carefully.

We received a total of 70 representations, including from the authority, the Nottingham Labour group, 16 Labour councillors, local MPs, 35 from members of the public, four local businesses, two community leaders, Unison and eight partner organisations.

The representations presented a mixture of support and opposition for the proposals to appoint commissioners. The representation from the council made clear its preference for retaining the improvement and assurance board, but stated that it will co-operate with commissioners if appointed and noted the proposed commissioner team. It requested that any decision to appoint commissioners is taken expeditiously and that a smooth transition is ensured.

Having considered carefully all of the representations received, and all other developments since the “minded to” decision, the Secretary of State and I are satisfied that no further issues have been raised which were not known at the time we made the “minded to” decision and that no change is warranted to the position outlined in that “minded to” decision. The Secretary of State is satisfied that Nottingham City Council is continuing to fail to comply with its best value duty, and that the necessary improvements are still not being made quickly enough. I am today confirming that commissioners have been appointed to Nottingham City Council and new directions have been issued.

The Secretary of State, as proposed in December, has decided to appoint three commissioners: a lead commissioner, a commissioner for finance, and a commissioner for transformation. This team structure reflects the most pressing priorities at the council as highlighted in the improvement and assurance board’s latest reports, namely weaknesses in finance and transformation, along with an underlying culture of poor governance. The Secretary of State is today appointing individuals to the roles of lead commissioner and commissioner for finance. The chosen commissioners have a proven record of leadership, finance, transformation and strong governance, together with the specific expertise relevant to their functions. We will appoint a commissioner for transformation in due course.

Tony McArdle OBE (lead commissioner) has extensive experience in local government and is the former chief executive of Lincolnshire County Council, and Wellingborough Council. Tony has experience in multiple interventions and best value roles, including as current chair of the London Borough of Croydon improvement and assurance panel, former lead commissioner at Northamptonshire County Council, and best value inspector at Thurrock Council.

Margaret Lee (commissioner for finance) previously worked at Essex County Council where she held the posts of section 151 officer and executive director for corporate and customer services for 13 years. Margaret also has experience of interventions and best value roles, including as former finance commissioner at Slough Borough Council, finance lead on the London Borough of Croydon improvement and assurance panel, and best value inspector at Thurrock Council.

The commissioners have been appointed for two years, or such earlier or later time as the Secretary of State determines. The Secretary of State is clear that the directions should operate for as long, and only as long, and only in the form, as necessary. The Secretary of State and I wish to again place on record the instrumental role the improvement and assurance board, under Sir Tony Redmond’s leadership, has played in Nottingham City Council’s improvement journey to date. Indeed, the current situation would be even more challenging without their dedication and sustained efforts over the past few years. Commissioners are today replacing the board with immediate effect. The Secretary of State and I are clear that we expect a managed transition from the improvement and assurance board to the commissioners and that momentum is not lost, particularly over the critical budget setting period for 2024-25. We are supportive of the commissioners drawing on reasonable support to facilitate this transition, including from the former board members, if they wish and in the terms they deem reasonable.

The commissioners will be asked to provide their first report within the next six months. Further reports will be provided every six months, or as agreed with the commissioners.

As with other interventions led by my Department, the council will be directed to meet the costs of the commissioners, along with such reasonable amenities and services and administrative support as the commissioners may reasonably require. The fees paid to individuals are published in appointment letters which are available separately on gov.uk. I am assured this provides value for money given the expertise that is being brought, and the scale of the challenge in councils requiring statutory intervention.

Slough Borough Council

Slough Borough Council has been in intervention, with commissioners appointed, since 1 December 2021, after an external assurance review found the council had failed to meet its best value duty. Following the commissioners’ first report on 9 June 2022 the intervention was expanded on 1 September 2022. The intervention is due to end on 30 November 2024, though we have always been clear that the Secretary of State may decide to extend directions beyond this date, or that it may be appropriate to return functions before this time.

When I last updated the House on 14 September 2023 on the commissioners’ third report, it was clear that while progress was being made and there was cautious optimism that the council was moving in the right direction, there were still significant challenges. It was vital that the council accelerated the pace of improvement to make substantial changes in the months ahead.

I am sorry to report that while the fourth report submitted to the Secretary of State on 17 January 2024 does record continued progress in some areas, including the political leadership, children’s social care and special educational needs and disabilities (SEND), procurement and contract management, the pace of improvement has been insufficient and inconsistent given the stage of the intervention, and there is still a lot to do before the council will meet its best value duty.

It is of concern that the council has not accelerated the pace of improvement, especially on tackling organisational transformation and developing a future operating model, and continued financial instability remains a concern. Commissioners are now of the opinion the Government need to consider the nature of the intervention beyond the current timelines. I have today written to commissioners to request a further assessment of progress in April 2024 to allow the Secretary of State and I to decide whether further intervention is required beyond November 2024. That report will need to cover:

An assessment of continued best value failure including progress against each of the directions and against the best value themes published for consultation by DLUHC last summer;

A view on timeframes needed for the authority to deliver its best value duty;

Whether the current directions are sufficient and necessary for the authority to meet its best value duty.

In the immediate term, it is essential that the council demonstrates fresh resolve in implementing the changes required to deliver a sustainable council that the residents of Slough deserve.

I will update the House on further progress with the intervention and next steps at that time.

Birmingham City Council

The Government intervened in Birmingham City Council in October 2023, and in January the commissioners wrote to the Secretary of State to set out their initial findings and progress of the intervention. I am today publishing that letter. The financial challenges facing the council are acute and, while it is encouraging that commissioners have made early progress, the situation is worse than they had initially expected. It is vital that the council continues to listen to, and work with, commissioners to ensure their savings plans are delivered to achieve a balanced budget for 2024-25 and beyond. The financial implications of the failed implementation of the Oracle system and the potential equal pay liability also remain a significant challenge. Commissioners have my full support in taking whatever steps are necessary to drive the required improvements. I expect to see demonstrable progress from the council in the commissioners’ first full report, which is due in the spring, and I will update the House on further progress with the intervention and next steps at that time.

Conclusion

I want to acknowledge in today’s announcement the work of the dedicated staff who deliver the important services of councils on which local residents depend. I also want to thank the commissioners for all they do. I will deposit in the Library of the House copies of the appointment letters for the Tower Hamlets inspectors, the appointment letters for the Nottingham City Council commissioners together with the directions and accompanying explanatory memorandum, and the report and letter I have referred to, which are also being published on www.gov.uk today.

[HCWS280]