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Session 2000-01
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Delegated Legislation Committee Debates

Local Government Finance (England) Special Grant Report (No. 75)

Second Standing Committee on Delegated Legislation

Wednesday 28 February 2001

[Mr. Bowen Wells in the Chair]

Local Government Finance (England) Special Grant Report (No. 75)

4.30 pm

The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Ms Beverley Hughes): I beg to move,

    That the Committee has considered the Local Government Finance (England) Special Grant Report (No. 75) (HC Paper 228).

It is a great pleasure to be here under your chairmanship, Mr. Wells. I am sure that we shall make good progress with this matter, which concerns the payment of a special grant to the London borough of Hackney for the purposes specified in the report. Most hon. Members will know that Hackney is currently grappling with serious problems. The purpose of the special grant is to pay for work that is being done this financial year to tackle those problems, and to help to turn Hackney round.

The problems in Hackney are corporate in nature and span all of the authority's services. Weak financial controls have led to overspending. The predicted budget deficit this year is around £20 million. Massive backlogs in housing benefit have caused unacceptable problems for many Hackney residents, and problems with refuse collection led to appalling piles of rubbish in the streets at the end of last year.

The Government are committed to driving up standards in local government. We want people in all local authority areas to benefit from high-quality, cost-effective services. We introduced the duty of best value to help to make that happen. Best value provides a mechanism to tackle unacceptable poor performance wherever it arises. In particular, we want it to deal with corporate failure in local authorities. Such problems stem from fundamental weaknesses in management systems, which some authorities do not have the capacity to correct. That is why we introduced new, wide-ranging powers of intervention under the Local Government Act 1999.

We backed up those powers with a protocol, agreed with the Local Government Association, explaining how they are to be used. The protocol is based on the premise that authorities will be given an opportunity to remedy their shortcomings, provided that they show the commitment and ability to do what is necessary. Hackney has been willing to do that and to accept help from outside. This is why we are supporting Hackney without, at this stage, using our intervention powers.

The issues that are being tackled by Hackney are exceptional in their range, severity and complexity. That is why we have put in place a package of support for the authority, of which the special grant is a part. It is part of a strategic plan for recovery, and I am pleased to say that there are already positive signs that it is beginning to make a difference. Some of the necessary preconditions for progress are in place. A coalition between the Labour and Conservative groups has ended years of political instability, a new managing director was appointed last summer and the authority has brought in help from the Improvement and Development Agency.

Unfortunately, the situation in Hackney has had to get worse before being able to get better. A thorough look at the books by the new financial management team showed that the financial situation was far worse than the authority had anticipated. That led to a freeze on new spending in October and November 2000. Members have faced difficult decisions to stop the overspending. There have been redundancies and industrial action. However, I am pleased to tell the Committee that the council has identified proposals for setting a balanced budget for next year, despite the problems.

The purpose of the grant and what it will help to achieve are set out in some detail in annexe A to the report. It will help Hackney to pay for measures that it has taken during this financial year to get the authority back on an even keel. Hackney has worked with the Improvement and Development Agency to draw up an improvement plan. The grant will meet the costs of implementation of that plan. The main thrust of the plan has been to address the lack of corporate capacity to establish key management disciplines and a sound basis for strategic planning.

For example, Hackney has recruited temporary secondees from other authorities to strengthen the senior management team. These include a deputy managing director and finance director. The finance director has played a vital role in assessing the authority's financial position and taking the necessary steps to bring spending under control. She has restructured financial controls in the borough and drawn up new posts for financial controllers. That has made it possible for us to start helping Hackney by finding people to fill those positions, and we expect some of those temporary staff to start work in the borough within the next few days.

The council has also appointed eight financial consultants to support the top team and assist with preparation of the budget. The financial consultants have been employed in a range of important roles. Those roles include testing the robustness of budget projections and ensuring that proposed savings are achievable. That is particularly important, given Hackney's financial problems, and the special grant will fund it.

Hackney has engaged the Improvement and Development Agency to provide support to members and managers. One IDA consultant has been facilitating development of a new management structure, and helping to tackle the deep-seated cultural problems in Hackney. The IDA has brought in elected members who have acted as mentors for Hackney councillors.

The IDA has also provided training and development for members and officers, as well as training for members covering leadership; effective representation; scrutiny and overview; and member-officer relationships. Training for managers and the top team has also covered many of those issues, and communications as well. The training and development programme is tackling problems in the longer term, by improving skills and countering the negative culture that has existed in Hackney. All those things need to be done if the change is to be sustainable and Hackney is to manage better in the future.

The support to members and managers has been essential in helping Hackney to get a grip on its managerial problems. It has also helped the managing director and other managers to deal with the numerous problems that they face. As well as the problems at corporate level, the improvement plan has also tackled service failure. The seconded deputy managing director has been involved in the housing benefit service, and has been managing negotiations with the contractor, and an IDA consultant has played a key role in negotiating Hackney's new waste contract. Since that contract began, there has been a great improvement in street cleaning and refuse collection in the borough.

The special grant is a start. It is part of a much broader strategy for helping Hackney to stand on its own as a functioning authority in the longer term. We are also giving the authority permission to borrow extra money this year to cover the budget deficit, which it will be expected to pay back over a number of years. The commitment has helped to protect services that are essential to people in Hackney.

We are also appointing consultants to undertake projects in finance, revenues, benefits and procurement. In the next few days, my Department will invite consultants to make proposals for revenues and benefit administration, pensions administration and facilities management. The consultants will also be asked to help the council to find a new partner to deliver important environmental services in the borough, including refuse collection and street cleaning, when the council's existing contract expires next year. We have already appointed a consultant to recruit interim and permanent financial controllers for Hackney, and the first of those key personnel will shortly be in place. All the projects are being funded from my Department's running costs budget.

The package of support that we have put in place, of which this special grant is an integral part, is aimed at making long-lasting improvements in Hackney. It is part of a detailed and well-articulated strategic improvement plan, for which a careful implementation process has been worked out. Quick fixes have not worked in the past. Hackney is now facing up to its problems, and we want to help the borough to make sustainable improvements. Our primary focus is the people of Hackney, and it is important to them that we do that. I commend the special grant to the Committee as a key tool in helping Hackney to meet its responsibilities in the long term.

4.40 pm

Mr. Nigel Waterson (Eastbourne): I, too, welcome you to the Chair, Mr. Wells, for what I hope will be a short but exciting sitting.

The background to our debate is a sorry tale that goes back through many years of Labour incompetence in local government. It is the worst example of it, so far as we know, but certainly not the only one. The Minister described, reasonably graphically, some of the problems that the people of Hackney have to grapple with. A large budget deficit of £20 million is projected in the coming year, and there has been a series of extremely critical reports on the authority. Annexe B of the special grant report states:

    ``The Authority was directed to outsource two education services following a critical Ofsted report in 1999. A further Ofsted report in November 2000 was critical of corporate governance''.

The best value performance plan showed serious weaknesses, and the conclusion was that the council was not well run and needed substantial help.

The local authority seems to have everything possible wrong with it, including weak corporate governance, a lack of proper financial controls and cultural problems such as those referred to more than once by the Minister. As if all that was not enough, according to annexe B,

    ``The Department of Health issued directions in December 1999 in respect of the Authority's social services, as it was failing to meet its statutory responsibilities to families and children.''

Even by July 2000, the social services inspectorate had still concluded that not enough progress had been made fully to comply with even its earlier direction.

It is difficult to see which parts, if any, of the activities of the local authority came up to even the most basic standards of competence and service to Hackney residents. I take issue with the Minister, who said that the situation had to get worse before it got better. In recent years, it has simply become worse. The people who have borne the brunt of it have not been Labour councillors—the whole point of the special grant is to bail them out—but the residents.

The Minister talked about the administration of housing benefit in Hackney, one of many problems that clearly needed addressing. Has she seen the current issue of Housing Today, which states:

    ``Internal sources at Hackney council have told Housing Today the authority's plans to take housing benefit administration back in-house are a shambles''?

A new benefit action team has been brought in but, according to the article:

    ``A senior councillor dismissed the team as `a piece of fluff' officer at the council, who''—

not surprisingly—

    ``asked not to be named, called the situation `a complete and utter mess beyond comparison'.''

The Minister says that things have got worse only to get better, but there is still a long way to go, at least on the housing benefit front.

As I said, the report is all about saving Labour's bacon. It must be emphasised that a heavyweight peer review team was asked to assess Hackney's problems and do what it could to help at a time when the authority was on the verge of total meltdown. Both sides of the Committee should pay tribute to the dedication and hard work of that group, many of whom are Conservatives. Indeed, one of the leading members is Councillor Paul Bettison, the distinguished leader of Bracknell council.

The review team was asked to tell the authority how it should run things. The Minister touched on some of the matters that it had to deal with. They included advising on the immediate removal of the interim managing director, the chief financial officer and others; advising on a package to secure the services of a managing director with suitable experience; seconding the lead officer from the peer review team—Mr. Ted Cantle, the chief executive of Nottingham city council—to support the new managing director; appointing four experienced council leaders to consult with the relevant group leaders in Hackney for between two and eight days a month; and various other important activities. Those experienced people are devoting time and energy to get what the Minister called the culture in Hackney right, but I suspect that it will be a long drawn-out process.

We do not intend to vote against the report. It would be churlish to stop the help and support that the Minister has described. We want to be constructive, but we must ask what is the alternative. As she pointed out, the alternative is for the Government to intervene and effectively to run Hackney council. We would have the embarrassing picture of a Labour Government running a Labour council that was not able to run itself. There is no alternative at the moment to supporting the report—and the efforts of those well-meaning, well-qualified people who are trying to help Hackney out of the deep pit in which it finds itself as a result of years of inept Labour administration. The only alternative is to have the Deputy Prime Minister's tanks rolling down Hackney high street. For the moment, the report is preferable.

4.47 pm


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Prepared 28 February 2001