Government sends best value inspectors into Tower Hamlets Council again

The Government has ordered a best value inspection at Tower Hamlets Council for the second time in a decade.

The London borough was subject between December 2014 and September 2018 to a statutory intervention under s15 of the Local Government Act 1999, following an inspection that reported in November 2014. 

The report from PWC found that Tower Hamlets had failed to comply with its best value duty in a number of areas. These included grant-making, certain property transactions, the use of media officers in the Mayor’s office, and the spending of monies on what amounted to political advertising.

The then Secretary of State, James Brokenshire ended the statutory intervention in September 2018.

Announcing the new inspection today (22 February 2024), the Department for Levelling Up, Housing and Communities said ministers were “concerned that some recent changes at the council have the potential to undermine the improvement that allowed the previous intervention to end”.

Kim Bromley-Derry, a former chief executive of the London Borough of Newham, will act as Lead Inspector, and Suki Binjal, a former president of LLG, Sir John Jenkins and Philip Simpkins as Assistant Inspectors.

In a letter to Stephen Halsey, chief executive of Tower Hamlets, Max Soule, the Deputy Director Local Government Stewardship at DLUHC, said: “The inspection is specifically in relation to the specified functions where we have concerns, namely part 1 of the Local Government and Housing Act 1989, section 151 of the 1972 Act 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 such as Tower Hamlets Homes and leisure services in house.

“Given our concerns relate to broad decision-making, and whether the standards expected for effective and convenient local government are being upheld, the inspection will consider decision-making in relation to those functions, encompassing leadership, governance, organisational culture, use of resources and impact on service delivery.

“The Department is concerned with your Authority’s ability to comply with its Best Value Duty under Part 1 of the 1999 Act and would like direct, independent assurance that the Authority is continuing to make arrangements to secure continuous improvement in the way in which its functions are exercised, having regard to a combination of economy, efficiency and effectiveness.”

The Soule letter said that, in deciding to appoint inspectors, the Secretary of State, Michael Gove, had regard to a range of events and issues including an Election Court ruling in 2015 in which Mayor Lutfur Rahman and Alibor Choudhury were found guilty of election offences. The more recent events and issues highlighted include: 

• The re-election in May 2022, of Mayor Rahman who was mayor during the time of the 2014 best value inspection.
• The appointment in June 2022 of Alibor Choudhury as Deputy Head of the Mayor’s Office; and the intention to recruit eight policy advisors (not directly employed by Tower Hamlets) to an expanded Mayoral office (increasing staff overall by 27, at a cost of £1.4m), “creating the risk of a ‘dual council’ side-lining officers of the authority in decision making”.
• The authority’s review of the grant making regime and decision to bring back all grants management to the authority.
• The decision to bring Tower Hamlets Homes and leisure services in house.
• The Mayor missing the vast majority of Overview & Scrutiny Committee meetings.
• The "significant level of churn" across a number of senior management posts, which had resulted in a number of vacant or interim roles.
• The findings of a Corporate Peer Challenge by the Local Government Association in September 2023, “which found clear evidence that the Mayor’s Office model is ‘leading to unnecessary delays’ in decision making and is making experienced officers ‘feel disempowered’, which is ‘detrimental to the delivery of the authority’s wider business’”.
• The decision on 31 January 2024 by Cabinet to agree a draft medium term financial strategy (MTFS), “which shows a reduction in the use of reserves by £19.1m and means that the MTFS is no longer reliant across its life on use of reserves to fund recurring costs. Whilst the budget is balanced for 2024-25, this still relies on previously agreed use of reserves, and the positive impact resulting from a proposed change to the Council’s Minimum Revenue Provision (MRP) policy, specifically, ‘the previous [MRP] approach within the HRA is to be discontinued to create additional revenue resources.’ The Council is also proposing to balance the 2024/25 budget with £30.8m of savings, which is a significant level. The scale of the challenge may also compounded by some significant insourcing of services which may require additional revenue and capital investment.”
• The action that may need to be taken by the authority, to deliver its ongoing business including manifesto commitments, “could include grant making, procurement and property transfers, which were the core functions considered by the Best Value Inspection that triggered the previous intervention in 2014”.

Bromley-Derry has been asked to report the findings of the inspection to the Secretary of State by 31 May 2024, “or such later date as he may agree with the Secretary of State”.

In a written ministerial statement on the inspection at Tower Hamlets (and interventions at Birmingham City Council, Nottingham City Council and Slough Council, Local Government Minister Simon Hoare said: "It is clear to me that [Tower Hamlets 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 that 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…..While the Mayor has a clear democratic mandate, and changes 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 means that compliance is now at risk.”

Hoare added: “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.”

A spokesperson for Tower Hamlets Council said: “We look forward to working in partnership to show the progress we have made as a council under our current administration.

“We are surprised by the decision, however it is of course the prerogative of the government and we are confident in our work and will cooperate fully."

They added: “Our work has been praised in recent independent reviews by the Local Government Association Peer Review and Investors in People. Although both reviews were positive, we are already delivering action plans to fulfil their recommendations for further improvement as is the culture in our council.

“In recent months, the council has also made significant progress in resolving historic financial issues of audit, assurance and governance going back to 2016. Accounts for financial years 16/17, 17/18, 18/19 and 19/20 have all been signed off by independent auditors. A period of public inspection for the remaining draft accounts is now underway and the 20/21, 21/22 and 22/23 are all scheduled to go to Audit Committee in March."

The spokesperson said that the council was proud of its "good financial management" and "strong foundations to secure the future sustainability of the organisation" was one of the areas highlighted for praise in the LGA Peer Review report published in December.

“The Peer Review also praised the council as ‘an organisation which has a comprehensive understanding of the needs of residents and communities’, while understanding that the council ‘is still adjusting to changes and challenges’ after ‘going through a period of significant change in the last eighteen months, with a new Mayor and, a new Chief Executive, as well as a move to new council offices'," the spokesperson said.

“All of this at a time when Tower Hamlets has delivered innovative measures to improve more lives such as being the only local authority to provide free school meals for all primary and secondary schools. An achievement recognised with an award by a cross party parliamentary group only last month.”