Council run by mayor found guilty of corruption facing Government probe

By Jonathan Bunn, Reporter22nd February 2024News EnglandBusiness / Funding / Finance, Local Authorities, London, News England

Government inspectors have been sent in to a council whose elected mayor was previously found guilty of corruption, because of concerns about the authority’s culture and use of resources.

A letter to Tower Hamlets Council sent on Thursday by the Department for Levelling Up, Housing and Communities (DLUHC) details a number of issues which are said to be cause for alarm.

They include budgetary proposals, financial planning, appointments to senior posts and the expansion of the mayor’s office, currently occupied by Lutfur Rahman.

A High Court ruling in 2015 found Mr Rahman had won the 2014 election in the borough with the help of “corrupt and illegal practices”, including the wrongful portrayal of his rival candidate John Biggs as a racist and the allocation of grants in a way that amounted to bribery.

The election was subsequently declared void and Mr Rahman was disqualified from holding office for five years, but he was re-elected as executive mayor in 2022.

The letter from Max Soule, DLUHC’s deputy director for local government stewardship, was sent to Tower Hamlets chief executive Stephen Halsey, who took the role in July having previously been the council’s head of paid service during a period of previous failures identified in 2014.

The letter notifies the council that it will be inspected to establish whether it is meeting its “best value duty” under the Local Government Audit and Accountability Act 1999.

This is a requirement for local authorities 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 letter said Mr Rahman appointed Alibor Choudhury, who was also found guilty of corrupt and illegal practices in 2014, as deputy head of the mayor’s office in June 2022.

Mr Rahman also intended to appoint eight policy advisers to an expanded mayoral office costing an extra £1.4 million.

This move, the letter said, would create “a risk of a ‘dual council’ sidelining officers of the authority in decision-making, which in turn risks replicating the circumstances in which decisions were made up to 2014 that were corrupt and/or failed in the authority’s best value duty”.

Inspectors will also examine changes to the council’s grant allocation regime, which led to all funding decisions and financial management being brought back under the council’s control after changes were made in the wake of irregularities being identified in the 2015 court judgment.

A decision to bring Tower Hamlets’ homes and leisure services back in house, despite officer warnings about the financial implications, will also be scrutinised.

Mr Rahman’s failure to attend more than 20 meetings of the council’s overview and scrutiny committee since July 2022 will also be investigated.

The letter identifies a “significant level of churn” across management posts and notes evidence of the mayor’s office model causing unnecessary delays in decision-making.

Concerns were also raised about the council’s financial strategy, with a balanced budget in 2024/25 relying on the use of reserves, the success of untested adjustments to revenues and £31 million savings, which is described as “significant level”.

“The scale of the challenge may also be compounded by some significant insourcing of services which may require additional revenue and capital investment,” the letter adds.

Mr Soule said the inspectors will also examine unspecified potential changes to the council’s “constitutional arrangements” and electoral processes, including “the use of resources and the maintenance of the independence of the returning officer”.

Former chief executive of Newham Council, Kim Bromley-Derry, will lead the inspection and is expected to report the findings to Communities Secretary Michael Gove by May 31.

A Tower Hamlets Council spokesperson 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 co-operate fully.

“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.”

DLUHC on Thursday confirmed it will send commissioners in to oversee the running of Nottingham City Council, which issued a section 114 notice declaring effective bankruptcy last year.

In an update on Birmingham City Council, which has also issued a section 114 notice, local government minister Simon Hoare said commissioners had made early progress, but had found “the situation is worse than they initially expected”.

Birmingham has requested a £1.25 billion bailout from the Government as it tries to recover from financial distress.

Budget papers published this week confirm the council is also planning to raise council tax by 9.99% this year and next, cut the cost of services by £367 million and initiate redundancies costing £100 million.