Written statement on Local Government Best Value - Nov 12

Minister of State (Housing, Communities and Local Government) Jim McMahon: I have previously updated this House that this Government is committed to resetting the relationship between local and regional government, and to establish partnerships built on mutual respect, genuine collaboration and meaningful engagement. Never is this more important than when individual councils face governance challenges. We are keen to work with local authorities to support focus on recovery and reform. It is imperative that all councils are fit, legal and decent. There must be a clear and deliverable plan in place to address problems where these have been identified to protect the interests of local taxpayers. In that context, I would like to update the House on the 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 (“the 1999 Act”) between December 2014 and September 2018. This followed an inspection by PricewaterhouseCoopers LLP which identified best value failure, particularly in relation to grant making, property disposal and publicity spending. Commissioners were withdrawn and functions returned to the Council in March 2017 on the condition that it continued to achieve against its best value plans and report regularly to the Secretary of State on its on-going compliance with the Best Value Duty. In response to a corporate peer review by the Local Government Association in June 2018, which concluded the Council was now “on a positive trajectory”, Ministers took the decision to end the intervention in September 2018.

Following evidence that suggested recent changes to the Council's governance arrangements may have the potential to undermine past improvements that had allowed the intervention to end, on 22 February 2024 the then Secretary of State (the Rt Hon. Michael Gove), commissioned an inspection of the Council's compliance with its Best Value Duty. He appointed Kim Bromley-Derry CBE DL as Lead Inspector, along with Suki Binjal, Sir John Jenkins and Philip Simpkins as Assistant Inspectors, and asked them to report their findings to him by 31 May 2024. On 24 May, following the announcement of the General Election, this deadline was extended to 31 July. The Inspectors completed their Inspection and submitted their Report to the Secretary of State and, as statute requires, provided a copy to the Council.

The Report identifies several positive features at the Council, such as the finance service and the enthusiasm shown by officers and members for serving the Borough. It also notes that the Council has already taken steps to make improvements, including in response to the Local Government Association's Corporate Peer Challenge Report of September 2023. However, the Report documents serious concerns across a number of areas which I considered against its Best Value Duty under Part 1 of the 1999 Act:

• On Leadership: The Report concludes that a lack of respect and co-operation between political parties prevents Councillors from engaging in a culture of genuine improvement. A lack of trust has contributed to officer churn at the top few levels of the organisation. Inspectors also found insufficient challenge of the Executive and a perception among many staff that “many good managers had left the organisation as a result of ‘speaking truth to power'”.

• On Governance: The Report paints a picture of an organisation with a clear drive and mandate to deliver the Mayor's priorities, but for whom due process is often treated as an obstacle to priorities rather than as a necessary check and balance. The Inspectors consider the Council's scrutiny culture to be “weak and confused”, and the level of challenge “inadequate”.

• On Culture: The Report concludes that the entire organisation is impacted by a lack of trust, with the Administration “suspicious and defensive in its behaviour”. The culture appears to be one where decisions are taken based on advice from a small number of people who are trusted by the Mayor and has been described by many staff and partners as “toxic”. A culture of patronage, even if not at play in every appointment, is perceived as pervasive enough to undermine trust between members, staff and leadership, as well as with external stakeholders.

• On Partnerships and Community Engagement: While the Report notes the strong community focus of the Mayor, Councillors and wider Council, it concludes how the “significant time and energy” spent in local communities “seems to distract from their critical and statutory strategic relationships”. Inspectors found a lack of co-production and joint planning undertaken by the Council and saw insufficient evidence that the Council undertook meaningful and comprehensive consultation with key partners, staff, and service users before decisions were taken in some key areas.

• On Continuous Improvement: While the Council has made targeted and concerted improvements over the last two years, this has lacked a strategic focus or a cultural prioritisation of continuous improvement. The culture set and exemplified by the leadership is to reactively respond and counter criticism rather than honestly appraise and self-improve. On some issues, the Inspectors are sceptical of the Council's capability to self-improve.

I have carefully considered the Report and other relevant material and am satisfied that the Council is failing to comply with the requirements of Part 1 of the 1999 Act, namely it is failing to comply with its Best Value Duty in relation to Continuous Improvement, Governance, Leadership, Culture and Partnerships. I am therefore minded to exercise powers of direction under section 15(5) of the 1999 Act in relation to the London Borough of Tower Hamlets to secure its compliance with the Best Value Duty. I believe, given the evidence of serious concerns in the Report, a broad and supportive intervention package, with robust external assurance, is necessary and expedient for the Council to secure compliance with this Duty. To that end, and in line with procedures laid down in the 1999 Act, I have today (12 November 2024) written to the Council asking them to make representations – if they wish – both on the Inspection Report and on the statutory support package that I am now proposing.

This proposed statutory support package, to be in place for an initial period of three years, is designed to strengthen and expand the improvement work that the Council has already begun. It acknowledges the political mandate the Mayor holds, whilst recognising the need to tackle deeply rooted and persistent issues. It recognises the constructive engagement I have had with the Council and acknowledges that they stand ready to work in partnership with Government to deliver the change needed for local people. It also recognises that the Council has some corporate capacity to address the challenges identified in the Report and has already put in place some of the building blocks for continuous improvement and will help to ensure that the Council remains in a stable financial position.

This approach balances the evidenced need for government support, with the desire to work constructively so that we see sustained improvement. A core element of the proposed support package will be the reconfiguration and strengthening of the Council's Transformation Advisory Board to provide external expertise, challenge and advice to the Council. I am proposing directing the Council to work with Ministerial Envoys to reconfigure its existing Board into a Transformation and Assurance Board, and to draw on existing and additional members to appoint independent and external Leads for Leadership, Governance and Culture & Partnerships; all areas where the Council is currently failing. I am also proposing directing the Council to appoint at least two opposition councillors to the Board and for the Mayor to continue his role as Chair. The Council will be required to report to this Board on the delivery of its Continuous Improvement Plan every three months or at such intervals as the Board may require. The Council will also be required to have regard to and respond promptly in public to any recommendations from the Board with respect to the Council's improvement work.

In order to assist the Council to achieve the necessary improvements, I am minded to appoint a Ministerial Envoy and Assistant Envoy to act as advisor, mentor and monitor to the Council, and to oversee its improvement work. The Ministerial Envoys will work comprehensively within the Council to oversee the proposed changes to the Board, including agreeing its scheme of work and meeting agendas, preparation of the Council's Continuous Improvement Plan and an open recruitment exercise to appoint a permanent lead for the Council's improvement work. They will attend meetings, provide ad hoc advice and challenge, and be available to Senior Leadership for support. They will also work closely with the Board Leads for Governance, Leadership and Culture & Partnerships to ensure the realisation of comprehensive programmes of cultural change and political mentoring. I am proposing directing the Council to cooperate with the Ministerial Envoys, and to allow them all reasonable access to their premises, documents, employees or members in support of their work.

I would like the Ministerial Envoys to report on the Council's progress against its improvement agenda after the first four months, and then regularly as we agree is appropriate. Their assessment will provide the assurance local residents, strategic partners and I need to ensure the Council's compliance with its Best Value Duty.

I will carefully consider any representations the Council and other interested parties make and decide how to proceed. If I decide to intervene in the manner described here, I will then make the necessary statutory directions under the 1999 Act and appoint the Ministerial Envoys. Any directions that I make will be without prejudice to making further directions, should this prove necessary.

This action is not undertaken lightly, and I am committed to working in partnership with the London Borough of Tower Hamlets to provide whatever support is needed to ensure its compliance with the Best Value Duty and the high standards of governance local residents and service users expect. I hope with focus and oversight that improvement will come at pace, but I will not hesitate to consider further action and escalation if necessary, in the interests of Tower Hamlets residents. I will deposit in the House library copies of the Report and letter I have referred to, which are also being published on gov.uk today. I will update the House in due course.