Written statement: Local Government Best Value (Tower Hamlets) - Mar 17

Secretary of State for Housing, Communities and Local Government (Steve Reed): I have previously updated this House that this Government will do what it takes to fix the foundations of local government. That includes taking prompt and direct action when councils are failing their Best Value Duty. In that context, today I am updating the House on the steps we are taking in Tower Hamlets.

On 19 January, I informed the House that, having carefully considered the evidence, I was concerned that a year into the statutory intervention, the Council was not making sufficient progress and had not understood the severity of its situation or moved beyond planning for improvement into action and impact. I considered that the Council was not yet complying with its Best Value Duty in relation to Continuous Improvement, Governance, Leadership, Culture and Partnerships, and that the evidence amounted to new failure to comply with the Duty in relation to its Use of Resources. I therefore proposed changes to the current intervention package to accelerate and strengthen the required improvement work, and invited the Council and other interested parties to provide representations on the proposals by 2 February.

I received five responses. I also received the Envoys' second report, which I am publishing today. The Envoys recognise the progress the Council has made in some areas, including engaging more effectively with its partners, the delivery of a staff survey and the development of a more mature Continuous Improvement Plan. They conclude, however, that “the overall pace of change and the grip of the officer and member leadership to drive improvement is insufficient.” They describe the Council's leadership as “unnecessarily defensive”, noting that their energy is centered on “managing the message and writing a plan, rather than on deeper ownership of the Council's issues and driving forward key deliverables”. The Envoys welcome the proposed package and believe that it will support a necessary shift in the approach of the Council's leadership.

I have carefully considered the representations, the Envoys' second report and other relevant material. I am satisfied that the Council is continuing to fail to comply with its Best Value Duty, including additional failure in relation to its Use of Resources. I am also satisfied that the Council is not yet making sufficient progress or demonstrating the required level of leadership grip under the existing model of intervention. I have therefore concluded that it is both necessary and expedient for me to exercise intervention powers in the Local Government Act 1999 as I have proposed to accelerate and strengthen the improvement work, with some minor amendments including to:

• streamline the governance of the intervention,
• increase the transparency and scrutiny of the Council's reporting against its improvement journey, and
• clarify the scope and intended effect of the powers being issued to the Envoys.

I have today issued the Council with revised Directions under section 15(5) and 15(6) of the 1999 Act which in summary require the Council to:

• continue to implement its Continuous Improvement Plan in a timely manner, including action to continue to address the Statutory Recommendations and significant weaknesses identified by the Council's external auditor,
• continue to achieve improvements in scrutiny, recruitment, transparency, procurement, contract management, internal investigations, officer structure and the scheme of delegation,
• co-operate with the Envoys to adequately resource and deliver the deep dive project into alleged misconduct at the Council,
• disband its Transformation and Assurance Board and establish an Envoy-led Improvement Board to oversee its delivery against the ministerial Directions.
• take appropriate action to ensure compliance with its Best Value Duty in relation to Leadership, Governance, Culture, Partnerships and Community Engagement, Continuous Improvement and Use of Resources.

To safeguard the improvement process, the Envoys will be able to exercise the following functions of the Council, which are to be treated by the Envoys as held in reserve. In summary, these functions are associated with the:

• governance, scrutiny and transparency of decision making,
• strategic financial management, financial governance and scrutiny of financial decision making,
• operating model and redesign of local services, and
• recruitment, appointment, structure, performance management and dismissal of senior and statutory officers.

To reflect the need for additional finance expertise and capacity in the Envoy team, I will appoint an additional Assistant Envoy with finance expertise in due course.

For the Envoy model to be successful, the Council and its leadership need to grip and drive its own improvement at pace, supported, challenged and overseen by the Envoys. I want to be clear in my expectation that the Council's political and officer leadership now demonstrate true acceptance and ownership of the issues and embed improvement at every level of the organisation, with clear evidence of impact and progress. I expect the Envoys to see a clear change in the current behaviours of the Council's leadership, and I know they will hold them accountable if change is not forthcoming.

Additionally, I would like to highlight to all members of the Council that their individual and collective contributions to the Council's improvement journey are crucial to its success. It is disappointing that some members have demonstrated a lack of commitment to improvement thus far and it is my expectation that members from all parties can put aside their personal and political differences to prioritise constructive scrutiny and debate. It is time for all members to put the residents of Tower Hamlets first and contribute whole-heartedly to the Council's improvement journey.

As we approach local and mayoral elections this May, it is of upmost importance that all interested parties work closely together to deliver safe and secure local elections. I would also like to remind the Council of the importance of adhering to the Code of Recommended Practice on Local Authority Publicity, particularly its principles of objectivity and even-handedness, especially in times of heightened sensitivity.

The revised Directions take effect from today. The Envoys will provide their next report on progress in the summer, with further reports as agreed with them. As with other statutory interventions led by my Department, the Council will meet the costs of the Envoys and provide reasonable amenities and services and administrative support. The Envoys' fees are published on gov.uk. I am assured this provides value for money given the expertise being brought in and the scale of the challenge.

I will review the Directions and the Envoys' roles at the appropriate time, to ensure Tower Hamlets has the right support to secure its recovery and to protect the public purse. Subject to clear and sustained evidence of improvement, certain functions may be returned to the Council ahead of the expiration of the Directions. As set out in my 19 January statement, I remain 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.