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Commons statement re Tower Hamlets Council by Eric Pickles (full text)

The text below is taken verbatim from Hansard and covers the statement to the House of Commons by Eric Pickles MP, Secretary of State for Communities and Local Government, where he outlines the governments response to the PwC report on London Borough of Tower Hamlets council, and the exchanges in the House afterwards.

12.36 pm

The Secretary of State for Communities and Local Government (Mr Eric Pickles): With permission Mr Speaker, I wish to make a statement about the London Borough of Tower Hamlets.

The Government have long been concerned about the worrying pattern of divisive community politics and alleged mismanagement of public money by the mayoral administration in Tower Hamlets. Following persuasive evidence presented to me making serious allegations in April, I commissioned PricewaterhouseCoopers to undertake a formal best value inspection report of the council. In my written statement this morning, I published the PwC report. It paints a deeply concerning picture of obfuscation, denial, secrecy, the breakdown of democratic scrutiny and accountability, and a culture of cronyism risking the corrupt spending of public funds.

Let me outline some of the conclusions. PwC found that the mayoral administration’s grants programme handed out taxpayers’ money with no apparent rationale for the grant awards. There were no objectives, and there was no fair or transparent approach to grants, which the council’s so-called corporate grants programme board was supposed to ensure. There was no proper monitoring. Grants were systematically made without transparency. Officer evaluation was overruled—across mainstream grants, 81% of all officer recommendations were rejected. More than £400,000 was given to bodies that failed the minimum criteria to be awarded anything at all.

On land disposal, properties were sold to third parties without proper process. Poplar town hall was sold to a company involving a person who had helped the mayor in his election campaign, against internal advice, and the winning bid was submitted after other bids had been opened. A number of other property transactions similarly had dubious processes.

Taxpayers’ money was spent on unlawful political advertising for the mayor. Ofcom ruled that the spending was in breach of the Communications Act 2003 and the code of broadcast advertising. There was a lack of any documentation or monitoring of the use of media advisers, so taxpayers’ money could be improperly and unlawfully used to pay for the mayor’s political activities.

Irregular practice took place in the awarding of contracts. For example, PwC identified cases in which one of the council’s officers recalls that, during a meeting, the mayor allegedly annotated a list of suppliers to indicate which suppliers he did not wish to be selected. As a whole, PwC concluded that the council had failed in numerous aspects to comply with the best value duty.

The council’s core governance arrangements have centred on the three statutory officers: the head of paid service, the chief financial officer, and the monitoring officer. The council has failed to make permanent appointments to those key positions. Currently, all three posts are held by interim appointments. PwC concludes that the governance arrangements do not appear capable of preventing or responding to the succession of failures by the mayoral administration. Executive power is unchecked and executive power has been misused.

The PwC report is not the only evidence of where the council is seriously failing on high profile activities that are open to abuse by, for example, political interference. Concerns have been raised about the ability of the senior officers responsible—the electoral registration officer and the returning officer—to ensure the proper administration of elections. The current election petition on the May 2014 European and mayoral elections is now sub judice. I will make no comment on anything before the election court, but I note that on 1 July the Electoral Commission published a report on the elections in Tower Hamlets. The commission concluded that there are significant lessons for the returning officer appointed by the council. Immediate and sustained action must be taken to provide assurance that future elections and electoral registration will be well managed and efficiently and effectively delivered. Free and fair elections must be the bedrock of local democracy.

There is a clear picture that there has been a fundamental breakdown of governance in this mayoral administration. If unchecked, it will allow improper conduct to run rife, further undermining public confidence in the council, damaging community cohesion, and, ultimately, putting public services across the borough at risk. The consequence of this conclusion, expressed in formal terms, is that I am satisfied that the council is failing to comply with its best value duty. I will therefore need to consider exercising my powers of intervention to secure compliance with the duty. To that end, in line with procedures laid down in the Local Government Act 1999, I am today writing to the council to ask it to make representations, if it wishes, both on the PwC report and on the intervention package I am proposing.

The proposed package will need to do three things: first, it will need to put an end to all council activities that are not compatible with its best value duty; secondly, it will need to remove, so far as possible, the risk of further failures to comply with the duty; thirdly, it will need to rebuild the governance and financial management capacity of the council to secure its future compliance with the best value duty. My proposed intervention is centred on putting in place a team of three commissioners who I will appoint and who will be accountable to me. Their role will be to oversee or, as appropriate, exercise certain functions of the council. I envisage that the commissioners will be in place until 31 March 2017. It will be open to Ministers to review this in the light of the progress made by the council to secure compliance with its best value duty.

To help me assess progress, I propose that within three months of launching the intervention the council will, with the commissioners, draw up and agree an action plan to secure the council’s future compliance with the best value duty. The commissioners will report to me at six-monthly intervals on progress being made. The action plan must reflect the specific intervention measures in the proposed package, which are as follows.

First, I propose to direct the council as a matter of urgency to undertake, as the commissioners may direct to their satisfaction, a recruitment exercise to make permanent appointments to the positions of the three statutory officers, all currently only interim appointments. I also propose to direct that any subsequent dismissal, suspension or further appointment of statutory officers must be with the agreement of the commissioners.

Secondly, I propose to direct that the council’s functions on grant making are to be exercised by the commissioners. The council must provide the commissioners with all the assistance they need. The commissioners will have regard to any views the council has on individual grants.

Thirdly, I propose to direct that the council obtains the prior written agreement of the commissioners before entering into any commitment to dispose of, or otherwise transfer to third parties, property other than individual housing.

Fourthly, I propose to direct that the council prepares a fully costed plan for how its publicity functions can be properly exercised. It must agree that plan with the commissioners, report to the commissioners on the delivery of that plan and adopt any recommendation of the commissioners with respect to that plan or to publicity more generally.

Fifthly, I propose to direct that the council’s functions of appointing an electoral registration officer and a returning officer for elections are to be exercised as a matter of urgency by the commissioners.

Sixthly, I propose to direct the council to prepare with the commissioners a plan for addressing the weaknesses on contracting identified in the PwC report. It must seek the written agreement of the commissioners before entering into any contract or service agreement contrary to any recommendation of the statutory officers.

Finally, I am seeking two written undertakings from the council: first, that it will not, without my approval, enter into any agreement or modify any existing agreement for the making of grants, pending any decision on any proposed intervention package; and, secondly, that the council will not appoint or designate any statutory officer without my prior approval, pending any decisions on any proposed intervention package.

If I receive no satisfactory undertaking within 24 hours, I will use the urgency powers I have under statute. I can direct the council not to take any action on the making of grants or appointing of statutory officers without my approval in this interim period. I am also asking the council to provide information about any property transactions it has in the pipeline. Depending on what, if any, information I receive, I may need to use my urgency powers of direction to safeguard the council and its resources.

The council now has 14 days to make representations to me on the PwC report and on my proposed intervention package. I shall then consider carefully any representations the council makes and decide how to proceed. If I decide to intervene along these lines, I will then make the necessary statutory directions under the 1999 Act and appoint the commissioners. Any directions I make will be without prejudice to my making further directions, should it prove necessary. I will update the House on any conclusions in due course.

The report has cost just under £1 million, which will be borne by the council. It would have been much cheaper, had the mayoral administration not been so obstructive. But to place this spending in context, the financial irregularities identified relate to a £1.4 billion a year council budget. There is significant scope for taxpayers’ money to be protected and saved from these interventions. This is a rare occasion where central Government intervention is required.

The commissioners I sent into Doncaster in 2010 show that such a targeted approach can turn around a dysfunctional mayoral administration. This thorough scrutiny by independent auditors shows we now have a stronger audit regime following the abolition of the Audit Commission, which did nothing to stop corrupt practices from emerging.

Localism requires local accountability and local democracy. Municipal corruption undermines the local checks and balances that are vital in a democracy and essential in mayoral systems with their concentration of power. We cannot risk such corruption elsewhere, but it is not just about the money. The abuse of taxpayers’ money and the culture of cronyism reflects a partisan community politics that seeks to trade favours and spread division on the rates. Such behaviour is to the detriment of integration and community cohesion in Tower Hamlets and in our capital city.

This is a borough where there have been widespread allegations of extremism, homophobia and anti-Semitism that have been allowed to fester without proper challenge. Certainly, Tower Hamlets has challenges given its level of deprivation and its diverse population, but one has only to look across the border at the mayoral system in Newham to see that there is an alternative. Councils should be championing a common sense of identity and Britishness—across class, colour and creed.

In all of this, it is the residents of Tower Hamlets who are being let down, whose services are being put at risk, whose taxpayers’ money is being wasted and whose home borough is being criticised rather than being cited with municipal pride.

Despite rare cases such as that of Tower Hamlets, councils as a whole have a good record of transparency, probity and accountability, and that is a reputation worth protecting. As a former councillor, I am proud of the standing that local government has in the United Kingdom, and of what it contributes to the lives of our communities up and down the country. I will take whatever steps are necessary to uphold the good name of local government, because there can be no place for rotten boroughs in 21st-century Britain.

12.50 pm

Hilary Benn (Leeds Central) (Lab): I am grateful to the Secretary of State for allowing me to have advance sight of his statement. Given that he had received serious allegations about Tower Hamlets earlier this year, and given the material that had been submitted to the Department, it was clearly right for him to exercise the powers granted to him under the Local Government Act 1999 to appoint PricewaterhouseCoopers to conduct an inspection of the authority’s compliance with its best-value duty. As I said at the time, that audit had to be full, open and transparent if it was to command public confidence. The publication of PwC’s report today has fulfilled the requirements for openness and transparency, and it has certainly done a comprehensive job, which may well explain why the process has taken slightly longer than I think both sides had originally hoped.

The findings of the report are indeed very troubling. There was a lack of transparency in regard to the giving of grants, the governance of grant awards was not effective, and grants were given to organisations that had been ruled ineligible or did not meet the required evaluation score. As for property transactions, in three of the four cases that were investigated—those of Poplar town hall, Sutton street depot and Mellish street—the inspection concluded that

“the Authority failed to comply with its best value duty.”

In the case of Poplar town hall,

“The Authority accepted a late bid from the winning bidder after other bids had been opened, creating a risk of bid manipulation”,

and the authority did not, in fact, select the highest bidder.

In relation to publicity and the use of media advisers, the report refers to a finding by Ofcom that a broadcast constituted political advertising, and states that

“the clear implication is that Authority monies were spent inappropriately on what amounted to political advertising for the benefit of the Mayor…This in itself constitutes a failure to comply with the best value duty in this instance.”

The overall conclusion of the inspection is that the current governance arrangements do not appear to be capable of preventing, or responding appropriately to, the failures identified. The fact that the council is still without permanent appointments to its three most important statutory officer posts should also be a matter of great concern to the House. In the light of what has been found, we support the course of action announced by the Secretary of State, although we must recognise that it is a very serious step to take. It is important for the considerable powers with which the Secretary of State has been entrusted not to be used lightly or because of a political disagreement with decisions made by a local authority, but to be used because that local authority has failed in its statutory duties.

When does the Secretary of State propose to announce the names of the three commissioners, and what background and experience will he be looking for in appointing them? Does he intend to consult anyone in making the appointments? Will the commissioners be paid, and, if so, who will bear the cost? The Secretary of State said that he envisaged that the commissioners would be in place until March 2017. Will the length of their term of office depend on the progress that they and the council make, together with the mayor, in dealing with the problems that have been identified? What progress reports will the Secretary of State, and the House, receive? What relationship will the commissioners have with the elected councillors in Tower Hamlets, and what role does he envisage for wider local government in the provision of support for Tower Hamlets, as happened in the case of Doncaster?

At the time of the Secretary of State’s original decision to send in the auditors, he told the House that a file had also been passed to the Metropolitan police for their consideration. The police subsequently announced that they had found

“no credible evidence of criminality”.

Does the Secretary of State believe that the PwC report contains any further information that might warrant its being referred to the police, or is that aspect of the allegations now closed?

In respect of publicity, the inspection report says that a

“significant proportion of the budget is allocated to the weekly publication of ‘East End Life’”,

which seems to be little more than a vehicle for promotion of the mayor. The Secretary of State knows of my concern about that particular publication. Will he tell us when he intends to make a final decision about “East End Life”?

There are, of course, other legal processes under way relating to Tower Hamlets, and it is right for us not to discuss them here. I will say, however, that given the concerns that have been expressed about the conduct of elections, we also support the Secretary of State’s decision to ask the commissioners to take responsibility for the appointment of an electoral registration officer and a returning officer for future elections.

Local authorities have important powers and duties, which they exercise on behalf of the people whom they represent. They should be free to do that independently, in the way that they see fit. However, with those powers come responsibilities, and, in particular, the responsibility to ensure that all decisions are made on an open, fair and transparent basis. The people of Tower Hamlets are proud to live alongside each other in a community that reflects the face of modern Britain, which is why there can be no place for the politics of division in Tower Hamlets or elsewhere, whatever its motivation. It is the job of every locally elected representative to care for the interests of all his or her constituents.

It seems clear from the report with which we have been presented today that those standards have not been upheld in a number of instances in the case of Tower Hamlets and its mayor. Just as, in April, Tower Hamlets welcomed the opportunity to demonstrate that council processes had been run appropriately—which, as we have learnt today, was not the case—it should now accept the findings of this report, and work with the commissioners to ensure that what has gone wrong is put right.

Mr Pickles: I agree with the right hon. Gentleman’s assessment. In particular, I agree with his view that in a diverse and vibrant community, a community to be proud of, it is the job and the responsibility of councillors and the mayor to ensure that no one feels out of place and everyone feels welcome.

The right hon. Gentleman asked me a number of questions, of which I hope I have made a reasonable note. He asked me for the names of the commissioners. I hope that he will forgive me: I have not yet made a decision. He asked whether I would want to consult and discuss matters once I had made a decision; well, of course I will. He asked about pay. The council will pay expenses and a reasonable fee. He asked about progress reports. As I said in my statement, we will expect such reports every six months, and, as in the case of Doncaster, we will of course share that information with the House.

I noted the right hon. Gentleman’s special pleading in respect of “East End Life”, which, perhaps, represents an exception to his usual views. We will listen to representations and make an announcement in due course, but that will be entirely separate from the process that I have described.

The right hon. Gentleman referred to criminal activities. I recall what the police said about the subject. I also recall their subsequent statement that they were continuing to look at the issues. I have no idea whether the report contains allegations of criminality, although we will of course send a copy to the police for their information. However, I have here a statement from the mayor of Tower Hamlets which relates directly to the right hon. Gentleman’s point. He said that I had announced that I was “concerned about potential fraud” and that

“the Evening Standard ran these claims on its front page” .

He added:

“These allegations have been rejected by PwC.

The report highlights flaws in processes. These are regrettable. We will learn from this report and strengthen our procedures accordingly.”

I am afraid to say that it seems to me that the mayor’s test is, “If you’re not actually caught with your fingers in the till, you’re innocent.” There are serious flaws in what has occurred. If I was the mayor of Tower Hamlets, I would be hanging my head in shame, because what he has allowed to occur in Tower Hamlets is shameful—not that I have made a final decision.

Mr Brian Binley (Northampton South) (Con): Forty years ago our electoral systems and controls were the envy of the world. They have deteriorated dramatically in the past 15 years and this report highlights that fact. This is not only a question for Tower Hamlets, but it features largely in Tower Hamlets. Will the Minister speak to the Electoral Commission to see whether we can have a proper review of electoral systems to ensure this sort of thing does not happen again in areas right across our country?

Mr Pickles: I am sure the Electoral Commission regularly reviews procedures, but my hon. Friend says things have deteriorated in the past few years, and he is of course right. Our rules and regulations with regard both to electoral law and to local government conduct assume people will behave reasonably—and the truth is that in the overwhelming majority of local authorities around the country people obey not only the law, but the spirit of the law—which makes it very difficult when we are dealing with an authority that has a cavalier disregard for good practice and probity. I will certainly ensure that the Electoral Commission is made aware of my hon. Friend’s very wise words.

Rushanara Ali (Bethnal Green and Bow) (Lab): Every community in our country is entitled to the highest standards of probity and honesty in our democracy, and no community should put up with lower standards and poor governance and transparency, so I welcome the sentiments expressed by the Secretary of State and the shadow Secretary of State. In particular, I welcome the Secretary of State’s commitment to appointing an electoral registration officer and returning officer. For too long the Electoral Commission has relayed concerns about public confidence in the electoral process, and it is vital that we give people confidence that the forthcoming elections will be free and fair. Can the Secretary of State say when those officers will be appointed, as this is, as he says, a matter of great urgency?

Mr Pickles: Clearly I will want to listen to what the council has to say to my suggestion, and we have given it two weeks to respond. Assuming—although I make no assumption—that I am not satisfied with its response, it will be a high priority for the appointed commissioners, should I decide to appoint them, to get those two people in place. Given that a general election and London elections are coming up, people need to feel confident in the system.

I did not reply to an earlier question so, with your indulgence, Mr Speaker, I would like to do so now: will we be looking to get a package of care together, as we did in Doncaster with the Local Government Association? Yes, of course we will.

Mike Freer (Finchley and Golders Green) (Con): I thank my right hon. Friend for his statement, but where taxpayers have been deliberately short-changed will he reconsider reintroducing surcharging?

Mr Pickles: I have no intention of reintroducing those measures in the lifetime of this Parliament. What is most important for us is to get a strong sense of corporate identity for Tower Hamlets and some transparency, so when people are overriding the sensible decisions made, they understand that it will be given the full glare of publicity.

Jim Fitzpatrick (Poplar and Limehouse) (Lab): Tower Hamlets is a great borough, whose reputation is being destroyed by independent mayor Lutfur Rahman and his Tower Hamlets First party. The mayor tries to present himself as a victim but, from reading the report, it seems that he and his senior colleagues are either in denial—they are the only people who do not know what is going on in Tower Hamlets—or they are lying to PricewaterhouseCoopers. Maybe the Secretary of State could indicate which he thinks is the case. Can he reassure us that the commissioners, if and when appointed, will meet the leaders of the Conservative and Labour groups on the council as a matter of urgency, and may I ask him to reconsider his decision to charge the taxpayers of Tower Hamlets the full sum of £1 million? Given the profile of Tower Hamlets—the poverty of the borough, notwithstanding the new business district, with Canary Wharf—charging Tower Hamlets taxpayers the £1 million seems unfair, especially as they are being victimised by Lutfur Rahman more than anyone else.

Mr Pickles: On the latter point, I entirely agree with the hon. Gentleman, but the method of charging is laid down in the legislation, and it needs to be emphasised strongly that the amount PricewaterhouseCoopers charged would have been considerably less had the mayor decided not to co-operate and to obfuscate and delay. The only reason why I did not make this statement in July is because of the delays by that administration. If the mayor would like to make a substantial contribution out of his own pocket to the report, that would seem to me to be a sensible thing to do.

Robert Neill (Bromley and Chislehurst) (Con): My right hon. Friend will know that I recognise from personal experience that intervention of this kind is very seldom used and its significance is not to be understated, but will he accept from me, from the experience of when we worked together in Doncaster, that this is utterly justified in this case, and that cumulatively this well-balanced report from PricewaterhouseCoopers indicates an overall political culture that is worse than that discovered in the Doncaster case and that justifies the high level of intervention? Will he pay particular attention to the need to have strong commissioners with experience in electoral and administrative processes, because the lack of objectivity of former monitoring officers has been the subject of comment in the House before, and in Tower Hamlets opposition members, both Labour and Conservative, have in the past not had the protection from the statutory officers that they were entitled to when subject to personal—in the case of my friend Councillor Peter Golds, deliberate homophobic—abuse from supporters of the mayor? That cannot be accepted in a civilised country.

Mr Pickles: My hon. Friend was a very distinguished Minister in my Department, and he will know how long I agonised over the decision on Doncaster, because this kind of intervention goes against everything I believe in. I believe that local government is an independent entity and that is one of the strengths of our constitution, but there comes a point at which we need to ensure transparency, fairness and accountability, and it is certainly my hope that one of the commissioners will have extensive experience of practical election law and procedure, as that will strengthen that. It is also certainly my intention that Tower Hamlets will come out of this process much stronger.

Mr Clive Betts (Sheffield South East) (Lab): I welcome the actions and proposed actions of the Secretary of State and his comments about the general good conduct of local government and local councillors throughout the country. He referred to audit arrangements. There have been some changes, but there is nothing in them that means that throughout this period the auditor in Tower Hamlets did not have the ability and powers to audit properly these accounts. However, in December 2012 the overview and scrutiny committee, despite being quite weak in many respects, highlighted concerns about the grant process and asked for a referral to the district auditor. Despite that, the external auditor, KPMG, signed off these accounts without qualification for 2012-13, as it did for 2011-12. Are there not serious questions to be asked about the role of the external auditors in this regard and about their value for money, or lack of it, in carrying out this work?

Mr Pickles: I was probably unkind to the Audit Commission in many respects, but it did stand around doing nothing on this, as, indeed, it did on Doncaster—which required the LGA to act in Doncaster. The existing auditors have to answer for their own conduct, but I will say that I do not think this was their finest hour.

Eric Ollerenshaw (Lancaster and Fleetwood) (Con): There are some good councillors in Tower Hamlets representing the major parties and, as other hon. Members have said, they have been raising these issues for a number of years. Will the Secretary of State ensure that the commissioners have the powers to ensure that the statutory council meetings and the scrutiny meetings of the committees are carried out properly, so that those councillors who have a proper democratic mandate can finally be heard?

Mr Pickles: I need to emphasise, and not just for form’s sake, that I am waiting to hear from Tower Hamlets in response to my report, but should I decide to appoint commissioners, one of their prime responsibilities would be to ensure that there was a robust system of transparency, scrutiny and accountability. The reason that I want to do that is that that is exactly what happens in just about every council up and down the land. That is normality, and no one ever really questions it. Sometimes, when I talk to other Government Departments about introducing new things for local government, people suggest nailing them down and making them a statutory duty, but the truth is that we probably do not need to do that. This is how local government operates, and how it has always operated. It puts its citizens first, so when we have one council that disregards that principle, it makes the system much more difficult to operate.

Mr Nick Raynsford (Greenwich and Woolwich) (Lab): I, too, welcome the Secretary of State’s statement, and I entirely support the actions that he has outlined. It is absolutely right that there should be effective intervention in the exceptional cases in which individual local authorities have manifestly failed. I was involved in a similar action some years ago in Hackney, which I am pleased to say led to significant improvements. Hackney is now a very different authority from what it was. One of the lessons from that is that intervention to root out problems should also involve trying to build on the strengths of the authority and of the elected members who want to transform the area. Will he tell us what more will be done to encourage the elected representatives of Tower Hamlets who want to transform that area for the better to work with the commissioners to achieve a lasting improvement in the service?

Mr Pickles: I might be doing the right hon. Gentleman a disservice, but I think he was the architect of the powers that I am currently using, so I shall be freshly polishing the substantial bust of him that sits in my office. He is right to refer to previous experience. In Doncaster, we used the Local Government Association and peer-to-peer monitoring, and we got alongside the councillors. It was not just the mayor that we were trying to bolster up; it was the councillors as well. We took cognisance of the fact that we needed to bring out the best. Not everything is wrong in Tower Hamlets, as the hon. Members for Poplar and Limehouse (Jim Fitzpatrick) and for Bethnal Green and Bow (Rushanara Ali) have said. It is a wonderful, vibrant place, but frankly it deserves better leadership.

Mr Speaker: I will leave open the question of whether a bust of the right hon. Member for Greenwich and Woolwich (Mr Raynsford) is any more or less substantial than any bust of the Secretary of State.

Paul Uppal (Wolverhampton South West) (Con): I thank my right hon. Friend for his statement, and I want to revisit a comment that has been made by colleagues on both sides of the House. It appears that the rot started to set in as a result of electoral fraud at the very beginning, and that that was the first step. Many people from a south Asian community background feel that it is unfortunate that this spotlight has been shone on the community. I hope that, for the sake of community cohesion, the proposed action can be a stepping stone towards ensuring that we have a full, robust and fair electoral system. Many migrants come to these shores to escape electoral fraud and dishonesty in the countries they came from.

Mr Pickles: I agree that electoral probity, honesty and transparency are hallmarks of our democracy. No one, on being elected—or failing to be elected—should have to wonder whether that was the electorate’s decision or a result of the system. With regard to your last remark, Mr Speaker, may I respectfully suggest that it is just a matter of scale?

Mr Speaker: We cannot explore this issue at length, but in terms of being intellectually substantial, the right hon. Member for Greenwich and Woolwich and the Secretary of State both score very highly.

Luciana Berger (Liverpool, Wavertree) (Lab/Co-op): Members on both sides of the House will be shocked by many elements of the report. Knowing how rigorous the process relating to securing grants is in Liverpool, I think many people will be appalled to learn that £407,700 was given to bodies in Tower Hamlets that failed to meet the minimum criteria for being awarded anything at all. What efforts will the Secretary of State’s Department be making to recover that money?

Mr Pickles: We will certainly look into that possibility. It is the council and the people of Tower Hamlets who have not received the appropriate sums. In the early part of the report, there is a map that shows how the grants have been allocated in a quite arbitrary way, concentrating them on just one area. The fact that more than £400,000 was simply handed out, as though by some mediaeval monarch, with no thought or consideration goes to the heart of the matter. Public money is precious and it should be accounted for. No one should receive public money without proper scrutiny. I refer the hon. Lady to the map on page 23 of the report, which shows the way in which the money has been distributed. It is an absolute disgrace.

Mr Speaker: We are all deeply grateful to the Secretary of State. I hope that everyone saw the map that he took the trouble to show to the House. Inspections can no doubt take place afterwards as well.

John Stevenson (Carlisle) (Con): Notwithstanding what has been going on in Tower Hamlets, does my right hon. Friend agree that elected mayors can provide a positive and effective form of leadership in local government?

Mr Pickles: Of course elected mayors can provide an effective form of leadership, but given their enormous power, they have an even greater obligation to ensure that there is proper scrutiny of their decisions and that the public have an opportunity to be assured that those decisions are made fairly and reasonably.

Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op): I need to declare that my husband works for the Leadership Centre for Local Government. I welcome the Secretary of State’s statement and, in particular, his comments about good mayors. In Hackney, the mayor has done an incredible job of leading Hackney towards becoming one of the best local authorities in the country. I believe that the mayor of Tower Hamlets should resign on the back of this report. Will the Secretary of State comment on that? Will he also, for clarity, outline to the House what the citizens of Tower Hamlets could do to abandon the mayoral model if they chose to do so?

Mr Pickles: The most important thing is for us to get into a position in which the residents of Tower Hamlets can feel confident in the mayoral system and in the functioning of their local government, which is now at best dysfunctional and at worst riddled with cronyism and corruption. I am not entirely sure that it would be appropriate for us to consider a big constitutional change. This is not about something being wrong with the system; it is about something being fundamentally wrong with the way in which the system has operated and with the people that are chosen. Should the mayor decide to resign at this point—I have no belief that he will—can I say that he would not be missed?

Mr Stewart Jackson (Peterborough) (Con): I speak as a vice-president of the Local Government Association and I was a London borough councillor for eight years. I have seldom seen such an appalling indictment of local governance. It is appropriate that we should put on record our thanks and pay tribute to those brave civic leaders such as Councillor Peter Golds who blew the whistle, and to journalists such as Ted Jeory and Andrew Gilligan who, in the best journalistic tradition, have fought a lonely battle to reveal the crooked and rotten regime in Tower Hamlets. May I point out to my right hon. Friend that that regime came about following an election? As my hon. Friend the Member for Northampton South (Mr Binley) said, we need to revisit the election arrangements in Tower Hamlets, focusing on postal votes, personation, polling place identification and, particularly, voter intimidation at polling places. This is imperative, not just in Tower Hamlets but across the country.

Mr Pickles: My hon. Friend has a justified reputation for being knowledgeable about matters relating to elections, and if I have a particular problem in this area, he is the first person I seek out. He outlines the task that awaits the returning officer and the electoral registration officer in Tower Hamlets. I hope that robust schemes are put in to support those two officers, be that through commissioners or through the council, should I decide not to act.

Andrew Gwynne (Denton and Reddish) (Lab): I thank the Secretary of State and his shadow, my right hon. Friend the Member for Leeds Central (Hilary Benn), for defending the best traditions of local government in England from the Dispatch Box today. Given that this week we have seen a further roll-out of the mayoral model, particularly in Greater Manchester, perhaps now is the time for the Secretary of State to define more closely the roles, responsibilities and expectations of an elected mayor and to uphold the independence of the local civil service in law.

Mr Pickles: I am not sure whether it will be necessary to uphold the local officials, some of whose rights are enshrined in law. I refer the hon. Gentleman to the point I made earlier to the right hon. Member for Greenwich and Woolwich (Mr Raynsford), which is that for the most part local government operates under this system and we do not need to regulate it too closely because everyone operates, and has always done so, for the benefit of the public. The difficulty comes when a council disregards the norm, the rules and the normal give and take that occurs in local authorities. I am not entirely persuaded that we should legislate for all local authorities because one has behaved badly, but I am persuaded that whatever system we operate, be it a cabinet, committee or mayoral system—I do welcome the variety—it must conform to probity, transparency and accountability under the law.

Sir Richard Shepherd (Aldridge-Brownhills) (Con): Words such as “crooked” and “corrupt” have been used across the Floor of the House in response to the issues before us, yet the police have no reason for action. I just do not understand how one can reconcile corruption as laid out in the forms that my right hon. Friend has pointed out and there being no criminal implications whatsoever. What can be the answer?

Mr Pickles: That of course is a matter for the police—it is not a matter for me—but let me quote from the PwC report about the sale of Poplar town hall: It said:

“The Authority accepted a late bid from the winning bidder after other bids had been opened, creating a risk of bid manipulation…While the difference was small, the Authority did not in fact select the highest bidder, in spite of the external adviser’s recommendation to do so….The winning bidder was, as a matter of fact, connected to a person with other business interests that had an association with the Mayor.”

Would a well-run, accountable, transparent council act like that? I suggest that it would not.

Stephen Pound (Ealing North) (Lab): This report may not be welcome but it is certainly timely, and in its comprehensive nature it correctly identifies the mayor’s parlour as the most likely source of the foul, fetid, reeking stench that has been a blight on a wonderful part of our city. I appreciate that the Secretary of State does not wish to rewrite the handbook of local government, but one problem in Tower Hamlets is the conflation of the roles of executive mayor and chief executive officer, with officers of the local government civil service reporting directly to this joint body. Will the Secretary of State at least consider, as we expand the role of the mayoralty, a system that would avoid that sort of contradiction and that sort of conflation occurring in future?

Mr Pickles: The conflation is made worse by the fact that the head of paid services is an interim appointment. An interim appointee does not have the same authority as someone who has their feet well and truly under the table, which is why, should we decide to use commissioners, it would be a priority to get a person in place who cannot be removed without their permission. The hon. Gentleman will have heard that, should I decide to act, we are setting up a framework whereby things come into being if the principal officer’s advice is ignored. That is where things are important.

Charlie Elphicke (Dover) (Con): Some 20 years ago, I was elected to Lambeth council on a mandate to fight corruption. In that struggle, I found that it is a many-headed hydra and that these cultures are long in the making. Mayor Rahman has been running Tower Hamlets since 2008. Is it not right that there should be accounting as to how long this has been going on and how widespread the problem is?

Mr Pickles: One certainly wants to root out corruption, no matter where it took place and how long ago—that is fundamentally important. But the priority, should I decide to act, is to give the people of Tower Hamlets the opportunity to make a proper informed decision about their council and the mayor whereby, first, their votes would count, secondly, their voices will be heard and, thirdly, fairness will be there.

Andrew Bridgen (North West Leicestershire) (Con): Does the Secretary of State agree that the misuse of public funds and any hint of corruption or fraud in public office brings the whole of our political system into disrepute and risks undermining public confidence in our democracy, and therefore any such incidents should always be vigorously investigated and the individuals responsible held fully to account?

Mr Pickles: I entirely agree with that. Many of us will have experienced people on the doorstep saying, “All politicians are on the take. They are all on the make. They are all out for themselves.” Many of us in this Chamber can think of our local councillors, people we have seen in politics for years, and realise that the overwhelming majority are people who simply want to put something back into their local community, to do civic service and to contribute to the value of life. The thing about what has happened in Tower Hamlets is that it besmirches even the most benign, hardest-working councillor, in even the remotest part of this country. That is why I will consider acting.

Mr Philip Hollobone (Kettering) (Con): I refer the House to my entry in the register as a member of Kettering borough council. Is not one of themes common to what happened in Doncaster, Rotherham and Tower Hamlets the importance, but sometimes the ineffectiveness, of local government scrutiny by councillors in their own authority? What can be done to strengthen the power of scrutiny committees, and raise the profile and esteem of scrutiny work? Instead of councillors always wanting to be in the administration, they should increasingly want to be in the scrutiny side of things, to hold mayors and chairmen of committees to account for making decisions about very large sums?

Mr Speaker: We could learn from the hon. Gentleman’s parliamentary example.

Mr Pickles:v Not for the first time, Mr Speaker, you take the words out of my mouth. My hon. Friend is a member of a very well-run council and he expresses some wise views. I would be interested in hearing his views, and those of any right hon. or hon. Member, as to how we might strengthen scrutiny in local authorities. Given that we have had a while to bed it down, there probably is a time for a re-examination.

Mr Betts indicated assent.

Mr Pickles: I see the Chair of the Select Committee nodding wisely.

 

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