Thursday 23 October 2008

What’s gone wrong with local government?

I have just stumbled across the web site of Douglas Carswell, the Conservative MP for Harwich & Clacton. Mr Carswell first stood for Parliament in 2001 in the Sedgefield Constituency against a certain Anthony Charles Lynton Blair. Mr Carswell is a Eurosceptic and co founded the Direct Democracy group - an organisation which embraces ‘radical localism’ and the democratisation of quangos.

In a paper for the Adam Smith Institute, Douglas called for the abolition of Council Tax and for VAT to be converted into a local sales tax, to make local authorities self-financing.

Mr Carswell’s also has a blog and his latest piece describes a problem with his local council - but it is a tale we have heard countless times about councils the length and breadth of the UK.

Thanks to the Local Government Act 2000, introduced by the aforementioned Mr Blair, unelected and unaccountable officials now wield enormous power which can be exercised without reference to the elected councillors. The committee system which worked well for generations has been thrown on to the scrap heap, and ordinary councillors have been completely emasculated by the Cabinet system.

I do hope that when the Conservatives are returned to office at the next election, that Mr Carswell is given a prominent role in reforming local government and restoring real power to the people. I reprint his blog below.


What’s gone wrong with local government?
By Douglas Carswell MP

Few things better illustrate what's wrong with local government than this;

Tendring district council in my constituency commissioned an expensive public fountain for Clacton town centre. Some local residents were sceptical, arguing it wasted public money. The fountain enthusiasts argued it put something back into our town. Either way, both sides could take comfort that it was a local decision.

Or was ....

Something called the Health Protection Agency has now got involved. One of their "experts" ordered the fountain shut. Apparently, to comply with "new draft national water guidelines" the fountain must go "on public health grounds as a precautionary measure."

Thus are our town hall officials incapable of running a municipal fountain. Indeed, I doubt they could even run a bath. At no point does it seem to have occurred to Tendring council that if you start asking remote officials whose job it is to say "no" for permission to do something, they are very likely to say "no".

The council didn't have a change of heart because they listened to local people. No. They paid heed to remote health and safety officials.

What is so insulting to local democracy isn't just that a bumptious little official at the Health Protection Agency carries more weight than local residents, but the fact that the council boasts of its willingness to submit to them. Tending council brags "the council is very fortunate to be working so closely with the expert from the Health Protection Agency."

If only council officials worked as closely with voters and the unfortunate, put upon council taxpayer.

Monday 20 October 2008

Is Iceland just the tip of the iceberg?

In 2006, Barnet council took out long terms loans of £40 million “to take advantage of the very low market rate loan available at that time.” (See paragraph 9.3.2 of the report to Cabinet this week)

The report continues: “Earmarking borrowing in this way to a capital project is not the norm….and the action was taken to protect the council from higher borrowing rates expected in 2008 and onwards (i.e. when the actual capital expenditure would be incurred). This prediction on interest rates has indeed occurred…”

However well intentioned the plan, this statement is an admission that the council was speculating on interest rates. The council uses the word “prediction”. The Thesaurus on my computer offers the word “guess” as an alternative.

Whilst interest rates did initially rise, they are now falling again. Our beloved Prime Minister Gordon Brown told Parliament today: “... with interest rates low and falling, inflation expected to come down over the next year, these underlying economic indicators - particularly interest rates - make us stronger than at any other previous downturn.”

Falling interest rates might be good news for some sections of the economy, but could they spell further disaster for Barnet Council, even if we eventually get back the money frozen in Iceland?

The council claims justification for their investment strategy because for two two years they made a ‘profit’ on the interest rate differential. But if rates continue to fall, will the council be paying more in interest than it is receiving, given that some of the big loans taken out were at fixed rates?

How much more of our money is at risk?

We need to know who made the decision to borrow all this money. Who authorised it? What kind of risk assessment was carried out? If it was this easy to make a profit, then we would all be doing it!

It seems as if the council was relying on alchemists for devising its investment policies, and we will be left to pick up the bill for their reckless folly.

Statler & Waldorf Are Back!

As Maggie herself would have put it. Rejoice! Rejoice!

Friday 17 October 2008

Money For Nothing - Barnet’s in Dire Straits

Just over a week has passed since Black Thursday - the day the news broke that nearly £28 million of our money was at risk in the Icelandic banking collapse. It’s a sad, sad situation but still no apology or words of comfort to put residents at ease.

If the council could turn back time, I am sure they would, and nobody is accusing them of deliberately losing our money. So is it really asking too much for Mike Freer to say: “We're very sorry about this. We are working around the clock to try and get your money back.” But sorry seems to be the hardest word.

Next week, a report on this crisis will be discussed by the Cabinet. You can download it from the council’s web site.

Paragraph 6.2 states: "The 2007/08 Statement of Accounts, which have been signed off by the Council’s external auditors, includes £1.037m of interest which has not yet been received and therefore the accounts are potentially overstated by that amount should the interest not be paid."

Isn't this what Enron was doing - overstating profits by including revenue which had not actually been received? Has the council been trying to massage the figures to help get an improved rating from the Audit Commission? Can anyone explain what’s going on?

The council would have you believe they were acting prudently, but paragraph 9.3.2. of the report contains an admission that they were playing the money markets. The council borrowed heavily in 2006 because they thought the rates of interest would be higher in 2008 when the cash was actually required. You can dress that up as much as you like, but borrowing money you don't yet need because you think the rates will go up in the future is speculation, pure and simple!

Council chiefs are patting themselves on the back because their interest rate prediction was initially correct. But they got lucky. Lucky, lucky, lucky. Only a few weeks ago, Mystic Mike said that the credit crunch could not have been foreseen. It is one thing for the council to invest its spare cash on a short term basis, but to deliberately borrow long term and lend short term is gambling. Northern Rock tried something similar and look what happened to them.

Paragraph 9.9.4 details possible courses of action the council will have to consider if we don't get our money back. It does not mention putting up council tax. Are they burying bad news, or giving a guaranteed undertaking not to put up our taxes? They should tell us the truth.

Cllr Freer says that Barnet acted responsibly. The crucial point, which applies to all local authorities, is that councils should not have a low risk policy, but a no risk policy - especially in the current climate when money is too tight to mention.

Let us hope that the funds and missing interest will soon be returned otherwise some heads are gonna have to roll.

Thursday 16 October 2008

Barnet Council admits to being run by clowns

The council has posted a ‘leadership’ video clip on YouTube in which officer Jonathan Smale describes the leader as a ringmaster, surrounded by clowns - one of whom is wearing a green jacket because he is environmentally aware! Watch it for yourself if you think I am making this up!

Mr Smale says clowns are prepared to take risks. Quite so. But not usually with £28 million of our money.

I don’t know whether to laugh or cry at such an absurd waste of public resources.

Wednesday 15 October 2008

Rog T Is Back!

As many of you know, the Barnet Times pulled Rog T’s blog from their web site in response to his article criticising the council’s posting of an offensive video clip on YouTube.

Unfortunately, under the stewardship of its Editor Phil Crowther, the paper is developing a reputation for removing articles that could cause embarrassment to some. Far safer to stick with stories about cats stuck up trees.

But fear not! Much as the political classes would like those who have the audacity to hold a contrary viewpoint to simply shut up and go away, Rog has launched his own blog - The Barnet Eye - which will be subject only to his own editorial constraints.

Visit his new blog at

Sunday 12 October 2008

Barnet pays dearly for Council’s incompetence

Thursday 9th October 2008 - Black Thursday - will go down in history as the day the once proud Borough of Barnet was brought to its knees by the incompetence, negligence and sheer recklessness of those charged with running the council.

As residents awoke to the dreadful news that nearly £28 million of our money might have been lost on a high risk investment strategy, what words of comfort were there for those of us who will ultimately have to pick up the bill? None. Because the council’s spin doctors were far too busy trying to find other people to blame for this debacle.

Householders are now facing the double whammy of massive council tax rises and having front line services slashed beyond recognition to plug the gaping crater in the accounts if we don’t get all of our money back. And while Barnet burns, leader Mike Freer fiddles: “No council could have reasonably foreseen the collapse of Iceland's banks in what once were safe deposits” was his response.

Is that so, Mike? Then please explain how Brighton & Hove City Council managed to remove all its Icelandic investments a year ago when they had an inkling of the impending crash.

You’re supposed to be a banker, Mr Freer, or is that just a typographical error? What were you doing when credit agency Fitch first sounded warnings. Their spokesman Martin Winn told the Daily Telegraph “We have been highlighting a growing risk about the Icelandic banking system since February 2007. The rating BBB+ is very high risk for a Western European bank.”

Those warnings were passed on to many local council finance managers, prompting some, like Brighton, to stop investing in Iceland. Did Barnet miss that one, Mike?

Well what about the warning from the highly respected Moody’s Investors Service who cut their ratings on Icelandic banks eight months ago? Or the warning from the Conservative and LibDem parties who both sounded the alarm bells in June? Were you too busy watching the Chief Executive’s wide screen television to notice what was going on?

You can’t pass the buck on this one, Mikey. You hold the resources portfolio. Ultimately, it was your responsibility. If this money cannot be recovered - but let us hope that it can - then it represents the biggest case of gross negligence ever known to the Borough.

As Simon Heffer said in his weekly Telegraph column:
As for the councils who have lost fortunes by investing in Icelandic banks, even though it had long been clear these were risky: sack the officials who took such advice and surcharge the councillors who endorsed it. Too many people have forgotten what a serious business managing money is.”

In trying to defend the council’s recklessness, Cllr Freer - the Tory candidate for Finchley & Golders Green - told the Barnet Times: “Councils have been actively encouraged, and indeed praised, by Whitehall to undertake investments of this kind.” What a complete and utter fabrication! Since when did the government encourage councils to play the money markets and risk taxpayers money?

Did anybody in Barnet Council ever stop to ask why Icelandic banks were paying a higher rate of interest than UK banks? You don’t need to be a banker to know that it was because they were a higher risk.

In all Mr Freer’s excitement to blame other people, he forgot to mention that Barnet is involved in the high risk strategy of arbitrage - borrowing from one bank and lending to another at a higher rate. This is not what councils should be doing and the practice might actually be illegal. Western Isles Council had to be bailed out by the government in 1991 when it lost £24 million which it had borrowed and subsequently lent to the discredited BCCI to try and make a profit.

In 2002 when the Conservatives came to power, the council had borrowings of £39 million. That figure has now risen to an astronomical £215 million. Some of the money has been used to pay for infrastructure works such as the road resurfacing programme and some to repay other loans (perhaps Barnet was advised by Carol Vordeman?) But it is now clear that a significant proportion of this money has been spent on speculative investments.

Perhaps Cllr Freer can advise us precisely how much of our money has been gambled on the money markets, how much more is at risk and who authorised these transactions?

Barnet Council has been criticised by the TaxPayers Alliance for its reckless behaviour. Instead of addressing the TPA’s concerns, the notoriously thin skinned Freer responded “The TaxPayers' Alliance has little grasp of reality when it comes to the complex nature of local authority finances.”

I do not think you will find many people in this Borough who are particularly impressed with your grasp of local authority finances either, Mr Freer. You have not even had the decency to apologise.

Wednesday 8 October 2008

Underhill Sale Confirmed As Illegal

The long awaited PricewaterhouseCoopers report was published this morning. It is a ninety-six page document with three volumes of supporting documentation, each over two inches thick. It will therefore take a little time to work through it all and give a full response. In the mean time, to summarise, the Council's Auditors concluded:

We are of the view that the sale of the freehold of Underhill did breach requirements of section 123 Local Government Act 1972 and it was occasioned by a number of procedural breaches, misjudgement and errors by a number of officers.

Based on the valuation information available to us, the entry in the financial accounts for the year ended 31 March 2002 in respect of the consideration for the sale of Underhill is contrary to law, on the basis that the £10,000 received together with the contingent further consideration does not meet the requirements of section 123 of the LGA 1972.

We have reservations as to whether it was appropriate to use a delegated powers report to authorise the disposal of the freehold interest. Even if this were a legitimate route, there were manifest flaws in the authorisation process, notably:

  • The Borough Solicitor’s concerns were not properly addressed;
  • The Constitutional requirement for publication of the DPR were not put in place;
  • The errors in drafting create doubt as to whether the delegated powers report was properly approved.

We are also concerned at the apparent absence of debate about the benefits to the Council of any disposing of the freehold interest in the Underhill stadium, and the granting of a proportion of any future development gain to the Company.

I am grateful to the Auditor for stating in clear and concise terms that the council acted unlawfully. However I am disappointed that he is not taking action against any individuals involved in this matter.

Given that the transaction was unlawful, I do not see how the Borough Solicitor Jeff Lustig can remain in his job. His excuse is that he had delegated the work to other people. Even if that was so, ultimately as head of the legal department he must carry the can for the failure of his department to carry out its duties lawfully. That is what happens in the real world.

The report says that one officer has been disciplined. That was Mr Dave Stephens, the Borough Valuer. He was given a written warning. But documents provided by the auditor show that just one month after receiving his written warning, he was promoted and given a wage rise. That taught him a lesson!!

I do have very serious concerns regarding the auditor’s comments in connection with the land valuation, but I will write about that in a separate blog in due course.

There is also the matter which PwC could not investigate as to whether an officer of the council gave evidence to the High Court about the sale which was at variance with the known facts. I am taking advice on this aspect and will comment in detail when it is appropriate to do so.

Although the council now recognises that it did not need to sell the freehold in order to help the football club, it is clear that they seriously failed the residents and taxpayers of the Borough. I have yet to see any evidence that processes have been changed to prevent further abuses of the democratic process occurring. Indeed, things actually seem to be getting worse.

I have been advised that PwC’s bill is over £875,000. I am surprised and shocked at that figure. The Auditor was legally required to be mindful of the cost to the public purse. He could not carry out an investigation if he believed that the cost would be disproportionate to the matter at hand. It is therefore reasonable to assume that he had sufficient concerns about the sale to have launched his investigation.

But was it worth it? If steps are taken to improve democracy, improve scrutiny and improve accountability, then the cost will be justified. However if, as I fear, the council sweeps this under the carpet and carries on as normal, then it will have been a complete waste of time and effort.

Tuesday 7 October 2008

Tory conference is good news for Barnet

The recent Conservative Party Conference was somewhat overshadowed by the recent turmoil in the world’s financial markets, so you may have missed some interesting policy announcements which are bound to appeal to voters of all political colours.

Shadow Chancellor George Osborne announced that there would be a two year freeze on council tax which will come as a welcome relief to everyone who has seen their tax bill rise relentlessly year on year over the last decade.

In Barnet, these rises have been due to a combination of poor settlement grants from central government and Labour having raided the kitty before they left office in 2002. But whatever the reason, taxpayers need a break.

There is, however, a potential loophole in Mr Osborne’s proposals because councils could try to raise additional revenue through stealth measures such as increased rents for council tenants, supplementary business rates, car parking fees or penalty charge notices.

George Osborne’s plans to allow councils to increase expenditure by 2.5%, to be paid for by an increased government grant - in turn to be paid for by reducing government spending on consultants and advertising.

But for his plan to work, there must be a corresponding freeze on charges raised by local authorities. The key buzzword at the moment is responsibility. Councils across the country spend far too much of our money on frivolous vanity projects, paying obscene salaries for chief officers and councillors, and creating thousands of non jobs such as Barnet’s very own Social Media Manager. All of these extravagances must come to an end because the taxpayer’s pips are well and truly squeaking.

David Cameron gave an excellent speech by all accounts. Two items caught my attention.

First was his announcement that taxpayers money cannot be used to buy plasma screens. This comes a bit late for us in Barnet with £14,000 having already been frittered away on wide screen televisions for chief officers, but clearly Mr Cameron was sending a coded message to Barnet that enough is enough.

Second was his statement that quangos have seen their day. The Taxpayers Alliance estimates that the total cost of these bodies was £101 billion in 2007 - a figure too large to even comprehend.

Many quangos duplicate the work of others and there does not appear to be any independent scrutiny of their effectiveness. Appointments are rarely based on ability or experience. Rather, quangos seem to exist purely for members of the political classes to give each other cosy little jobs with plum allowances.

So, if you want to stop your tax being wasted lining the pockets of money grabbing politicos then the answer is simple. Vote Conservative!

Sunday 5 October 2008

Gordon Brown - Beware the Ides of Barnet

Picture the scene. A leader under pressure. Plots all around him. Leaks to the press. A head of steam building up to remove him from office. What is he to do?

Against the advice of his closest friends and political confidantes he extends a warm hand to his nemesis. The man who previously had nothing but bad things to say about him. Someone who wished him out.

A brilliant plan by the beleaguered leader or a crucial strategic mistake?

History suggests the latter, for this is not the story of Gordon Brown bringing Peter Mandelson back into the Cabinet. This is the story of Brian Salinger supporting Mike Freer for Deputy Leader of the Council in 2005.

A year later, despite a fantastic election result, Salinger sat helplessly as his so called friends ruthlessly knifed him in the chest, allowing Freer to claim the crown.

Mr Brown, take note. Your days as Prime Minister were already numbered. Now that number is even smaller.

Friday 3 October 2008

Council Refuses To Remove Offensive Video

This article has been updated. See below

Barnet Council has recently found a new way to waste taxpayers money by posting pointless video clips on YouTube of local residents talking about the area where they live. One such clip was posted on 29th September - the eve of the Jewish New Year.

One minute into the video, the resident says: “I know it's mainly a Jewish area so a lot of the Jewish people have got things, but for the normal British people...there is nothing really for them.”

Being Jewish and being normal are not mutually exclusive.

I e-mailed Barnet’s Communications and Consultation Director Emer Coleman explaining that whilst I realised this person was not speaking for the council, I did not think they should be promoting her views. I asked for the clip to be removed.

Mr Dominic Campbell, the council’s Social Media Manager (no, I have no idea what one of those is either) replied: “While we understand your concerns, the views expressed are those of the resident and not those of Barnet Council and as such we do not intend to take any action at this point.”

This is absolute nonsense! Are we supposed to believe that if a resident made a video clip saying “I think the Chief Executive is an overpaid waste of space and should be sacked” they would allow it to remain on the website?

Let us give this resident the benefit of the doubt and say that she was not intentionally being anti-Semitic. Indeed she would probably tell you that some of her best friends are Jewish. Rather, let us assume that she has a somewhat weak grasp of the English language and did not appreciate the meaning of what she was saying.

But the same cannot be said of Barnet Council’s highly educated officers. Is it that difficult for them to see why these remarks are offensive?

Our well beloved leader Mike Freer claims to be a good friend of the Jewish community. Let him prove it by ordering the video clip to be removed immediately and apologising for Mr Campbell’s crass insensitivity.

Update 03.10.08 (11.15 am) The council has given in to pressure and now removed the video. However, they have not offered an apology or an explanation as to how it was ever allowed to be posted.

Wednesday 1 October 2008

Barnet FC Freehold Announcement Imminent

The long running investigation into the council's unlawful sale of the freehold of Barnet Football Club's stadium has finally been completed and the council’s auditors, PricewaterhouseCoopers, will be publishing their findings on 8th October - a mere 6 years, 6 months and 12 days since the land was sold by the previous Labour/LibDem Administration for a measly £10,000.

Opponents of the investigation are very anxious to concentrate only on the cost of the inquiry. Perhaps this is because they do not want the public to be reminded that in 2004, the High Court declared that the sale contravened s.123 Local Government Act 1972.

The sale had previously been described by an independent inquiry team as being “a major breach of the democratic process.” Add to that the High Court declaration that the sale was unlawful and you have the most damning indictment possible of Barnet Council.

To those who have opposed the auditor’s investigation, I ask:

1. Do you support the sale by the previous Labour/LibDem council on unlawful terms?
2. Are you happy that the land was sold secretly for £10,000 despite being worth considerably more?
3. Are you happy for all the procedural irregularities to be swept under the carpet?
4. Are you happy that nobody has been held to account for their actions?

Many people have raised concerns as to PwC’s costs. Opponents of the inquiry conveniently forget that the auditor is legally required to be mindful of the cost to the public purse of any audit investigation. He cannot carry out an inquiry if he believes that the cost would be disproportionate to the matter at hand.

Furthermore, the auditor alone decides whether or not to conduct an investigation. The public are entitled to ask for an investigation, but they have no right to force the auditor to hold one. Therefore, it is reasonable to assume that PwC had sufficient concerns about the sale to have launched their investigation in the first place.

It should be stressed that the PwC investigation has absolutely nothing to do with Barnet Football Club. Over the last few years I have spoken many times with club Chairman Tony Kleanthous. He has always been keen to point out that the club did nothing wrong. But PwC were not asked to investigate the club’s conduct in the transaction, and nor did they have the power to do so. They were only investigating the council’s conduct.

But just as the Labour Government is trying to divert public attention away from its abysmal mismanagement of the economy by blaming everything and everyone else, so Barnet council now seeks to divert attention from its failure to comply with the law or to take action against those responsible.

The spin coming from the council is that the investigation has cost about £1 million and it is all David Miller’s fault. Talk about shooting the mesenger! This nonsense started in July when council Leader Mike Freer posted the most outrageous and blatant lie on Rog T’s blog when he said “The referral to the external auditors was by three members of the public not the Council”.

Yes, three members of the public (of whom I am one) made a complaint to the auditor, but it was the Cabinet which voted on 1st June 2004 to refer the matter to the Auditor for further investigation after the internal investigation carried out by Brian Reynolds was unanimously rejected by them. Cllr Freer was present at that meeting and voted in support of the resolution.

The then leader, Victor Lyon, formally wrote to PwC on 23rd June 2004 requesting an investigation.

For the record, it should be noted that whilst I and another Barnet resident first contacted PwC in 2002, our complaints were not formally registered until 2005 - long after Cllr Freer and his chums had made their own complaint.

The original auditor assigned to Barnet told me that he would not start his inquiry whilst Barnet was carrying out its own internal investigations. You would need to ask the council why they did not call in the auditor on day one, which would have been the sensible thing to have done.

As for the claim over costs, the figure of £1 million has been thrown about for some time now, but does it include the £200,000 spent on legal indemnities given by the council to the officers and councillors under investigation? PwC have hired their own lawyers, but at what cost?

Does the £1million include the hundreds of thousands of pounds wasted on the failed and futile High Court case against Barnet Football Club?

I rather suspect that most of the money has been spent on lawyers and legal fees rather than going to PwC. I have served a Freedom of Information request on the council to get the definitive answer and I have been told that I will have a reply by 10th October. Watch out for a new posting on this blog.

In the mean time, we can only sit and wait for PwC’s findings. I hope the entire report will be placed in the public domain as there are some really important documents which the public needs to see. Unfortunately, I am legally prevented from publishing them at this time.