Gloves off

Eric Pickles - DCLG 4624682386 3166f51890 146x219Graeme Creer examines the Communities Secretary's decision to send commissioners into Tower Hamlets Council and the authority's response.

“I am a fan” said David Cameron “of directly elected mayors”. There may be one or two exceptions. Lutfur Rahman is the elected Mayor of Tower Hamlets. On 4 November Eric Pickles told the House of Commons that he proposed to appoint commissioners to exercise some of the Council’s functions. He referred to “rotten boroughs” and said “If I was the mayor of Tower Hamlets, I would be hanging my head in shame” adding carefully “not that I have made a final decision.”

Tower Hamlets and Mr Rahman are engaged in an epic battle with Mr Pickles, redolent of 1980s politics and pay-per-view TV boxing. Mr Pickles attacks with new legislation, Tower Hamlets counter-attacks through the courts.

On the undercard, the Council has already been roughed up by an Ofcom ruling that its TV adverts were too political, and is tussling with Mr Pickles about its free newspaper, East End Life. The Electoral Commission issued a critical but helpful report about the speed of the count in the 2014 elections. An election petition is awaiting a hearing, having survived a legal challenge by Mr Rahman. The Information Commissioner is monitoring the speed of FOI responses. And Mr Pickles cited “Tower Hamlets Council barring a 71-year-old resident from filming” as one of the reasons for obliging local authorities to allow their meetings to be recorded.

The top of the bill opened with a March 2014 Panorama programme alleging that the Council had allocated grants to community organisations for political purposes. Tower Hamlets hired specialist lawyers and consultants, and tried to halt the programme because of its proximity to the election. A few days later, Mr Pickles used new powers under the Local Audit and Accountability Act 2014 to appoint inspectors to investigate whether the Council was complying with its best value duty, “following the receipt of a number of documents” (which were passed on to the police, who found “no evidence of criminality”). The Council asked for the documents, but was unhappy with the response. It challenged the investigator’s appointment but permission was rejected on the ground of delay – more on this later.  

PriceWaterhouseCoopers (PWC) conducted the investigation, at a cost (to Tower Hamlets) of just under £1m. Mr Pickles said it would have been cheaper if the Council had been less obstructive. Their findings were:

  1. The process for awarding grants failed to meet the best value duty. There was a lack of transparency as to the criteria, evaluation and rationale for grant decisions, with organisations which had not met minimum standards receiving grants, and a high proportion of member-led decisions. There had been no external review, and there were gaps in the monitoring of grant recipients.
  2. They found best value failure in three property disposals. In the sale of Poplar Town Hall, the Council preferred a bid which was marginally late and not the highest. It ran a messy contract race, and there was an indirect connection between the winning bidder and an organisation that assisted the Mayor in his campaign, although it was unclear whether anyone in the Council knew about it. Sutton Street Depot was sold to a late bidder, in a way that could have exposed the Council financially. This was not the highest bid, but the bidder offered community benefits and it seemed that other bidders were asked to provide such information. In the lease of another property, only two bids were ultimately considered, one bidder was a consortium member of the other, and the Council’s initial rental value assessment was higher than the bids, which offered community benefits which the Council had no formal model for valuing.
  3. Unsurprisingly, PWC found best value failures in relation to publicity. They criticised the television advertisements. They did not criticise engaging external advisers for the Panorama programme, but spoke of the risk that the demarcation line between the interests of the Council and those of the Mayor, in his political capacity, could be crossed. They did not find that it had been, but they said that there was a lack of control around monitoring, and a lack of clear documentation. They commented that the Council had devoted considerably more resource to countering the Panorama allegations than to determining whether there was any substance to them.
  4. There was no breach of duty in relation to contracting, just some weaknesses.
  5. There were governance failures, not identified directly but arising by implication from the inability to prevent the other failures, and from a “tendency towards denial or obfuscation rather than an inclination to investigate concerns raised”.

Whether all this justifies Mr Pickles’ invective, and the formal intervention, is a matter of opinion. Mr Rahman said that these were process and governance issues, which could be addressed, but Mr Pickles has not pulled his punches. He proposes to:

1.    Appoint three commissioners until March 2017, subject to review.

2.    Require them and the Council to draw up an action plan, based on the following interventions:

  • The Council must recruit a permanent Head of Paid Service, Monitoring Officer and Section 151 Officer, agreed by the commissioners, and refrain from dismissing, suspending or sidestepping them unless the commissioners agree.
  • The commissioners will exercise the Council’s grant-giving powers, having regard to the Council’s views.
  • Property disposals, other than individual houses, must be approved by the commissioners.
  • The Council must agree a costed plan for publicity with the commissioners, deliver it, and adopt the commissioners’ recommendations.
  • The commissioners will appoint an electoral registration officer and a returning officer for elections.
  • The Council and the commissioners will prepare a plan for addressing the contracting weaknesses. It must seek the agreement of the commissioners before entering into any contract contrary to a statutory officer’s recommendation.
  • The Council has been asked to give two interim written undertakings: not to enter into or modify any agreement for the making of grants, or appoint or designate any statutory officer,  without CLG approval

The Council has said that it will give the undertakings, and Mr Rahman has said that the actions are unjustified and politically motivated, and that the requirements are excessive.

Goss J gave judgement in the Council’s renewed application for permission to seek judicial review of the decision to appoint PWC in R (on the application of London Borough of Tower Hamlets v SoS for Communities and Local Government on 14 November.

First, should the application be rejected on the grounds of delay? Proceedings were started just within the three month deadline, but arguably not “promptly”. The Council said it was impeded by the pre-election “purdah period”. Goss J rejected the delay argument, but remarked that the way the proceedings had been pursued impinged on the strength of the claim.  

Second, was there an arguable case that Mr Pickles had acted unlawfully? The Council’s case was that he had failed to give adequate reasons, or to explain which areas of governance would be inspected. Goss J said that there was no express statutory duty to give reasons, just a common law duty of fairness and natural justice. The statutory duty was just to identify whether the local authority had generally performed its “best value” duties under section 3 of the Local Government Act 1999 “to make arrangements to secure continuous improvement in the way in which its functions are exercised, having regard to a combination of economy, efficiency and effectiveness”, which was a very broad concept. Concerns about fraud had to involve economic issues, efficiency and effectiveness. The reasons given were sufficiently precise, the Council could not credibly claim to be in the dark, and its claim was unarguable.

It was never going to be easy to succeed with an argument that you did not know what Mr Pickles was on about when, with the benefit of hindsight, it was perfectly plain. Tower Hamlets has lost this round. Mr Pickles is leading on points, but Tower Hamlets is not on the canvas yet, and there will undoubtedly be more of this to come.

Graeme Creer is a consultant at Weightmans LLP. He can be contacted on 0151 243 9834 or This email address is being protected from spambots. You need JavaScript enabled to view it..