Wednesday, 30 October 2013

Broken Barnet plc- the bank that like to say yes - to Capita, or: another version of the truth

But first make out a cheque for £16.1 million to 'Crapita', Councillor Cornelius

Following on from the last post, then, here is a more forensic examination of the most interesting revelation to emerge, wriggling,  from the can of worms that is the NSCSO Capita contract, so happily agreed by our Tory councillors last December, and an admission which was the subject of Mrs Angry's awkward questions put to last week's Audit meeting.

If you recall, John Dix, blogger Mr Reasonable, has identified recently that huge payments have been made by the council to Capita - totalling more than £30 million. 

When asked about this matter by a councillor at the contract monitoring committee a couple of weeks ago, the head of Capita in Barnet said this represented 'interim' payments relating to the period during the Judicial Review. Protest from the public gallery refuted this, and residents informed the meeting that this was not true, and he then deferred to the senior officer present, who could not or would not respond, and said she would only do so privately to the councillor.

At last week's Audit committee meeting, questions from Mrs Angry, which had been allowed only after much argument, and strong opposition from senior officers, confirmed that only some of the £30 million was for interim payments, of which £4.1 million was due to be returned -and that was mysteriously refunded over the weekend between the submission of the questions and the meeting. 

Other amounts of the total sum, it transpired, a staggering £16.1 million, represent a previously unacknowledged and frankly astonishing amount of capital investment demanded from Barnet Council by Capita as part of the new 'partnership'.

Why is this astonishing? Because until now, we have been given to understand that the outsourcing programme was necessary so that Capita could provide the capital investment that our services require, and in order to make savings.

Take a look at this post by fellow blogger Mr Mustard, here  from 10th December 2012, only four days after the fateful council meeting in which our Tory councillors signed off the deal with Capita. 

The post is entitled "Investment" = borrowing from Capita" in which he took Cllr Robert Rams to task for this letter sent to the local Barnet Times: 

As you will have read, Tory cabinet member Rams, one of the key advocates of the One Barnet privatisation, is here castigating the Labour group in Barnet for daring to suggest that instead of outsourcing, there could be an in-house solution, saving jobs, and keeping all efficiency savings for local residents rather than in order to line the pockets of Capita shareholders. Rams tweeted on 30th November:

Barnet Labour Party let the cat out of the bag last night - their alternative to outsourcing is to BORROW £13.5m to pay for new IT!!

Neither a borrower nor a lender be: just hand residents' council tax over to Capita as a lovely present.

In fact Mr Mustard's heading is wrong, because now  we know that "Investment" = not borrowing money from anyone, but giving money to Capita ...

Councillor Rams says that for the council to borrow this level of funding for investment would cost every man, woman and child in Barnet £41. Instead of such financial profligacy, the idea was that our prudent Tory councillors would be given this investment by Capita, as detailed in the business model shown in Mr Mustard's post: 

It states here: 

"Capita has planned investment of £17.5 million to transform the services ..."

Perfectly clear: and we were told constantly by our Tory leader and councillors that this investment by Capita was what was needed to sustain and even exceed the standard of service provision. At no time were we given to understand that Barnet Council would be funding the investment itself, or rather that Barnet taxpayers would be stumping up the cash. 
As John Dix has pointed out, in the business model it states here , on page 50:

A partnership with the private sector will be the option best available to provide investment into the service, which would not be possible through an in-house option due to the state of the council's finances.

So the state of the council's finances does not, it seems, preclude the donation of £16 million from the taxpayers' piggy bank to help Capita out, and save them borrowing the money.

Clearly the interests of Capita are more important than the residents and council tax payers and the poor council employees losing their jobs.

On the council's own website, in the course of its idiot's guide to One Barnet - see here , updated after August 5th, helpfully explains under the NSCSO/CSG section that:
Capita will make an upfront investment which will provide improved Information Technology and telephone support to improve council back office services. 

 That is worth repeating, I think, and louder:

CAPITA will make an upfront investment which will provide improved Information Technology and telephone support to improve council back office services.

Where is this upfront investment? 

And in a press release issued on August 6th:

Capita will also make an £8 million pound investment in technology to improve council back office services.

So Capita is to make an investment in council services, but using money given by the council. Hmm.

Let's jump ahead now from the business model to the contract, which of course as we now know our Tory councillors did not look at in any detail, as suggested by Tory councillor Khatri's statements at the July Audit meeting, which you can read about here:

 "Khatri told the committee:

that as a member of the council he was of the opinion that there had not been transparency over the DRS contract he was expected to approve.

The room fell silent. His fellow Tory councillor Hugh Rayner froze in his seat, visibly unnerved.

Councillor Khatri described the 'ridiculous' way in which he and his colleagues had been given the most minimal information, in rushed conditions, material strewn around a table,  and a couple of hours to inspect the relevant material, and pressed into agreeing something they simply had not had time to grasp.

How could that be called transparency?"

 Part of the NSCSO Capita contract members had 'a couple of hours' to read

And indeed, looking at this censored paragraph in the now partly published contract, it would appear that things become even more puzzling. 

 Go to point 11.5:

The Capital Contribution of REDACTED  is in relation to the following investments made by the Service Provider as shown in the Financial Model set out in Appendix 1 to this Schedule (TT tab lines 7 to 283), and shall be payable by the Authority to the Service Provider on the first Business Day following the Service Transfer Date. All other investment shown on this tab in the Financial Model and not recovered through the Capital Contribution shall be recovered through the Periodic Service Payments as Deferred Revenue.

Got that? The following investments made by the Service Provider, with amounts blacked out, and the capital sum redacted ...  but crucially it does say in relation to the following investments made by the Service Provider, ie Capita, and implies the main source of funding is by the company, not the authority. 

What was the redacted sum, and did the executive, the leader and Cabinet members understand this to mean £16 million of investment was to be handed over by us? 

If so, did they mislead residents with statements about the necessity of investment by Capita?

In August 2012, while Tory leader Richard Cornelius was safely out of the way, relaxing in his French holiday home, the senior management team slipped out a statement informing staff that they had decided to change the other contract model to a Joint Venture - without any right to do so, and without any knowledge of the matter by the leader.

In August 2013, on the day before the signing of the contracts with Capita ie 5th August, another interesting decision was made. 

While most other people were away, this time the Leader was obliged to stay at home, and required to sign his approval to the handing over to Capita of £16,118,796, as reported in a decision you can read via the link below. 

The details state that this is not a key decision. 

Odd that it was only signed off in haste the day before the contract signing, is it not?

My emphasis.

8.1 Further details in respect of the NSCSO contract are contained within the NSCSO full business case which was agreed by Cabinet on the 6 December 2012. This report set out details in respect of the investment in the NSCSO services, but it did not formally request approval for this investment to be added into the Council’s capital programme. This report requests this approval.

So the agreement to hand over such a whopping sum of money to Capita, rather than receive it from them, was implicitly agreed at the time of the Cabinet approval on December 6th, but in a way that kept the information from common knowledge. 

If you look at the following report submitted to this meeting, you will find it littered with references to the investment due to be made by Capita, as agreed in the business model.

See page 32, for example, repeating again the refusal to consider an in-house option on the basis that -

The council has limited capability to secure and manage the significant investment, transformation and remodelling required for these services to preserve service levels, achieve strategic objectives and reduce cost.

And then on page 41,  Table 5.1, Key Commercial Risk Areas - 'inability to source investment capital' by the partner ie Capita - oh, low risk, so no chance that would ever happen. 

Except - it did happen. Or at least until Capita went to the council and asked for some money from our savings, so as to make savings - mostly aspirational and immeasurable, as evidenced by the endlessly varying figures we are given - oh, and lots of profit for Capita.

The addition to the Council's capital programme was not sanctioned until eight months later, the day before the contracts were signed. 

The formal authorisation of this capital expenditure of £16.1 million, on 5th August, was clearly described as a decision, but according to the document, NOT a key decision. 

How very strange, when according to the council's own constitution:

Key decisions are those significant in financial terms or in their effect on communities comprising two or more wards.
And also according to the constitution, when a key decision is made, this must be the subject of discussion within the public domain, and when involving a decision outside the budget framework, referred to full council.
When key decisions are to be discussed or made, notification is published at least 28 days before. If these decisions are to be discussed with council officers at a meeting of the Executive, this will generally be open for the public to attend, except where personal or confidential matters are being discussed. The Executive has to make decisions that are in line with the Council’s overall policies and budget. If it wishes to make a decision that is outside the budget or policy framework, this must be referred to the full Council to decide.
Not only has the council made the decision to take on the capital investment of £16 million in secret, it has continued to imply to residents that the investment is being made not by Capita, but by the use of their council taxes, held in reserve.

The excuse given to Mrs Angry at last week's Audit meeting regarding the decision that Barnet would pay for the capital investment was that we can obtain cheaper rates of borrowing, stating:

The council agreed to fund the capital costs up front because the council benefits from a lower interest rates which keeps the overall cost of funding CSG as low as possible.

Oh. But ... lower interest rates would only be of significance if this money was being borrowed, wouldn't it?

Barnet Council has taken the £16.1 million from council tax reserves, held on deposit, where it was earning us interest, which will now be lost, as well as the capital sums.

There are so many questions that demand answers.

  • What was the redacted amount of capital contribution defined in the contract? 

  • If it matches the amount approved by Cornelius in August, why is it still redacted? 

  • How many councillors saw this redacted amount, in the very short time in which they were allowed to view the 8,000 page contract?

  •  Was the contract deliberately worded in such a way so as to imply that the ambiguous term 'partnership investment' could mean either investment by Capita or the authority itself?

  • Did the Cabinet members know at the time of approving the deal in December that, contrary to statements made to residents that Capita would be providing substantial amounts of investment, Barnet Council would be taking the money from council tax reserves?

  • When was the decision to use council reserves for capital investment rather than being given the money by Capita made, and why?

  • Why was the business model not amended before it went to Cabinet on 6th December?

  • Was the change of plan, or at least the astonishing level of investment demanded from Barnet,  linked to the delay caused by the Judicial Review and appeal?

  • Did Capita threaten to pull out and did Barnet offer to supply investment in order to maintain the deal?
As the Audit committee Chair Lord Palmer commented last week, Barnet Council has acted as Capita's banker. 

You may think this is a suitable position for a local authority to assume. I most certainly do not, and I am certain that the vast majority of residents or taxpayers will be outraged by this generosity with their hard earned cash.

This 'partnership' of Barnet Council with Capita seems to me to be not so much a partnership of equals, but a relationship of abject submission, and in the matter of the capital investment the council has indulged in a fundamental misrepresentation of the truth, perpetrated by a Conservative administration intent still, even after the findings of the Judicial Review, to evade the duty of consultation and scrutiny by residents, and even its own elected members.

We thought we knew, didn't we, the full price of becoming the last outpost of the Capita empire, being sold into bondage for the next ten or fifteen years? 

How wrong we were.


Mrs Angry said...

For those readers with concentration problems, let Mrs Angry put the gist of this post in simple terms: a way in which even you, Councillor Rams, can understand, Topsy and Tim style.

It is a lovely day in Capitaville. And it is Mrs Angry's birthday.

Mr Reasonable says he is going to give her a lovely present. Mrs Angry is very pleased.

Mr Reasonable says, oh but Mrs Angry, I have no money, give me some cash at once.

Mrs Angry gives Mr Reasonable her purse.

He takes some money out and buys her a present - oh dear: but he keeps it himself.

He tells everyone in Broken Barnet, however, how generous he is.

The next day Mr Reasonable won't pay Mrs Angry back, as he says he can't afford his bus fare home.

(In fact this is pretty much the story of Mrs Angry's life, but don't worry about her.

No, actually, do worry about her: if only you knew ...)

Disclaimer: Mr Reasonable would never be so horrible in real life, and really is a very nice, and reasonable man .

Anonymous said...

The president of the EU in the next few years.

While we all know that the deficit is temporary, the cuts
at this stage are permanent. Prime Minister Margaret david cameron Thatcher, Education Secretary Michael
Gove, was quoted in a national newspaper as describing
the weakness of his association in unusually frank terms.

Feel free to visit my weblog ::