Wednesday 6 February 2019

The Tail Wagging the Dog: Capita and Barnet - a joint post.

The Tail Wagging the Dog: Capita and Barnet

Barnet's Conservative led administration has never been so divided.

Since the local elections last May, new members of the Tory group have been confronted with the legacy of their longer serving colleagues’ failure in office: the crisis over the Capita contracts, a massive budget deficit, and the exposure of fraud by a Capita manager, enabled by a failure to put in place any adequate system of financial controls.

Members of the previous administration appear not to have grasped the seriousness of the situation, or at least are reluctant to acknowledge the extent of the problems facing this borough. 

After receiving payment of a paltry £4 million from Capita in ‘compensation’, Tory councillors have now voted to delay any immediate severance of ties, in favour of a long drawn out process of assessment, during which time Capita will continue its contractual partnership with this borough, and our services will continue to be left in their control. 

We believe this is quite wrong, and so, it seems, do some Tory members.

At last week's Audit meeting, for example, it was revealed that BDO, the authority's external auditors, are now obliged to visit Capita's offices in Darlington, where their administration of Barnet's Local Government Pension Scheme is based. This extra work will incur an additional charge on top of the audit fee. Capita continue to administer this scheme, despite very serious concerns about standards of performance. 

Also at last week's Audit meeting, there was discussion about why new systems that should have been implemented following the £2 million fraud by a Capita employee were not in use. 

Grant Thornton, Internal Audit, Senior Council Officers and Capita’s Partnership Manager in Barnet had all agreed these control systems should be implemented immediately. A Capita employee, however, based in Chichester, where these payments are handled, had taken it upon themselves not to implement this critical system, a failing only identified when Internal Audit carried out a follow up check. 

At least one of the Tory members had grave misgivings about the continuing partnership with Capita. 

Councillor for Hale, Laithe Jajeh, said at the meeting, “I find it really worrying that someone from Capita (can do this)’s almost the tail wagging the dog …’ He also commented on twitter that assurance from Capita on implementation of Grant Thorntons’ recommendations was ‘not reassuring whatsoever …’ 

He added that Capita’s performance was not good enough and that he was not confident that promised dates for completion would be met.

At a further point in the audit meeting it was identified that 51% of the internal audit recommendations were not completed, the majority of which were the responsibility of Capita. Labour councillor Alison Moore suggested that such a high level of actions not implemented was a sign of an unhealthy organisation. The Head of Assurance said it was a very serious matter from the officers’ perspective. 

The Committee Chairman wanted to take a ‘positive’ view of the situation and suggested that we do not look at criticisms. There was a clear consensus, however, that Councillors, both Conservative and Labour, were not satisfied. 

At last there is an acknowledgement, at least from councillors who were not involved with the original outsourcing exercise, that the partnership with Capita may not be the great panacea we were promised, under the lure of ‘Better services for less money’.

We are facing a review of the contract in February, yet there is a very real concern that decisions have already been made. 

The dispersed structure of the contract, with Capita offices situated all around the country, makes it hard to implement change, hard to control, and hard to monitor. Different reporting lines in different organisations mean that it is difficult to pin down responsibility for actions or inaction. This exacerbates and complicates the failure in accountability between the management of local services, and the local community itself.

We call upon the council to make the outsourcing review as open and unbiased as possible, held in public, with full and meaningful consultation with residents - and with key roles for some of the new Conservative members such as Cllr Jajeh, and Cllr Prager, who seem to have a more clear sighted view of Capita’s performance - and we urge all members to look at how quickly services can be brought back to Barnet, where they can be properly managed, monitored and controlled. 

Derek Dishman
John Dix
Theresa Musgrove
Roger Tichborne

Friday 1 February 2019

The Right Thing to Do: or - Heading off the Public Noise - Barnet Tories and a £22 million loan to Saracens

An example of the grudgingly released, and still redacted, Barnet/Saracens correspondence

Well, then. Time for a return to a story we followed last year, in the midst of Tory Barnet's financial meltdown: a curious tale whose unpicking, via the submission of Freedom of Information requests, has been slow, laborious - and blocked at every point by the council, despite, as you will see, this matter being very definitely a matter of public interest.

Is still being blocked by the council: but it has just been confirmed that the Information Commissioner is now formally investigating why that is the case ...

Yes: a return to the story of the £22 million loan to Saracens Rugby Club, a privately owned company, for whom we must act as brokers, we are told, so as to assist them find the cash to build a new grandstand at their ground. 

I say their ground: of course this is ours, a publicly owned stadium at Copthall, now renamed 'Allianz Park', which the club has the use of, for free - on the basis of a nominal, peppercorn rent. 

At a time when the Tory council faces the consequences of its financial folly in so heavily investing in the Capita contracts, throws bucketloads of money from its reserves at the whopping budget deficit, attempts to install, rather too late, some system of financial control in the aftermath of the massive fraud perpetrated by a Capita manager, what do you think was its priority? 

Pushing through approval to fund Saracen's expansion plans. 


This is a question no one has been able to answer satisfactorily.

We are now committed, thanks to the efforts of the Tory members and senior officers who have arranged this deal, to borrow money on Saracens' behalf from the Public Works Loan Board, an archaic and obscure Treasury department - rumoured to consist of only four civil servants - and which sounds like a sub-committee of Dickens's Circumlocution Office. 

Created in the eighteenth century, and flourishing in the next, this Board was meant to provide funding for much needed projects then creating the basic framework of a new social infrastructure: funding for schools, clean water, sewers. It is meant to have been abolished, but these plans have been shoved to the back of the legislative queue, due to Brexit.

Not in the wildest dreams of the Victorian clerks of the Public Works Loan Board, sitting mutely at their ledgers, signing off bills for these noble aspirations, could there have been a glimmer of an idea that one day in the future, their future colleagues would be handing over millions of pounds of public money in order to subsidise the commercial activities of private companies: but that, effectively, is what is happening here, in Broken Barnet.

A hard day's work, at the Public Works Loan Board:

Our council demands the money from the Board. The Board hands the money over to our council. The council gives the cash to Saracens. Saracens is meant to pay it back, over thirty years. If they stop paying? We carry the debt. 

Does this benefit the borough in any way? Not much: certainly not in any way substantial enough to justify such a risky venture, you might think. A small amount of interest, if payments are maintained. 

Saracens is not a major employer, and, unlike Barnet FC, now driven out of its home territory, has no long history of association with the borough; its community work is hardly irreplaceable. One councillor involved with local charity groups told me that they cannot afford the rates charged by Saracens for use of their rooms. And it seems that even the use by the council of the stadium it owns for election night counts comes at a price. 

What price democracy, in the London Borough of Barnet? 

Quite steep, as it turns out.

So: why then, you may ask, have Tory members and senior officers gone to so much trouble, and spent so much time, funded by Barnet taxpayers, on promoting this loan? 

We don't know.

Why does Saracens not arrange its own commercial loan? 

It seems it can't, or won't, hence the generous offer from us to step in.

Why does Saracens not bear the risk of failure, should the loan repayments, over such a long period, not be honoured?

No apparent answer to that one, when public money is at stake, whether via the PWLB, or Barnet residents and taxpayers.

And all very reasonable questions. But there has been a concerted effort by the council to defy the duty of transparency and accountability to residents and taxpayers in the course of this curious arrangement.

A Freedom of Information request for all correspondence relating to the agreement that led to this deal has been consistently fought since last July, on the basis of various excuses, largely claimed as time spent considering the public interest implications: taken past the time of the committee which approved the loan, for no good reason, as the belated disclosure of material would suggest.

Please tell me when the proposed loan to Saracens was first suggested to the
council, and by whom.

Please give me all copies of all correspondence between council or Capita
representatives and all representatives relating to this proposal.

Please include all internal discussions between officers regarding the loan.

Please include all correspondence by any Conservative councillors regarding
the loan..

Quite clearly this is an issue of considerable public interest, and would be at any time, but at a time of unprecedented financial difficulty, it is even more so. 

Only after six months of challenge has some of the most telling material been released: months after the approval, and only after the ICO had become involved. 

Not all material has been published, including emails from the Leader of the Council. This is despite the Leader apparently not knowing, last year, that his emails had been withheld, and indicating to me at a committee meeting that he had no objection. A senior officer who has been involved in the negotiations also present at this meeting had to tell him that the emails had not been released. He had no idea. Whose decision was it, in that case?

Now we can at least see some of the correspondence that took place. And one can understand why they were so reluctant for this to be disclosed. 

The documents disclosed under FOIA are in the public domain now, however, and available to read below, but there are an absurd number of redactions ... and blank pages ...

Scroll down to the bottom and read from the end, (with some variation in chronological order):

Not only are the emails are littered with redactions - quite wrongly, I would suggest, in many cases - there is a confusing inconsistency in the choice of names blacked out.

Such anonymity is not appropriate if the individual concerned holds a senior position within any body in question and quite clearly in the context of the discussions here, that must be the case. 

Redactions may not be used simply to cover the identity of an individual who is a senior executive, simply because that disclosure might be embarrassing or controversial.

The key figures here, as revealed by the inconsistent redactions, are Cath Shaw, the Deputy Chief Executive, Wayne Butcher, Associate Director at Grant Thornton, (who were charged with producing a (still exempted) report covering 'due diligence' of Saracens' role in the arrangement), Mitesh Velani, CEO for Saracens. There are references to Stephen Mc Donald, Director of Capita Re, and a walk on part played by bemused Tory 'Leader', Cllr Richard Cornelius. Poor Kevin Bartle, Chief Finance Officer, and Section 151 officer, is piggy in the middle.

What does emerge from this correspondence is that the proposal for the £22 million loan to Saracens has been strongly supported and promoted by a small group of senior officers, and a significant amount of time and resources used to make sure this deal is made politically acceptable. Were they asked to do this by a Tory member? If so, why, and why at this time? 

One rather odd feature of this is the involvement of the absurdly titled 'Director of Place', for Capita Re, the Joint Venture that the previous senior management team decided to pursue, before the contracts began, a decision taken without the knowledge or participation of the Tory Leader, Richard Cornelius.

What, you might reasonably ask, are the Director of Capita Re and the Deputy Chief Executive doing, spending so much time, paid for by Barnet tax payers, organising a £22 million loan for a private rugby club? And at this time, of all moments in the dark history of Broken Barnet? Did the Tory administration have nothing better to occupy their interest?

Were there no more pressing issues in Broken Barnet to deal with, at the time? Well, yes there were.

In fact there has never been a time in which the state of the borough has been in a state of crisis more extreme than the one we are now seeing.

At this point, all was falling apart: the Capita contracts - due to be 'realigned' - and the huge budget deficit, temporarily plugged by bunging up the hole with money ransacked from our reserves. The knock on effect of the giant fraud by a Capita manager, and the catastrophic failure in financial control that this exposed. Within a short time we were also engrossed in Bingate, Brexit, and impending cuts to vital services - this is the reality we face, and nothing could be more serious, yet we had time to look down the back of the sofa for £22 million in spare change to lend a rugby club, did we?

Why does the Saracens loan concern senior planning officers, including the Commissioning lead for planning?  All mentioned in the emails, as you will see. At a time when resident dissatisfaction with planning and enforcement - all the remit of the Director of Capita Re - is at an all time high, this seems an inappropriate focus of attention.

There are no doubt perfectly valid reasons for the senior officers' roles in overseeing this process: but we hope that Tory members can explain what those reasons are.

Does Capita receive any contractual gainshare payment or fees from brokering this loan? We would probably not know, as so much of the contracts and its variations are shrouded in secrecy.

Should any senior officers or contractual partners, be putting so much effort into facilitating this project?  Would residents not reasonably expect, at such a time of crisis, that the council and their Capita partners, concentrated on the immediate challenges staring us in the face? Where is the political leadership from the Tory group, so easily persuaded to agree this loan?

Well then.

Here are some choice selections from the FOI material.

Let's start with one email that has the date redacted - it is hard to be certain, but the sequence suggests it is from October 2017, from the deputy CEO to the Tory 'Leader':

So a funding OR financing partner. Sounds like we were lucky not to be asked for the cash outright. Oh, but it must make commercial sense. And they were going to be hard nosed, not fall over and do as asked. Until the Tories fell over and did as asked, with lovely wet noses, and a lot of tail wagging. 

Again, to the Dear 'Leader':

Oh dear. It wouldn't have appeared superficially credible to suggest a commercial loan to a loss-making business

What a shame. Hang on though - Saracens have been convincing as to the reasons why all professional rugby  clubs operate at a loss

Mmm: and Stephen (remember, Director of Capita Re ....) well: his advice is that he thinks this is still the right thing to do ... 

The right thing to do.

Even so, getting this past the empty headed Members may not be - ha ha - the 'formality' we first thought ... The formality! 

There, readers, you have the democratic process of Broken Barnet laid bare.

If the loan goes ahead, our costs will be covered by Saracens (awfully generous), but if it doesn't go ahead ... it will be 'sunk cost' - ie at the expense of the taxpayers of Broken Barnet. Ah. 

And - payment for initial work on this deal , it is suggested, should come from the revenue element of the Infrastructure Reserve. 

Not sure what the Infrastructure Reserve is usually raided for, but one imagines it would have to be for vital projects necessary to the borough. Probably not intended for speculative expenditure of this nature, regarding a loan to a private company.

Read from the bottom up: 

Mr Bartle spells it out. 

The shareholders/board won't stand behind the deal themselves, so they are asking Barnet residents to do it instead. And the Tory leader starts to wobble. What a shame he did not follow his instinctive reaction, and drop the idea. Why didn't he? What persuaded him to ignore any misgivings, and take on such a high risk venture? 

We move on to the investigations and report carried out by Grant Thornton - which we are not allowed to see. Can't think why.

Saracens are not happy with the initial version, according to an email on 6th April, sent by their CEO. The summary contained a number of inaccuracies, he complains. By the 16th April, more dissatisfaction is expressed; Barnet's deputy CEO, Cath Shaw, confides in GT that Saracens think the report 'creates a misleading picture' ...

A sound commercial proposition. Hmm.

On 9th May we catch up on the plans now that the outcome of the election is clear: to the club's CEO, from our deputy CEO:


'the Leader was personally keen on a shareholder guarantee - I absolutely understand this is off the table, but if he continues to push it I wonder if we might suggest a meeting with Nigel Wray?

'if he continues to push it ...'

If the Leader of the Council expresses concerns about Barnet tax payers taking the risk, rather than the shareholders, ie the wealthy owner of Saracens, taking the risk of the loan for their new stand ...?

On the 30th May, we see our Deputy CEO, addressing a long black line of redacted names, asking: Is there a standard list of reasons for making a report exempt?

(According to Mrs Angry's Standard List of Reasons for Making A Report Exempt, from the same manual as: Freedom of Information Requests, How to Obstruct, Whilst Pretending You are Considering the Public Interest  Issue Over a Six Month Period': there is listed only one Reason - to prevent embarrassing material entering the public domain, but of course ... there may be a hundred and one others ...)

On to 11th June: this is illuminating - to 'redacted' again: (why?) & Mr Bartle:

Saracens need to 'get comfortable' with what they are funding, in regard to due diligence work on, erm: themselves. 

Of course they do. Sit back. Here's a cushion. Cup of tea?

By the 25th June, we learn that the Leader has met with the Saracens owner 'who has indicated a willingness to consider the types of additional security set out in the Grant Thornton Report'. Good oh.

Part of that security, of course, is the lease on the stadium that ... we already own, and that is hard to use for any other purpose.

Ah, and then, on the 10th July: to the Leader and - 'redacted', a reference to changes to a public report going to P&R committee: oh, including a mention of awkward points raised by blogger Mr Reasonable (John Dix) in regard to problems with similar deals at Coventry & Northampton; an acknowledgement that Saracens' £45m debt 'has been restructured to create a positive position' ... and: an undertaking to make it more explicit that Saracens' loan will be funded by 'PWLB on-funding', council costs covered, and 'risks mitigated',  to - haha - to head off some of the 'public noise'.

To head off some of the public noise?

That went well, didn't it?

As we know, the 'Leader' clearly was persuaded, somehow, to drop any objection to this deal, and then he and his Tory chums staunchly defended the proposal, even after every reasonable argument raised over concerns about the risk of failure, and the consequences for Barnet taxpayers.

You can't blame Saracens for asking for the loan, I suppose: if you don't ask, you don't get, do you, readers? And undertaking that sort of gambit is exactly how entrepreneurs and successful companies thrive, although in this case, surely Saracens must have been rather astonished to find the council, its officers and members so happy to oblige? 

This is ultimately entirely the responsibility of the Tory administration, the Tory Leader Richard Cornelius, and all his colleagues, for approving the deal, despite serious - and perfectly valid - misgivings. 

But then this is how they do things: taking gambles with public money without due consideration - and in this case, you won't see any of them for dust, should the proverbial stuff hit the fan. 

Barnet Tories are remarkably foolhardy when it comes to chucking money at massive projects like the ten year outsourcing deal with Capita, but usually studiously parsimonious when it comes to all else, and certainly ideologically opposed to the very notion of public subsidy,  supporting the needs of vulnerable residents, or those dependent on social care, or social housing. 

In other boroughs, all around the country, application to the Public Works Loan Board is usually made in order to support such needs; for housing, community centres; education. 

Not here: here we make use of this facility for the benefit of private enterprises unwilling to bear the risk of their own development plans. 

Instead of building new homes for social housing, we decant our poor into the backyards of other authorities, even if it means making other families homeless. 

We don't need community centres, when we do not recognise the value of community, do we? And new schools are something we want to be provided by private funding, in the new market place of education. 

New stands for rugby clubs though: a high priority.

Does any of this make sense? No. 

Is this the end of the story? 

I suspect it is not. 

Stay tuned.