Hackney asks for government help as cash crisis threatens key services

The government has signalled that it may take over the running
of Hackney Council’s services, following clear warnings from senior
council officials that it is overspent and unable to take on any
new commitments.

Stephen Byers, secretary of state for transport, local
government and the regions, said he was “minded” to use his powers
under the Local Government Act 1999 to ensure the provision of
adequate services to the people of Hackney.

If he did employ these, it would be the first use of the
provisions that give the secretary of state a wide range of powers
of intervention such as directing an authority to transfer
functions to Byers or his nominee.

“The situation in Hackney is unacceptable. Action is needed to
maintain essential services,” said Byers. “Frontline services must
be put first. We shall take the necessary steps to ensure that this
happens.”

Early last week, Hackney Council’s leader Jules Pipe and its
managing director Max Caller visited the Dtlgr to request
government assistance. Their request was prompted largely by
unforeseen costs caused by the failure of the authority’s revenues
and benefits services, which until recently were run by ITNet.

“Where benefits have been paid in error by ITNet, it is the
council that has to foot the bill rather than the government,” said
Pipe. Estimates of the anticipated losses have risen from £4.5
million to £11 million. In addition, there are potential
overspends in other budgets, added Pipe, but these were “dwarfed”
by the ITNet costs.

“This has completely knocked out any hope of the council being
able to cope on its own,” said Pipe. “In the long term we will be
seeking recompense from our previous contractor ITNet, which must
take blame for the failures. But the legal processes will take
years to complete.”

In the meantime, the Dtlgr has given Hackney permission to
borrow money, but it will not receive additional grant money from
the government. Byers has asked for advice from the Audit
Commission about action needed to put in place a package of
measures that will tackle the underlying financial control problems
and lay foundations for improvement.

The commission recently completed a second reinspection of
Hackney’s corporate governance, after a Best Value review last
November identified fundamental weaknesses that meant government
involvement was necessary to prevent the council’s collapse.

Byers will base his final decision on the commission’s report –
he expects to do this before the end of July.

Hackney’s social services department has been on special
measures since January last year, with serious problems identified
in children’s services and the regulation and inspection unit.

A May Social Services Inspectorate report suggested things were
improving, with the regulation and inspection unit judged as
fulfilling the imposed statutory directions. Children’s services
had improved, but not enough to justify the lifting of special
measures and ministerial directions.