A Government ‘Best Value’ Inspection of Tower Hamlets Council Turned Out to Be Very Bad Value

A government inspection into whether a London borough is spending taxpayers’ money wisely will cost £130,000 more than planned, Novara Media can reveal.

Michael Gove first announced the “best value” inspection of Tower Hamlets in east London in mid-February, the second such inspection of the council in 10 years. Though ordered by the government, responsibility for paying the inspectors lies with the council – eating into the funds the government claims to be concerned about.

The inspection was due to finish at the end of May but was extended until the end of July after the general election so that inspectors could monitor election proceedings – despite this being the job of the Electoral Commission.

The inspection’s significant overspend has drawn criticism from taxpayer advocacy groups. A spokesperson for the TayPayers’ alliance described their “dismay” at the “spiralling costs” of the inspection, which they said risks “acting as a gravy train for officials”.

Novara Media understands that the council intends to call for a “reset” of the relationship between central and local government to avoid future misspending.

A council under scrutiny.

Tower Hamlets, which has the largest proportion of Muslims of anywhere in the UK, has come under scrutiny in recent months over its refusal to remove Palestinian flags flying around the borough (the council eventually removed the flags in March following threats of legal action from the lobby group UK Lawyers for Israel). Some have drawn a link between the government probe into the council’s spending – the second in 10 years – and its leaders’ pro-Palestinian stance (Mayor Lutfur Rahman flew the Palestinian flag from the town hall in 2014).

Amanda Bentham worked for Tower Hamlets for 20 years. Speaking to Novara Media, Bentham – a former leftwing Labour party activist who was expelled from the party after retweeting independent mayoral candidate Jamie Driscoll – described the “general feeling” in the council during the previous best value inspection “that Rahman was coming under attack because of who he was and what he represented under a Tory government: a strong Bangladeshi population that has progressive views.”

Bentham also suspects that Rahman’s determination to invest in public services – during his last term as mayor he built more affordable and social homes than any other local authority in the UK, and gave all council employees the living wage – made him a target for the austerity-loving Conservatives.

The notion that Rahman was being targeted again “chimes with me”, Bentham said.

All aboard the gravy train.

Then secretary of state for the Department for Levelling Up, Housing and Communities (DLUHC), Gove appointed four inspectors to examine the council’s spending: Kim Bromley-Derry CBE, Suki Banjul, Sir John Jenkins and Philip Simpkins, ​​a former British diplomat and senior fellow at rightwing think tank Policy Exchange who has been accused of liking Islamophobic social media posts and anti-Muslim propaganda. The four were invited to bill substantial fees to the council: chief inspector Bromley-Derry was offered £1,200, his co-inspectors £1,100.

Among the concerns DLUHC cited in announcing the inspection was the appointment of several advisors to Rahman’s office, paid a combined £1.4m. The appointments “creat[e] the risk of a ‘dual council’ side-lining officers of the Authority in decision making,” the department said in its letter to Tower Hamlets CEO Stephen Halsey.

Other areas the letter cited were the council’s grant-making processes; its decision to in-house Tower Hamlets Homes and its leisure services; and the mayor’s poor attendance at certain committee meetings. The inspection lacked formal terms of reference; Novara Media understands that none were supplied despite repeated requests from the council.

Had the inspection concluded as planned on 31 May, it would have cost the council around £230,000. With its extension to 31 July, it is anticipated to cost £360,000 – more than the annual salary of the council’s chief executive. Some at the town hall have questioned whether the council is getting good value for money: Novara Media understands that council employees have been forced to spend large amounts of time responding to inspectors’ queries (they have sent 430 individual requests); one inspector was spotted nodding off in a council meeting.

Since taking over from Gove, secretary of state for the newly renamed Ministry of Housing, Communities and Local Government (MHCLG) Angela Rayner – one of whose parliamentary under-secretaries is Bethnal Green and Stepney MP Rushanara Ali – has allowed the inspection to continue. MHCLG declined to comment on this story.

The mayor and our money.

The last best value inspection into Tower Hamlets was launched by Eric Pickles in 2014 following a BBC Panorama report on spending in Tower Hamlets entitled ‘The Mayor and Our Money’. In the programme, presenter John Ware put his findings to Pickles, then local government secretary. Four days later, Pickles announced the best value inspection. Conducted by PriceWaterhouseCooper, the inspection found a lack of transparency in the council’s rationale for awarding certain grants, as well as the mishandling of certain property sales to third parties. It also criticised the council’s defensive response to the Panorama episode.

The inspectors recommended that certain council functions be taken over by central government, which sent in commissioners to centralise control of the council’s grant-making and certain other processes. The commissioners, who were embedded in the council between 2014 and 2017, and continued reporting until 2019, were paid close to £1m. Auditors Deloitte described the council in this period as having “no proper arrangements for timely financial reporting; significant financial control weaknesses and no sound systems of internal control”.

The 2014 inspection was cited heavily in a subsequent legal challenge of the 2015 mayoral election in Tower Hamlets. The tribunal found the mayor had committed several counts of “corrupt and illegal practices”, including unduly spiritually influencing the majority-Muslim electorate in the borough (a charge that some have characterised as discriminatory) and led to Rahman resigning from and being banned from holding public office for five years (two concurrent Metropolitan Police investigations produced no arrests). The 2024 best value inspection has therefore been closely watched.

Government guidelines state that during the pre-election period (previously known as purdah) ongoing projects should be continued, though not if they are controversial. Rather than pausing their inspection during the pre-election period, the four inspectors insisted they stay throughout it. Among the reasons they gave was to observe the running of the election.

Benjamin Elks, grassroots development manager at the TaxPayers’ Alliance, an advocacy group that campaigns for lower taxation, told Novara Media: “Residents of Tower Hamlets will be dismayed at these spiralling costs. A best value inspection is put in place to ensure efficiency, not to act as a gravy train for officials. Inspectors should practise what they preach and deliver best value for local taxpayers.”

Almost one in five English councils currently is on the verge of bankruptcy; six have gone bust in the last three years alone. Tower Hamlets is not one of them: in December 2023, a peer review by the Local Government Association found the council had “a good record of financial management, with strong foundations in place to maintain the future financial sustainability of the organisation”.