Barnet Council - Response to letter regarding £16.1 million bung to Capita

Yesterday, at 18:35, I received the email detailed below on my blog email account
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Dear Mr. Dishman, Mr. Dix, Ms. Musgrove and Mr. Tichborne

Cllr. Thomas and Cllr. Rams have asked me to respond to your open letter of Friday 8 November 2013. 

Please find attached

Chris Naylor
Chief Operating Officer

Management Suite, Building 2, North London Business Park, Oakleigh Road South, London N11 1NP
D/L: 020 8359 5193 Mobile: 07825 351801
Barnet Online: www.barnet.gov.uk

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Contents of attachment
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  Barnet Council Response t bloggers  LBB Letter 131111.pdf

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I was not surprised by the timing of the email. It had been sent so that it would make the print deadline for the local papers, whilst giving bloggers the minimum possible time to get a sensible response back before the press went to print. I was also unsurprised to be informed that promenant local Conservative Blogger, Mr Dan Hope (who blogs and tweets under the name BarnetBugle) was leaked a copy of the letter and was tweeting about it in time for the press deadlines.

Barnet Council Breaks Silence Over '£16M Capita Payment' Branding Prolonged Social Media Storm A 'Red Herring' http://t.co/PWhIYkpzUS
— Barnet Bugle (@barnetbugle) November 12, 2013

Clearly someone, somewhere at the council wanted to try and get us to rush out an ill considered response. Whilst the Barnet Eye has no objection to other bloggers writing what they like, we have to question why someone with no association with the original email was used in such a way to break the news.

Of course the Barnet Bloggers are not surprised at anything in Barnet anymore. I had speculated yesterday that just such a thing would happen, so we immediately set about mustering all of the resources available to pull together a response. Normally when we jointly draft a response, we work on it for a couple of days, but with looming press deadlines, we had to work really hard to agree a joint response, especially given the lengthy nature of the email.

The Barnet Eye found it intriguing that the Leader of the Council was not included on the list of people who Mr Naylor said were keen for him to respond. We have to ask if Councillors Thomas and Rams were actually the only ones who were happy with it. Did Mr Naylor even bother to show the semi detatched leader, Richard Cornelius? I will be monitoring the Barnet Bugle Twitter feed intently to see the next response from the Council

Here is the text agreed by the four Barnet Bloggers in response to Mr Naylor

In December 2012 the Cabinet report which authorised this contract was quite clear when it said:

“Capita’s proposal also includes (within the financial offer described above) approximately £15.3m revenue investment in areas such as information technology (computer hardware and software), and customer services. This investment not only enables Capita to deliver the transformation it is proposing, but also avoids the Council having to find money in the future to fund replacement technology for systems that are at or nearing the end of their useful life”.

It went on to say:

“if the Council chose not to complete this procurement, it would have to:

• attempt to replicate the investment, technology and other solutions being proposed by  Capita in order to drive out the future savings required”

In September 2013 Barnet paid Capita £15.2 million which Mr Naylor described as follows:

“Of the total £320m, £16m of this is paid up-front for the capital investment. The remainder of the service charges are paid quarterly in advance. The reason for making an up-front payment to Capita for capital investment, and for payment of service charges quarterly in advance is that the Council’s “cost of money” – i.e. the amount that it pays for access to cash, is considerably cheaper than Capita’s. The Council has internal reserves, and access to the Public Works Loan Board funding which is closely aligned to the Bank of England base rate. So the up-front capital contribution and quarterly in advance payment reduce the overall cost of the contract to the taxpayer.

In August, the Council made £10.5m payment to Capita which represented the balance of the capital contribution for investment in the services, and £4.7m in respect of the service charge.”

The council have made a decision to fund the investment instead of Capita and from Mr Naylor’s response in October there is a very clear inference that this would come from reserves or borrowing. 

At the audit Committee of 23^rd October the council stated:

“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. The assets are Capita’s, but Capita is obligated to provide them back to the council upon contract termination for at no further cost” - again implying borrowing or lost interest on reserves.

Mr Naylor says in his letter of 11 November 2013 that:

 “there has been no change in policy, and no radical change to the terms of the business model agreed by Cabinet on 6th December 2012”.

Based on the above this would appear to be untrue.

The Cabinet report of December 2012 was very clear when it said that:

 “As dialogue has now closed, the Regulations permit that the Council may only request a bidder to clarify, specify or fine tune a tender, but further detailed negotiation is no longer permitted.”

Relieving Capita of the obligation to fund £16.1 million of capital investment which impacts the cost of the contract by £800,000 does not appear to fit these criteria.

Clarification is needed over the specific issue of the origin of the funding source used by the authority to support the £16.1 million. Mr Naylor asserts in his response that this was not from reserves, yet in his earlier statement he refers to ‘internal reserves’ and the ‘Public Works Loan Board funding’. Was the funding from reserves, or not? Was the funding borrowed, and if so, how much, and does not such an action contradict the position taken by Cabinet member Robert Rams in criticising opposition proposals to borrow money for capital investment?

Was the £16.1 million from internal reserves, contrary to Mr Naylor’s statement, or if not, why did Councillor Thomas think so?  If some of the money was obtained by a loan from the Public Works Loan Board, how much did the sum comprise, and does the use of borrowed funding not contradict Councillor Robert Ram’s stated criticism of Labour proposals to fund investment this way?

Why have our councillors remained so reluctant to address the questions publicly, and why has the Leader of the Council remained silent on an issue of such public concern?

Why was the belated statement about the £16.1 million at the behest of Councillors Thomas and Rams, rather than the Leader?

There are further unanswered questions about the authorisation signed by Leader Richard Cornelius on August 5^th.

Why is a decision, which is not a decision, listed as a ‘non key decision’?

Why are there no background papers listed for this document?

What exactly are the ‘international financial reporting standards’ to which the document refers?

If this authorisation was merely a technicality, why was it necessary for the Leader to approve it, rather than a senior officer acting under delegated powers?

Were the backbench Conservative members aware that the funding of the capital investment was not in fact an ‘upfront’ payment from Capita, but to be undertaken by the council? If they were, why have so many statements been made seeming to imply the contrary?

Is the truth that although the method of funding the investment this way was arranged between Barnet and Capita, for reasons of political sensitivity the Conservative administration has failed properly to explain this to backbench members or the residents of this borough?

Is it fair to suggest, as the Labour leader Alison Moore commented at last week’s Cabinet meeting, that the way in which the funding has been arranged would appear to involve a ‘sleight of hand’, and is this really compliant with the principles of transparency, accountability and open government, and the duty to protect the best interests of the residents and tax payers of this borough?

It is clear that there are still many serious outstanding questions left unresolved and for this reason we repeat our call for an immediate investigation into the issue so as to ensure that our elected representatives are fulfilling their roles in the proper scrutiny of the actions of this council.

Signed 

Derek Dishman

John Dix

Theresa Musgrove

Roger Tichborne