13 November 2013

Our minds are not at rest


Response sent 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.

n 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 23rd 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 5th.

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.

Derek Dishman
John Dix
Theresa Musgrove 
Roger Tichborne

Mr Naylor is in danger of suffering from the Streisand Effect. He didn't start One Barnet or this chain of correspondence and wasn't in the blogger crosshairs, but by responding to it he has taken the place of the people who should be answering (anyone seen Richard Cornelius since that photo of him in an old folks home, perhaps they kept him?) Rams is wimbling on about tiny good things and ignoring the elephant in the room and Dan Thomas is keeping his head down to avoid the flack. It's not as if there is an election in May 14, is it?

More from Chris and then from us and from Mr Mustard and hopefully soon he will be able to blog about other matters.

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