Wednesday, 30 October 2013

Broken Barnet plc- the bank that like to say yes - to Capita, or: another version of the truth

But first make out a cheque for £16.1 million to 'Crapita', Councillor Cornelius

Following on from the last post, then, here is a more forensic examination of the most interesting revelation to emerge, wriggling,  from the can of worms that is the NSCSO Capita contract, so happily agreed by our Tory councillors last December, and an admission which was the subject of Mrs Angry's awkward questions put to last week's Audit meeting.

If you recall, John Dix, blogger Mr Reasonable, has identified recently that huge payments have been made by the council to Capita - totalling more than £30 million. 

When asked about this matter by a councillor at the contract monitoring committee a couple of weeks ago, the head of Capita in Barnet said this represented 'interim' payments relating to the period during the Judicial Review. Protest from the public gallery refuted this, and residents informed the meeting that this was not true, and he then deferred to the senior officer present, who could not or would not respond, and said she would only do so privately to the councillor.

At last week's Audit committee meeting, questions from Mrs Angry, which had been allowed only after much argument, and strong opposition from senior officers, confirmed that only some of the £30 million was for interim payments, of which £4.1 million was due to be returned -and that was mysteriously refunded over the weekend between the submission of the questions and the meeting. 

Other amounts of the total sum, it transpired, a staggering £16.1 million, represent a previously unacknowledged and frankly astonishing amount of capital investment demanded from Barnet Council by Capita as part of the new 'partnership'.

Why is this astonishing? Because until now, we have been given to understand that the outsourcing programme was necessary so that Capita could provide the capital investment that our services require, and in order to make savings.

Take a look at this post by fellow blogger Mr Mustard, here  from 10th December 2012, only four days after the fateful council meeting in which our Tory councillors signed off the deal with Capita. 

The post is entitled "Investment" = borrowing from Capita" in which he took Cllr Robert Rams to task for this letter sent to the local Barnet Times: 

As you will have read, Tory cabinet member Rams, one of the key advocates of the One Barnet privatisation, is here castigating the Labour group in Barnet for daring to suggest that instead of outsourcing, there could be an in-house solution, saving jobs, and keeping all efficiency savings for local residents rather than in order to line the pockets of Capita shareholders. Rams tweeted on 30th November:

Barnet Labour Party let the cat out of the bag last night - their alternative to outsourcing is to BORROW £13.5m to pay for new IT!!

Neither a borrower nor a lender be: just hand residents' council tax over to Capita as a lovely present.

In fact Mr Mustard's heading is wrong, because now  we know that "Investment" = not borrowing money from anyone, but giving money to Capita ...

Councillor Rams says that for the council to borrow this level of funding for investment would cost every man, woman and child in Barnet £41. Instead of such financial profligacy, the idea was that our prudent Tory councillors would be given this investment by Capita, as detailed in the business model shown in Mr Mustard's post: 

It states here: 

"Capita has planned investment of £17.5 million to transform the services ..."

Perfectly clear: and we were told constantly by our Tory leader and councillors that this investment by Capita was what was needed to sustain and even exceed the standard of service provision. At no time were we given to understand that Barnet Council would be funding the investment itself, or rather that Barnet taxpayers would be stumping up the cash. 
As John Dix has pointed out, in the business model it states here , on page 50:

A partnership with the private sector will be the option best available to provide investment into the service, which would not be possible through an in-house option due to the state of the council's finances.

So the state of the council's finances does not, it seems, preclude the donation of £16 million from the taxpayers' piggy bank to help Capita out, and save them borrowing the money.

Clearly the interests of Capita are more important than the residents and council tax payers and the poor council employees losing their jobs.

On the council's own website, in the course of its idiot's guide to One Barnet - see here , updated after August 5th, helpfully explains under the NSCSO/CSG section that:
Capita will make an upfront investment which will provide improved Information Technology and telephone support to improve council back office services. 

 That is worth repeating, I think, and louder:

CAPITA will make an upfront investment which will provide improved Information Technology and telephone support to improve council back office services.

Where is this upfront investment? 

And in a press release issued on August 6th:

Capita will also make an £8 million pound investment in technology to improve council back office services.

So Capita is to make an investment in council services, but using money given by the council. Hmm.

Let's jump ahead now from the business model to the contract, which of course as we now know our Tory councillors did not look at in any detail, as suggested by Tory councillor Khatri's statements at the July Audit meeting, which you can read about here:

 "Khatri told the committee:

that as a member of the council he was of the opinion that there had not been transparency over the DRS contract he was expected to approve.

The room fell silent. His fellow Tory councillor Hugh Rayner froze in his seat, visibly unnerved.

Councillor Khatri described the 'ridiculous' way in which he and his colleagues had been given the most minimal information, in rushed conditions, material strewn around a table,  and a couple of hours to inspect the relevant material, and pressed into agreeing something they simply had not had time to grasp.

How could that be called transparency?"

 Part of the NSCSO Capita contract members had 'a couple of hours' to read

And indeed, looking at this censored paragraph in the now partly published contract, it would appear that things become even more puzzling. 

 Go to point 11.5:

The Capital Contribution of REDACTED  is in relation to the following investments made by the Service Provider as shown in the Financial Model set out in Appendix 1 to this Schedule (TT tab lines 7 to 283), and shall be payable by the Authority to the Service Provider on the first Business Day following the Service Transfer Date. All other investment shown on this tab in the Financial Model and not recovered through the Capital Contribution shall be recovered through the Periodic Service Payments as Deferred Revenue.

Got that? The following investments made by the Service Provider, with amounts blacked out, and the capital sum redacted ...  but crucially it does say in relation to the following investments made by the Service Provider, ie Capita, and implies the main source of funding is by the company, not the authority. 

What was the redacted sum, and did the executive, the leader and Cabinet members understand this to mean £16 million of investment was to be handed over by us? 

If so, did they mislead residents with statements about the necessity of investment by Capita?

In August 2012, while Tory leader Richard Cornelius was safely out of the way, relaxing in his French holiday home, the senior management team slipped out a statement informing staff that they had decided to change the other contract model to a Joint Venture - without any right to do so, and without any knowledge of the matter by the leader.

In August 2013, on the day before the signing of the contracts with Capita ie 5th August, another interesting decision was made. 

While most other people were away, this time the Leader was obliged to stay at home, and required to sign his approval to the handing over to Capita of £16,118,796, as reported in a decision you can read via the link below. 

The details state that this is not a key decision. 

Odd that it was only signed off in haste the day before the contract signing, is it not?

My emphasis.

8.1 Further details in respect of the NSCSO contract are contained within the NSCSO full business case which was agreed by Cabinet on the 6 December 2012. This report set out details in respect of the investment in the NSCSO services, but it did not formally request approval for this investment to be added into the Council’s capital programme. This report requests this approval.

So the agreement to hand over such a whopping sum of money to Capita, rather than receive it from them, was implicitly agreed at the time of the Cabinet approval on December 6th, but in a way that kept the information from common knowledge. 

If you look at the following report submitted to this meeting, you will find it littered with references to the investment due to be made by Capita, as agreed in the business model.

See page 32, for example, repeating again the refusal to consider an in-house option on the basis that -

The council has limited capability to secure and manage the significant investment, transformation and remodelling required for these services to preserve service levels, achieve strategic objectives and reduce cost.

And then on page 41,  Table 5.1, Key Commercial Risk Areas - 'inability to source investment capital' by the partner ie Capita - oh, low risk, so no chance that would ever happen. 

Except - it did happen. Or at least until Capita went to the council and asked for some money from our savings, so as to make savings - mostly aspirational and immeasurable, as evidenced by the endlessly varying figures we are given - oh, and lots of profit for Capita.

The addition to the Council's capital programme was not sanctioned until eight months later, the day before the contracts were signed. 

The formal authorisation of this capital expenditure of £16.1 million, on 5th August, was clearly described as a decision, but according to the document, NOT a key decision. 

How very strange, when according to the council's own constitution:

Key decisions are those significant in financial terms or in their effect on communities comprising two or more wards.
And also according to the constitution, when a key decision is made, this must be the subject of discussion within the public domain, and when involving a decision outside the budget framework, referred to full council.
When key decisions are to be discussed or made, notification is published at least 28 days before. If these decisions are to be discussed with council officers at a meeting of the Executive, this will generally be open for the public to attend, except where personal or confidential matters are being discussed. The Executive has to make decisions that are in line with the Council’s overall policies and budget. If it wishes to make a decision that is outside the budget or policy framework, this must be referred to the full Council to decide.
Not only has the council made the decision to take on the capital investment of £16 million in secret, it has continued to imply to residents that the investment is being made not by Capita, but by the use of their council taxes, held in reserve.

The excuse given to Mrs Angry at last week's Audit meeting regarding the decision that Barnet would pay for the capital investment was that we can obtain cheaper rates of borrowing, stating:

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.

Oh. But ... lower interest rates would only be of significance if this money was being borrowed, wouldn't it?

Barnet Council has taken the £16.1 million from council tax reserves, held on deposit, where it was earning us interest, which will now be lost, as well as the capital sums.

There are so many questions that demand answers.

  • What was the redacted amount of capital contribution defined in the contract? 

  • If it matches the amount approved by Cornelius in August, why is it still redacted? 

  • How many councillors saw this redacted amount, in the very short time in which they were allowed to view the 8,000 page contract?

  •  Was the contract deliberately worded in such a way so as to imply that the ambiguous term 'partnership investment' could mean either investment by Capita or the authority itself?

  • Did the Cabinet members know at the time of approving the deal in December that, contrary to statements made to residents that Capita would be providing substantial amounts of investment, Barnet Council would be taking the money from council tax reserves?

  • When was the decision to use council reserves for capital investment rather than being given the money by Capita made, and why?

  • Why was the business model not amended before it went to Cabinet on 6th December?

  • Was the change of plan, or at least the astonishing level of investment demanded from Barnet,  linked to the delay caused by the Judicial Review and appeal?

  • Did Capita threaten to pull out and did Barnet offer to supply investment in order to maintain the deal?
As the Audit committee Chair Lord Palmer commented last week, Barnet Council has acted as Capita's banker. 

You may think this is a suitable position for a local authority to assume. I most certainly do not, and I am certain that the vast majority of residents or taxpayers will be outraged by this generosity with their hard earned cash.

This 'partnership' of Barnet Council with Capita seems to me to be not so much a partnership of equals, but a relationship of abject submission, and in the matter of the capital investment the council has indulged in a fundamental misrepresentation of the truth, perpetrated by a Conservative administration intent still, even after the findings of the Judicial Review, to evade the duty of consultation and scrutiny by residents, and even its own elected members.

We thought we knew, didn't we, the full price of becoming the last outpost of the Capita empire, being sold into bondage for the next ten or fifteen years? 

How wrong we were.

Saturday, 26 October 2013

One version of the truth, or - an audit committe in Capitaville

Mrs Angry's expertise in local government audit is legendary, of course, and deservedly so, after a long and painful apprenticeship in the scrutiny of what passes for financial governance, here in Broken Barnet. 

Oh: ok - admittedly, her mathematical ability is frozen in time, at the general level of competence of a rather challenged seven year old, but in audit what counts is, well: not being able to count, exactly, more the ability to scent the subtle odour of deceit, incompetence, and corporate intrigue.

That said, she really did not want to go to this week's audit meeting, but it came to her attention that no one else from the Barnet blogosphere was likely to attend, or to submit questions, and that would, she knew, be a highly undesirable situation, especially as it would be the first Audit meeting since we came to live under the flag of Capitaville.

Last week, therefore, Mrs Angry submitted several questions to the committee on the very important issue, identified by the masterful accounting of fellow blogger Mr Reasonable, of more than £30 million of taxpayers' money which Barnet has recently handed over to Capita. (These questions must have been better than she thought, as in committee, they earned the highest praise of all: a thumbs up from veteran protestor and council commentator Mr Shepherd - and there is no better commendation).

When these questions were submitted, on the basis of reports going to the committee regarding internal audit, Mrs Angry was asked, rather mystifyingly, to explain why she thought her questions - about matters of internal audit -were relevant to an agenda dealing with reports on matter of, erm - internal audit. 

Mrs Angry obligingly referred to the council's own definition of well: internal audit, and sat back. 

Over the days that followed, it seems, despite the new age of transparency and love-in with bloggers over the ideals of open government, senior officers did all they could to find reasons to prevent her questions going to the committee. Odd, because one senior officer has been telling bloggers that in the new world of Capitaville, they believe that:

 'our active blogging community in Barnet is an asset, not a threat, and one we would like to support' ...


Have you told the Tory councillors?

Probably not. They don't tell them anything much, do they?

It should be noted that the Chair of the committee, Libdem councillor Lord Palmer, saw no problem at all in the questions being allowed, and happily in the end this view triumphed over the officers' objections.

And here is an extraordinary thing.

One of Mrs Angry's questions was in regard to a sum of £4.1 million pounds, handed over to Capita while the Judicial Review was in progress, as an interim payment for services, but which due to the earlier date of the appeal, was a payment which was not necessary. 

This time last week, there was no sign of any repayment. 

On the night of the Audit meeting, the response to the question informed us that since the question had been submitted, at the end of last week, this £4.1 million payment was repaid by Capita. Over the weekend, in fact, on Sunday.

Would this repayment have happened at all, if Barnet bloggers had not asked about it?

Here are the questions in full: and the responses. Mrs Angry's superfluous comments are in red. Some of it is rather tedious, but it is important to put this on record, and have it in the public domain, as it was so hard fought for.

From Mrs Angry:

Can the Chairman offer me assurance, limited or otherwise, that the risks posed by the following financial transactions were properly assessed and authorised, and if not, will he ask the External Auditors to investigate the matter?

The council has paid Capita £14.7 million for an interim contract of which only £0.7m was spent, while £14 million is still awaiting refund to the council. Why has this 'interim' payment not been returned? Will we receive interest accrued during the delay?


Of the money unspent in respect of the interim service agreement (ISA), some of this was offset against the capital payment, some of this is offset against on-going service charges, and £4.1m was returned to the Council on 20th October. The response to Contract OSC is provided below. The £4.1m was returned to the Council following a detailed reconciliation of amounts spent under the ISA in September. No interest payments are due to the Council.

Mrs Angry found this very interesting. A detailed reconciliation in September, but no immediate plans to return it until this Sunday, when it was handed over. Mrs Angry tried to imagine the intricate negotiations of this 'reconciliation' ...

LBBarnet: Please can we have our money back?

Crapita: No.

LBBarnet: Please ...

Crapita: Feck off.

LBBarnet: But Mrs Angry is asking about it, and she's really scary. And there's an Audit meeting this week.

Crapita: No shit? Mrs Angry. Ok: meet us in the car park in NLBP on Sunday, we'll have a bundle of used notes in a brown envelope.

LBBarnet: Could you make it the car park in Lodge Lane, North Finchley? There's free parking on a Sunday, thanks to all the fuss kicked up by campaigning cafe owner Helen Michael ...

Crapita: Ok.

The rest is history.

At the Audit meeting, Mrs Angry expressed her sense of amusement at the sudden repayment, but said now she was more interested in the matter of - interest. Why was none due, when surely the council has a duty to reclaim the loss of interest caused by having a lesser amount of money on deposit?

Mr John Hooton, deputy to the deputy Chief Executive, transparency evangelist Chris Naylor, looked puzzled, and slightly pained by the thought of such nitpicking.

Chair Lord Palmer commented that he had asked the same question. Ah. 

It was, he said, an obvious question to ask. Of course Palmer is not an armchair auditor, but a real one, and yet still keen to learn what he can, at Mrs Angry's knee.

Mr Hooton shrugged, and later on told the committee he thought it would be only a matter of the loss of, what - a couple of thousand pounds? 

Maybe so: it was still the loss of money belonging to the taxpayers and residents of Broken Barnet. 

Why we should be subsidising the largest outsourcing company in the UK is something our elected members should be asking, especially the Tory councillors who nodded this deal through with absolutely no grasp of the implications of the commitment they were undertaking on our behalf, and without our consent.
Was there a risk assessment made before the council agreed to borrow £16 million to fund investment in the Capita contract, and why was this sanctioned when no such action had been mentioned before the contract was awarded? Is this lawful, and did the authority take legal advice before agreeing such a loan?


The Council has not taken a loan out to fund this investment; this payment has been made from the Council’s cash balances. However, the Council received legal and accounting advice throughout the procurement process, and can confirm that making payments for services provided under the CSG contract is legal.

Ok, it was not a loan - worse than that, we just handed it over from our own reserves.

Why is it that we were constantly told during the procurement process, from Cabinet members like Robert Rams, that an in-house alternative to One Barnet was out of the question because we could not afford any capital investment, and yet here we are, funding Capita's capital investment? And when was the decision made that allowed such a handout of money to Capita?

No adequate response emerged to either of these supplementary questions, of course, as the Chair is obliged to answer, and as a member of the Opposition is not in a position to answer, and indeed is more inclined to agree with the questions. Mr Hooton again seemed not inclined to respond other than to insist this position was perfectly normal. Normal for Barnet, for sure: lying back and accommodating the appetites of our new partner, with no say in the matter. 

At last week's Contract Monitoring Committee, the Capita Partnership Director in Barnet initially explained to Cllr Khatri that the £30 million given to Capita were 'interim' payments. Members of the public who were present disputed this, and he deferred to a Barnet officer, who would not respond, and said she would speak to the councillor out of the meeting. Does the Chair agree that such a lack of clarity over these enormous amounts of taxpayers' money is unacceptable, and in the interests of transparency, and accountability, can he confirm the details of any response given to Councillor Khatri?


The Head of Commercial has provided a detailed response to Councillor Khatri and the members of the Contract Monitoring Committee Overview & Scrutiny Committee on this matter and is replicated below in question 4

Hmm. What a shame that not even an outline of the facts was forthcoming at the meeting from Mr Wyllie, head of Capita in Barnet, and not even the senior officer present was able to explain to us what the payments were for.

Mrs Angry's supplementary question to this and the next one was to ask if the Chair did not agree that a child of six would understand the peculiarity of giving Capita more than £30 million pounds, on top of paying a bill for £10 million to private consultants, with no return in sight for the foreseeable future in terms of the promised savings which were said to necessitate the deal, and was it acceptable that Mr Wyllie was not able to explain these payments at the contract committee?

The Chair did not disagree. The officers glowered down the table. The Tory councillors as usual looked on blankly, thinking about their dinners. Nothing happened. Nothing will ever happen. In Broken Barnet, the worlds revolve like ancient women, gathering fuel, in vacant lots.


Clearly such generosity has saved Capita a substantial amount of money by avoiding the payment of interest rates, but how does this represent good value for money for the taxpayers of Barnet? Does our External Auditor take a view on the probity of such a use of our money?

Response (Warning: on first looking at this, Mrs Angry was inclined to write to Mr Naylor begging him to take his finger off the new default mode of open government and stop trying to confuse her with too much information - except of course on careful analysis, it is not so much information as well ... spin ... )

From the Council and taxpayers perspective, the payment of capital investment up front represents good value for money. It reduces the funding costs that would otherwise have been charged to the Council under the contract, ensuring that the Council receives the best possible deal. The contract saves the Council £125m over 10 years which is a substantial benefit to the tax payer in a time when government support for local authorities is being reduced substantially. Whilst the assets are owned by Capita, Capita is obligated to provide them back to the council upon contract termination at no further cost, and the assets are recognised in the council’s accounts irrespective of how they are funded.

From our external auditor - we have reviewed the management response and discussed it with the Chief Officers and do not have any concerns at this time. On the wider point of ensuring value for money (vfm) from the Capita contracts we have already agreed with management to incorporate coverage of this in our 2013/14 vfm audit.

We do not have any concerns at this time. Mr Paul Hughes, of our external auditors Grant Thornton, is blessed with the ability never to have any concerns at any time about any issues relating to the accounts and financial probity of the London Borough of Broken Barnet. 

Hughes spent the entire Audit meeting, in fact, looking awfully bored, clutching his chin, or playing here's the church, and here's the steeple, open the doors and here are the people, and making faces at Mrs Angry, and repeating to the Chair that none of Mrs Angry's observations were of relevance to him. 


Capita Payments – response to Contract OSC:

By way of context, it is worth setting out the rationale for the payments made to Capita for customer and support services, and associated risks. They are as follows

Why did we enter into the interim service agreement? The reason for this was that, due to the on-going uncertainty of the judicial review, it was becoming impossible to continue to run these services with such a significant level of vacancies and turnover of staff, particularly in customer services and revenues and benefits, and the ISA enabled the Council to increase staffing capacity and resilience. 

In addition, there were urgent pieces of work that the Council had to undertake, particularly in respect of updating ageing IT infrastructure. Further to this, it was important to undertake work that would enable the Council to realise financial savings. So for example, the project to replace the SAP financial system had to start, because if it is not completed by the middle of 2014, the Council would incur an additional £1.5m of spend with Logica to continue this service for another year.

Why did the Council fund the £16.1m up front? The reason for this is that the Council benefits from as low as possible costs of funding investment within the deal. Under accounting guidelines, the assets are recognised in the Council’s accounts irrespective of how they are funded, but paying the £16.1m up front reduces the costs of financing.

Why does the Council pay in advance for the service provision? Again the reason for this is that this minimises the costs of funding investment within the deal.

What risk exists in respect of payment in advance? For the first 6 months of the contract while assets are purchased, if Capita were to go bankrupt, it would owe the Council money for payments made up front (£8m in November, reducing to zero by March 2014). After that point, investment in the services through the contract are in excess of the payments made in advance. Regular financial assessments have been made, and will continue to be made, on Capita’s financial health to mitigate against this risk. This is in accordance with the Council’s financial regulations.

In respect of the terms of payment for both contracts, these are contained within schedule 4, which is published on the council’s website for CSG (see: and will be published by the end of the month for RE.

Customer and Support Group (CSG)
The agreement in the CSG contract was that the council would provide £16.1m of upfront capital investment as part of a total of £275m of payments to Capita over the 10 year term. Ongoing service payments are quarterly in advance, with £14.1m due as payments for the first 6 months of service provision. 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. 

As Lord Palmer said, we are acting as Capita's banker.

The assets are Capita’s, but Capita is obligated to provide them back to the council upon contract termination for at no further cost.

Hmm. Here is a thought: will those assets not have considerably depreciated in value by the end of the contract? Will they be worth anything at all? Will we be compensated for the depreciation?

However, the delay caused by the application for Judicial Review meant that the council had to take out a separate interim services agreement with Capita in June 2013 to undertake essential work on infrastructure and systems replacement projects, as well as temporary staff cover for various services. This involved an upfront payment of £14.7m. The details of this decision can be found here:

The signing of the CSG contract in August 2013 meant that the interim services agreement (ISA) was terminated and replaced by the CSG agreement, which commenced on 1 September 2013.

Of the total £14.7m paid under the ISA:

£1m was paid in respect of services delivered in July and August (interim services for revenues and benefits and customer services, project management, procurement consultancy and management oversight and governance)

A further £4.0m was in respect of mobilisation costs, the IS programme team, insight and wide area network projects. £2.9m of this was to have been paid as part of the first advance service payments for the first 6 months of service provision and therefore deductible from the first CSG payments. A further £1.1m was to have been paid in future service payments and will be deducted at this point.

£5.6m was paid in respect of upfront capital costs, which was deductible from the larger CSG upfront contract capital contribution

A rebate of £4.1m is now due for amounts paid and not spent under the ISA which has now been received.

Hello: since Sunday, you mean ...

That meant that when the CSG contract was signed, £10.5m was paid to Capita in respect of the capital contribution (£16.1m less the £5.6m paid under the ISA), and payments of £4.1m and £7.1m in respect of the first 6 months of service provision (£14.1m was the upfront contractual CSG payment for services, and £2.9m already paid under the ISA has been deducted from this).

So in total Capita has been paid £14.7m, £10.5m, £4.1m and £7.1m as set out above, totalling £36.4m, with £4.1m subsequently being repaid to the Council.

RE (Development and Regulatory Services)

I have also set out below the payment structure for the joint venture for development and regulatory services.
The agreement in the Re contract is that the council provides £1.7m of upfront capital investment as part of a total of £150m of payments to Capita over the 10 year term. Ongoing service payments are quarterly in advance, with £3.5m due as payments for the first 3 months of service provision. The council agreed to fund the capital costs up front for the same reason as in the CSG contract and Capita is obligated to provide the assets back to the council upon contract termination at no further cost.
So in total, thus far Capita has been paid £5.2m for RE, as set out above.

So even more capital investment paid over to Capita to enable them to maximise their profit from the provision of our services, even though we could not find the money to do the job ourselves, in-house, and keep all the savings?

 Mrs Angry had also asked about the replacement of the council's bailiff contractors with Capita's own subsidiary company, Equita - by the terms of the contract, Capita can do this with no tender process.

Capita has already required Barnet Council to breach a contract with bailiffs, an action that has led to the threat of legal action against the authority: has the risk of this and similar legal challenges from other contractors displaced by Capita been assessed by the council, and if not, why not?


Capita has not required Barnet Council to breach a contract with bailiffs. As part of the mobilisation of Customer and Support Group (CSG), a number of contracts have had to novate from the Council to Capita. The only suppliers that have refused to co-operate in the novation process are those bailiff contracts referred to in the question. In this circumstance, the contracts include a novation clause which requires the contractor to novate the contract, so on that basis it is clear that the Council has not breached the contract. The bailiff contract is volume based and non-exclusive, so there is no financial implication to the Council in respect of the inability to novate. Furthermore, Capita have arrangements in place which means that there has been no disruption in service.

Yes, but the question was how many other contractors have been displaced in this way - oh and how many of the replacement contracts are with Capita subsidiaries? Mr Hooton did not know. Mr Hooton will look it up for Mrs Angry. Good. 

Next were a couple of questions which were submitted to the committee after the #bingate story broke, and were an attempt to extract answers to questions the authority clearly are very reluctant to answer. After a lot of behind the scenes wrangling, these questions were graciously allowed, under sufferance, but with limited response:

The following questions are not related to an item on the agenda. These questions relate to items best dealt with by either the Executive or Scrutiny Committees. However the responses have been provided. A supplementary question can be asked and will be noted by Governance Officers for response however the Chairman of Audit Committee will not be answering these questions.


The new recycling scheme has cost more than £4 million for the purchase of new wheelie bins and food bins. There are now allegations that these new bins are not compliant with regulations that will apply in 2015. Was the risk of non compliance assessed by the authority, and if not, why not?



For the benefit of the Committee, the question arises due to a recent letter from Lord de Mauley on behalf of Department of Environment, Food and Rural Affairs (DEFRA) on the 15th October 2013 on the separate collection of waste. The letter can be found here:

The revised Waste Framework Directive (2008/98/EC) which came into effect from June 2012 requires member states to set up separate requirements for collections of paper, metal, plastic and glass, where separate collection is:
1) necessary to provide high quality recyclates, and
2) technically, environmentally and economically practicable.

Paper, metal, plastic packaging and glass collected from Barnet households is separated at the Materials Recovery Facility operated by Biffa at Edmonton. We are aware that glass separation can be more problematic than for other materials, however the council's view is that separate collection is not necessary to meet materials quality objectives, and that separate collection is not technically, environmentally and economically practicable for Barnet. 

By changing from a source separated collection to a comingled (mixed) collection of recycling it is expected that there will be economic savings of £1.2m by 2014/15 and £4.1m by 2016/17. It is expected that a significantly greater tonnage of material will be diverted from costly disposal, to recycling, with the proportion of household waste recycled, composted and reused projected to rise from 33% in 2012/13 to 41% in 2014/15 and 43% in 2016/17. If the previous source separated collection had been continued, these economic savings and environmental performance improvements would not be realised.

A recent judicial review (UK Recyclate Ltd & Ors R (on the application of) v Secretary of State for Environment, Food and Rural Affairs & Ors) demonstrated that the most sensible approach, and indeed the most effective approach to mitigating the risk of legal challenge, is to rely directly on the words of the Waste Framework Directive itself. Article 10 of the Directive clearly states that ‘waste shall be collected separately if technically, environmentally and economically practicable and shall not be mixed with other waste or other materials with different properties.

Therefore we believe that the bins are complaint (sic) with the current law as it stands.

What this boils down to, readers is 'we believe' the bins are compliant, but we haven't really got a clue, because we didn't check it out properly beforehand, and took a gamble. Which may cost you, the residents and taxpayers more than £4 million.
Is there, as required by Department for Environment, Food and Rural Affairs (DEFRA), an audit trail that meets the requirements of the new regulations, to provide evidence in support of an argument for exemption from the forthcoming changes?



DEFRA have advised that new regulations will be published this winter regarding the quality of materials produced by the Materials Recovery Facilities, and the council will ensure its compliance with these requirements following publication.

Lord de Mauley states in his letter – “local authorities should consult their own lawyers as necessary and keep an audit trail given the potential for legal challenge.” We confirm that once the regulations are published we will review them in line with our current procedures in consultation with our lawyers. However we note currently case law prevails which notes “the obligation to set up separate collection of paper, metal, plastic and glass from 2015 is restricted by both practicality and necessity requirements that also restrict the obligation in Article 10(2) to collect separately for the purposes of recovery”

It is important to note that DEFRA’s correspondence from Lord de Mauley has been recently (16th October) commented upon by the Local Government Association (LGA) in their letter to the Rt Hon Owen Patterson MP as an “unhelpful contribution to the debate and will only cause confusion amongst councils and the industry in their interpretation of the legal framework”. 

Yes, Mrs Angry imagines that opinion will be a fat load of use, and a minimal amount of comfort, when it comes to a legal challenge.

LGA notes that it is “crucial that councils understand that the letter records simply the opinion of the Minister, and that it would be legally unsafe to allow it to guide Local Authority decisions in any way. The most useful advice in the letter is that Local Authorities should take their own legal advice, and make decisions in accordance with that advice locally.”
LGA further state that the “most important thing is having in place systems that work locally, encourage recycling and are easy for people to use”.

In fact guidance on this matter was published long before de Mauley's letter, in June 2012. And the reluctance of the authority to reassure us that there is indeed an audit trail that will get them out of this difficulty can only lead one to assume that - there is none.

Lord Palmer commented ruefully that he was sitting next to Lord de Mauley in the House that day: perhaps, he said, he should have asked him about it.

Time for a member's item, from Labour's Geoff Cooke, on a matter which also originated in the first contract monitoring meeting attended by Capita.

Geoff Cooke is an example of a councillor on a scrutiny committee who pulls his weight, and asks the questions that demand to be asked. Whilst remaining polite and courteous he also manages to convey something that is sadly lacking in too many other members, a righteous sense of anger at attempts to evade the principles of transparency. 

Unlike too many other councillors, he does not subscribe to the idea that you should not challenge senior officers. This is a tradition encouraged even among the ranks of the Labour group, and it is frankly completely misguided. 

Gone are the days when senior officers are meekly following the instructions of elected members: these days it is the senior management team which is driving much if not all of the decisions, and certainly the outsourcing programme has been fuelled not by input from the political executive, but from the officers, as evidenced by the Joint Venture fiasco.

Councillor Cooke wants to know if Capita is going to allow, as promised to the Audit committee at the last meeting, auditing by Barnet. At the contract monitoring meeting this had suddenly seemed to be not the case. Officers thought that there would have to be a 'special agreement'. Cooke wanted a statement from Capita. 

Assurance Director Maryellen Salter told Cllr Cooke that Capita Plc  could not be audited by us. He explained that was not what we wanted, to inspect the accounts of other clients. 

A representative from Capita was called to the table. She was somehow manoeuvred into agreeing to make a statement. 

Representives from Capita, called to the committee table, seem completely unprepared for the experience of accounting for their actions to any form of scrutiny.  Their demeanour is not in line with the expected - if usually feigned - humility of council officers. Another Capita employee came later and discussed data processing systems, lounging back in his seat, talking blithely about dealing with 'one version of the truth'

Mrs Angry smiled, grateful for the headline. 

But back to Cllr Cooke:

Ms Salter said it was in the contract, and commented that that 'we don't need it in blood'.

Mrs Angry was sure that she did not mean to sound disrespectful to Councillor Cooke, but that was how it appeared: eyebrows were raised. And Lord Palmer insisted that Capita were please to put it in writing, and that was that.

Back to the matter raised by the troublemaker Mrs Angry. Lord Palmer, with all the naivete and disingenuity of an honest man, noted that if he wanted to borrow money, he went to Lloyds Bank, who would charge him interest. 

Oh, how the people from Capita and all the senior officers laughed. Silly Lord Palmer. Next time tell the bank manager you are doing him a favour by borrowing the money in the first place.

Why was the £4.1 million paid up front at all, though, aside from the matter of the lost interest?

Councillor Cooke wanted to know if the money could not have been paid in arrears: was this ever an option? Mr Hooton gave a load of waffle in response. Cooke asked if they knew how much this would have cost. Barnet pays lower rates of interest than Capita, we were told. So Capita would to have had to borrow the money, it was suggested? The Capita heads nodded enthusiastically, like sad puppies. Mrs Angry felt moved to tears. 

So Barnet has acted as banker to Capita, concluded Lord Palmer.


Funny, isn't it? 

Could have sworn that our Tory councillors kept selling the joys of these contracts on the basis that Crapita were stumping up loads of investment, rather than that we would be bailing them out ... 

Were our councillors fully aware of the extent of these payments? 

When was the decision to hand over so much cash made, exactly - before or after the contracts were signed? 

And if you do not know the answer, councillors of Broken Barnet, please pull your f*cking fingers out for once - and ask your own flipping questions. 

We may be living in Capitaville now: but how long for may depend on the answers you receive.