Barnet and the Art of Tautology

On Tuesday I attended the Budget & Performance Overview and Scrutiny Committee meeting. I had submitted 30 questions well in advance of the meeting so I was looking forward to some detailed answers. Well that was not to be. Before I go through just a few of the answers I want to make it clear why I asked them. Some people have branded me an "activist" or "troublemaker" or "lefty". Personally I don't think I am any of those. I come from a business background and have dealt with contracts  and contractors over the last 27 years. Barnet is where I live and I want to make sure that the Council are not messing up mine and my children's future. That's all.

So coming back to the questions.

My first question was asking how much additional gross revenue would be required to generate the net income growth of £33.8 million that Capita are promising. The reason for wanting to know that is to understand how much additional business Capita are going to need to generate and what the ,margin is. If the margin is high, say 50% then Capita will need to generate an extra £67 million of gross income which might be achievable. However, if the margin is lower, say 10%, after you take into consideration all of the staff and overhead costs of providing these additional services, that would mean that Capita would have to generate an additional £334 million and that stretches the bounds of possibility. So a logical reason for asking the question and if I was a Councillor it would be critical to my assessment of their proposal. The answer back from Barnet was significant additional gross revenue. In other words we aren't going to answer your question.

Second question asked what circumstances have changes between March 2011 and today to justify a tripling in net income. The answer came back that the March 2011 business case was very prudent. Now this is important because back in 2011the council may decisions about how they would outsource these services based specifically on the business case and it has now been proved to be wrong by a factor of three. To my mind this entirely undermines the credibility of the original business case and the people who put it together as if may have ruled out other options which should have been considered.

The third question related to the cost savings that Capita are promising. In the original business case carried out just 2 years ago Barnet's consultants estimated that cost savings would be £19.7million whereas now Capita are only promising £5.3 million of cost savings. So I asked what reason has been given for savings that are only 26.9% of that originally forecast?  The Council's answer  to why the savings are so much smaller is "The bidder has identified a more modest saving". Now I think that must rank with one of the most useless answers of all time.

Now many of the other responses displayed similar tautological dexterity, however there were a few nuggets of information which came out as follows:

• Capita will receive £18.5 million in profit and overhead recovery
• 30% of the staff will be on joint employment contracts, i.e. employed by both the Joint Venture and Barnet Council. How that will work in practice is anyone's guess!
• The Council can veto any director of the Joint Venture being paid more than £150,000 - so that will mean a bunch of unelected people will sit on the board of a JV company running Barnet and as long as they are paid salaries of £149,999 or less then there will be absolutely nothing anyone can do about it.
• The extended opening hours at Hendon Cemetery and Crematorium and pre-purchasing of graves which Capita are saying will generate additional revenue, are actually in operation now before the contract has been signed.
• Capita will not have any contractual requirement to hold open meetings with the public to explain what they are doing but they will "provide Community Liaison Officers to attend Town Centre Forums  - sorry but don't council officers do that already?

My last question asked if the chairman would consider separate workshop meeting so the public could ask more questions to which the response was:

"It is not appropriate for Scrutiny members to hold workshops with members of the public on matters that are the domain of executive decision making". 

As it so happens I was reading just yesterday about a Scrutiny Camp run by the Centre for Scrutiny Studies. Take a look and see examples of best practice where local authorities engage with and involve local people, something that simply does not happen in Barnet.

I would add that actually there were 77 questions in total asked and the answers do make interesting reading which you can see here. Barnet is fortunate in having a very inquisitive and questioning resident base and that should be something the Council embraces not evades.

£3,400 booze up paid for by Barnet Ratepayers

The Claddagh Ring Pub, located close to Hendon Town Hall, hosted an event on 26 April for the Revenues and Benefits staff who will lose their jobs when (if) Capita take over. Having seen the pub's name in the suppliers' payments list I requested a copy of the invoice under FOI and today it arrived (See opposite)  The invoice is referenced "Barnet Council Event" and which states that the £3,400 was for "Food and Room Hire" - no mention of drinks, I note.  ( I have edited the pub's sort code & bank account number btw). This was authorised by the Head of Revenues & Benefits and described as a team building exercise. In the supplier payments it is categorised as training.

Now, the reports I have had from staff who were at the event say that there was a free bar and that staff were led to believe  that the Head of Revenues and Benefits, who is a consultant/interim, and another consultant would be picking up the bill. Some staff are indeed very upset that Council money was spent on the event and would not have participated if they had known it would be billed to the Council.

Looking at the Claddagh Ring's website it mentions that finger buffets start  at £7.95 per head with the deluxe buffet at £19.95 per head. Given that there are only 126 FTE staff (so maybe 150 in total) that works out at  over £22/head. From what I hear there was a little food available but the main incentive appeared to be a free bar.

I have no problem with team building events as such and have been on many in my former corporate days - but they were not paid out of the public purse at a time when all budget are being cut. I think it is also offensive to the staff to mislead them about who was paying for the event. This shows a serious error of judgement and needs to be investigated further.

Come on Richard Cornelius tell me this £3,400 booze up was not paid for by ratepayer.

My Questions on the DRS Contract

On Tuesday there is a meeting of the Budget & Performance  Overview & Scrutiny Committee (7pm Hendon Town Hall). Set out below are the questions I have submitted:

1.       How much additional gross revenue is required to generate the net income growth share to Barnet of £33.8 million?

2.       What circumstances have changed between March 2011 and today to justify a tripling in net income growth?

3.       In the March 2011 business case it stated that cost reductions over the period of the contract would amount to £19.7 million yet the Capita bid suggests the savings are now forecast at only £5.3 million or just over £500,000 per annum. What reason has been given for a saving that is only 26.9% of that originally forecast.

4.       At Table 7.1 in the business case it illustrates that the DRS staff numbers will stay relatively static over the period of the contract. How can the same number of staff generate so much more additional revenue?

5.       At Table 8.2 in the business case it suggests that the £5.3m guaranteed benefit represents a saving of 3.5% of costs. It also says that CSL will retain 13% of the cost savings as their fee. Based on my calculation that means that CSL will receive £31.8 million of the costs reduction. Does this seem to be an equitable split of cost savings?

6.       Where will the 21% reduction of core operating costs be made given that staff numbers are virtually unchanged over the period of the contract.

7.       At Table 8.2 in the business cases it states that pre-purchasing of graves will deliver additional benefit. As an advance payment for a service to be provided in the future surely it should not be counted as additional revenue?

8.       At Table 8.2 in the business cases it states that there will be extended opening hours (at Hendon Cemetery and Crematorium) and additional cremation activities. What opening hours are envisaged and will this mean that local residents will have to wait longer for their loved ones to be cremated unless they choose an early morning or late night slot?

9.       How much additional highways advertising will we be forced to endure in order to generate the additional £9.8 million of guaranteed benefit?

10.   Of the £6 million investment in IT what is the phasing of that investment over the 10 year contract period, what specific software will be purchased and what mechanism is in place to ensure that the money promised is actually spent?

11.   Where specifically will the DRS staff be located?

12.   How many posts will be joint employment contracts?

13.   What happens if council and Members’ do not approve new services or changes to fee levels or fee structures and how does this impact on the guarantees?

14.   If the contract is terminated early how much will Barnet have to pay CSL in compensation?

15.   When a planning decision is made, who will make that decision, a Barnet council employee, a Capita employee or an employee of a new joint venture company?

16.   Given that the report states that Capita Symonds will maximise the financial and economic benefits of new developments including increase receipts of New Homes Bonus what reassurance can we have that they will not push through massive new housing developments simple because they have a financial incentive to do so?

17.   Who will sit on the board of the Council wholly owned company that will manage its interests in the Joint venture company, how many company directors will be created and how much will they be paid?

18.   Will directors of the Council wholly owned company sit on the board of the joint venture company and what level of decision making will they have discretion over?

19.   What provisions are in place to stop the directors of the council wholly owned company or the joint venture from paying themselves excessive salaries?

20.   What is the anticipated level of corporation tax payable by the joint venture company over the ten year period of the contract.

21.   On page 12 of the business case it states that one of the reasons why a joint venture was favoured over the original strategic partnership is that “the risks were lower”. Please can you clarify which risks are lower under the JV model and are there any risks that are higher?

22.   At page 14 in the business case it states that the council reserves the right to veto salary and rewards schemes above £150,000. Is that £150,000 in total for all DRS staff or £150,000 to any one individual?

23.   At the end of the 10 year contract how will the joint venture be dissolved, what liabilities will accrue to the Barnet wholly owned company and how will DRS staff be separated from the staff carrying out duties for other customers?

24.   Why are 30 posts to be added in year one only for them to be removed in year two, will the posts to be removed in year two  be the individuals are were brought in in year one and what safeguards do existing staff have that Capita will not simple bring in 30 new staff on much lower terms and conditions and then make 30 Council TUPE’d staff redundant at the end of year two.

25.   At the end of the contract can the shares in the JV owned by the Barnet wholly owned company be sold to a third party?

26.   Why was this report cleared by Trowers & Hamlins not the council’s own legal service (outsourced to Harrow Council) and does this not represent a massive conflict of interest given that Trowers & Hamlins have provided legal advice on the outsourcing project?

27.   Why were registration services included in the 2011 business case but excluded from the Capita bid and who will provide registration services when the DRS contract is let?

28.   Please can you tell me what, specifically, is the Barnet Observatory?

29.   Is there any requirement in the contract for Capita Symonds to hold open meetings with the general public to explain what they are proposing and how the new contract will operate?

30.   Will the chairman consider setting up a separate workshop meeting open to and involving members of the public at which a more detailed analysis of the contract proposals can be discussed.

Let's see if I get some clear answers!

Barnet DRS - When is a Guarantee not a Guarantee?

The Barnet DRS contract will be considered at the Budget & Performance Overview & Scrutiny committee on Tuesday 11 June. You can see the papers here. This week I have been flagging up major areas of concern that I hope someone from the Council can address. Today I want to look in more detail at the so called "Guaranteed Benefits".

In the DRS Business Case much has been made about the guarantees that will be provided to Barnet around the £39.1 million financial benefits. However, this guarantee appears to be between the Joint Venture and Barnet Council which is fine until you realise that Barnet Council will be a major shareholder in the Joint Venture. The council shares will be held by a wholly owned council company one step away from the council but still 100% owned by the council. In the DRS business case (page 38) where it identifies all of the financial benefits it states:

"The description of benefits sets out the expected activities that will achieve the total benefits. However, should any of these activities prove to be unviable, the joint venture is obliged to develop alternative proposals to meet the guaranteed financial benefit rather than it being reduced."

My reading of this very subtle caveat is as follows: Capita put in an ambitious budget which gets everyone excited. They then lock in Barnet to the Joint Venture through the council owned standalone company. When it transpires that  they can't make the budget for some reason (such as when residents kick up a massive stink when cremation charges sky rocket to generate the additional £4.3 million net profit), Capita say to their joint venture partner (who is the council) "Right partner, you have to agree to other ways to make up this £4.3 million so we are going to have to push through a lot more commercial development in the borough or double planning charges. Take your pick". It will be the Barnet directors of their wholly owned company sitting on the Joint Venture Board who will have to make that decision. Failure to do so could possibly lead to the situation faced by Somerset Council where they ended up being sued by the joint venture, Southwest One, of which they were a shareholder.

When the decision to have a joint venture was first tabled, I expressed my concern that the council didn't fully understand what they were getting into. They talked about sharing the upside but no one talked about the risk they would be assuming. The Council will, I am sure, argue that the money to Barnet is guaranteed. Yes, but their representatives on the Joint Venture will have to collude in any decisions which may be against the wishes and best interests of the community to deliver that guarantee.

I would advise anyone who isn't familiar with Southwest One to read this most informative article.

I just hope the councillors who will be scrutinising this decision can provide some clear answers to these concerns on Tuesday but sadly I suspect they will vote on party lines meaning that this gets nodded through to be rubber stamped by the Cabinet on 24 June.

Barnet DRS - Increased Charges at Hendon Cemetery and Crematorium

Going through the DRS Business Case which will be discussed at the Budget & Performance Overview & Scrutiny Committee  on 11 June, there are some very worrying statements which every resident should be concerned about.

Hendon Cemetery and Crematorium has been identified as generating an extra £4.3 million of net additional revenue. That is just £1 million less than Barnet will receive from all of the costs savings over the period of the contract. They will generate this revenue through "Pre-purchased graves, extended opening hours, additional cremation activities". Now we don't have the full details  of exactly how this will be generated but to my mind it does not stack up.

Pre selling graves seems a bit tasteless to me but more to the point it is just bringing forward income that will be realised at a later date so after the end of the contract we run the risk of having lots of burials to fulfil without the income.

More worryingly is the extended opening hours and addition cremation activities. Are they proposing hosting budget late night cremations with higher prices for peak periods. This runs the risk of pricing out the less well off to late night and early mornings. I wonder if this is what was envisaged when the title EasyCouncil was previously used?

As for the additional cremation activities, does this mean pet cremations? Who knows because there is absolutely no details and as ever the contract itself is strictly confidential. Hopefully Tuesday will give us a few answers.

Barnet DRS Savings - an Equitable Split?

Going through the DRS Business Case which will be discussed at the Budget & Performance Overview & Scrutiny Committee  on 11 June, there are some very strange numbers which I hope to explore in a bit more detail.

The basis of awarding the contract to Capita is that they will "save" £39.1 million over 10 years of the contract. When you dig into the figures the reports says that actually the £39.1 million of savings are made up of £5.3 million of cost reduction and £33.8m of "net income growth". So on the face of it Capita aren't going to make that much of a cost reduction but they are going to hike up prices to customers (like you and me) and sell DRS services to other local authorities.

However, if you read the detail within the report and buried away on page 38 in Table 8.2 there are some percentages for cost savings which start to illustrate just what a convoluted contract this really is. What is says is that Capita envisage making cost savings of 21%.  The report says that Barnet will receive 3.5% of that 21% and that equates to £5.3 million. They also state that 4.5% of the savings will be reinvested which equates £6.8 million although I can't quite understand where that reinvestment will take place other than to fund the investment Capita are already claiming in IT software and hardware. But then we come to the key figure which is the value of cost savings that  Capita will retain. Based on the report, this suggests that Capita get to keep £19.7 million.

So let's just look at that again. Capita cut costs by c£31.8 million, Barnet get to keep £5.3 million of that and Capita get £19.7 million with the balance reinvested. Now to me that looks like a rotten deal and a long way from what I would see as an equitable split.

Barnet will apparently receive £33.8 million of net income growth but what worries me is that someone will find a reason for that income not to be realised yet Capita will get to keep the lion's share of the cost savings. Surely Barnet should have said "we will keep most of the cost savings and you get to keep most of the new income growth". All very strange and hopefully more will be revealed at the meeting next week. More on the DRS contract tomorrow.

Provisional Dates for Judicial Review Appeal Announced - What's the Delay?

Today, Maria Nash's barrister has been informed of the provisional (although highly likely) dates of 7/8 October for the Judicial Review appeal. That seems like a bit of a way off especially as Maria's barrister and legal team are ready and waiting to go to court. Apparently Barnet's team cannot make an earlier date and rather than switch legal teams they are happy to sit it out till October.

I just hope Richard Cornelius doesn't  start blamestorming again - the delay is down to you and your team and no one else. I also hope that Capita are in the loop on this latest information as their temporary contract to assist Barnet Council while awaiting the appeal, expires on 21 June, so what happens after that?

And let us not forget we are in this situation because Barnet FAILED to consult.