Though Cowards Flinch

The Liverpool Echo remains one of the best read, and therefore best resourced, regional daily papers (along with its sister paper the Liverpool Daily Post).

It’s shown its worth in the last couple of days by doing what a proper regional newspaper should be doing – exposing appalling incompetence and even worse governance processes at the heart of Lib Dem-run Councils.

The Echo has put on-line (part 1 and part 2) an internal Council investigation, marked ‘Strictly Private and Confidential’, into the council’s Joint Venture vehicle Liverpool Direct and its contractual relationship with BT for the delivery of a wide range of what might broadly be described as ‘communication services’. 

The findings of the investigative report, which follows on earlier concerns express by IDeA in 2008, are shocking.

They include:

• ‘[I]t is conservatively estimated that the current level of overcharging [by BT]…is in the region of £10m per annum’ (p 6).
• ‘An assessment of the historical overcharging [by BT] amounts to a figure of approximately £19m as of 31/03/10 based upon an extrapolation back to contract start’ (page 8).
• ‘It is the Council’s position (including that of the City Treasurer) that the amounts of investment to be made by BT are the absolute minimum amounts as detailed in both the original contract and the contract extension (£56m, subsequently revised for £59m and £41m respectively)…This however is in contrast to the position taken by BT that they have no obligation to invest’ (page 10).
• ‘BT/LDL have clearly failed to engage the Council fully in their investment making decisions by virtue of the evident lack of council input in the Service Improvement planning process, Operational Plan development and the absence of potential BT investment as a consideration as part of the annual corporate planning process’ (page 11).

And on goes the report, for another 14 pages, setting out in dry but revealing terms a shocking story of what appears to be the negligent use of public funds by the Council and Liverpool Direct, and rapacious abuse of the a weak contract process by BT.

Coincidentally, Peter Cosgrove, one of the researchers for this now leaked report, was suspended in June under the new Acting Chief Executive, who is a former Chief Executive of Liverpool Direct.  His suspension is said to be in relation to discrepancies in council tax revenue collection, although his union says he has not worked in this section for four years.

So what are we to make of this growing scandal?

First, of course, it exposes the Lib Dems, who ran the Council until May 2010 for what they are: a bunch of incompetent charlatans that the City is well rid of. 

Second, it makes you wonder what on earth Lancashire County Council are up to with their massive but secretive ’IT-related’ outsourcing project, which is being closely modelled on the Liverpool Direct Joint Venture, and which has as its preferred partner…yes, you’ve guessed it, BT. 

As I’ve noted, IDeA raised significant concerns about Liverpool Direct as long ago as 2008, but that doesn’t seem to have registered with the outsourcing obsessed Tories at Lancashire’s County Hall, nor, apparently with my own Borough Council, who are happily readying themselves to join the contract, quite content at what their Tory colleagues are up to, and apparently quite oblivious to the risks they may be running with taxpayer cash.

Third, and perhaps most relevant in the long run, is the position in which the new Labour administration in Liverpool now finds itself.

From being vehemently opposed to the Liverpool Direct contract in opposition, they have now gone very quiet about it all (while, inevitably, the Lib Dems who put them in this position in the first place are happy to express outrage at this). The leader, Joe Anderson, has simply declined to comment on the latest developments.

This suggests that the new administration is in a very difficult position contractually and legally. 

I don’t know what the details are, but the fact that BT were very happy to threaten legal action when Essex County Council terminated their contract in 2009 on account of BT’s service performance there, suggests that Joe has lawyers at his back, urging him to keep quiet until the matter can be resolved.  

In any event, the first opportunity to get rid of BT would appear to be in 2012, and even then only at a significant pay-off cost; while logic may suggest this pay-off may be more than made up for the savings that will be made by bringing the services back in-house, such a move is not without its own complexities, and possible upfront investments, and Joe and his team may be struggling with whether it can actually be managed in the face of the huge cuts faced.

Whatever the exact difficulties now faced, the general difficulties now facing the new Labour administration reflect the central problem: that local democracy is effectively undermined by outsourcing of this type. 

Read the local blogs and forums and you’ll see the guns are already turning on Labour for not dealing with this mess, even though it is not a mess of their own making, and may be something that is legally impossible to resolve without costing the taxpayer even more.  Essentially, the Lib Dems are not just getting off scot-free with their short-sighted, incompetent tendering, but may well even benefit from it politically.

And it’s not just in Liverpool that this is happening.

My own local Tories signed a 15 year contract in 2005 for the running of West Lancashire sports facilities, with an inflation-linked subsidy of 1m per year. 

That might have seemed hunky dory at the time, but the poor contracting process and inadequate governance by the specially established Leisure Trust, has led to abuse by Serco, for example through the use of mathematically invalid calculations of their price increases which hide the real impact on customers. 

Meanwhile, the Leisure Trust, set up five years ago so it could enjoy the tax advantages applicable to registered charities, and thereby save taxpayer money, has failed to become a registered charity, because the Charities Commission has seen through their little game.

The upshot of this, though, is that as and when the Labour group takes over the administration, it is we that will be faced with a contract which takes up  significant percentage of overall council expenditure, but over which we have absolutely no democratic control.  At a time when all other services are facing massive cuts, that is absurd, but it is Labour not the Tories who will get it in the electoral neck.

Local government outsourcing is not just bad for employees and services.  It’s bad for local democracy.