Council tax rise is not connected to department's £8.7m overspend
PUBLISHED: 12:36 22 January 2019
The increase in Newham's council tax is not connected to an £8.7m overspend in the repairs and maintenance service, the mayor has confirmed.
Rokhsana Fiaz told the Recorder that the money to sort the council department’s imbalance was instead taken from the reserves.
She said: “We’re not taking money from residents. We’ve got a pot of money called reserves, rainy day money, we’ve had to dip into that in order to cover and balance.
“The rise in council tax is nothing to do with RMS.
“The council tax issue emerges from a number of things. We have had a council tax freeze for the best part of the last 10 years and that has led to a significant amount of money not being able to be drawn by the council.”
Ms Fiaz explained that the overspend came about because of the way the department had attempted to balance its books for one financial year which had an impact on the following year.
“They did a form of accounting whereby to balance the budget for one financial year they sequenced invoices so that the financial year that they needed to present a balanced budget for all looked fine and then they pushed all the invoices into the next year that led to a picture of overspend,” she said.
“It meant that the council, in order to pay off all its invoices, has had to use some of its reserves money to balance the budget for that year because of the way the RMS had underestimated the true scale of cost.
“That money is not going to impact residents in so much as they’re not losing out, it’s just unfortunate that because of the way RMS was managed and allowed to manage, our reserves position isn’t as strong as it would have been had we not needed to use the money to negate the overspend.”
She also explained how the planned internal control commission, set to go before an extraordinary council meeting tonight (Tuesday), would be set up.
“The internal control commission has been something I have been thinking about for a long while, including the period preceding the local election last May,” she said.
“In the interests of transparency and good governance I am going to be inviting the relevant experts to sit on this commission and then report back within a defined timeframe.
“RMS is a feature of a long-standing history. What does that history look like? What has happened in the past and why have recommendations in the past not been executed at the time they were recommended?”
The department now has a new look, with seven of the nine senior managers dismissed, with the mayor confident this is enough to stop an overspend from happening again.
She said: “I have confidence in the new management arrangements because I have seen the turnaround and the reduction of the overspend position. I have confidence in the process that we have instituted to ensure that where we have identified issues we are addressing them.
“I am looking forward to the recommendations and conclusions reached by the internal control commission which we will put in place so that we have got a rigorous and robust internal control system to ensure that nothing like this will happen again.”
Ms Fiaz said that she hoped a review would not find anything else within the council to the scale of RMS, but added: “The issues and features in RMS echo features of other instances in this council going back years.
“It’s clear there is a systemic issue at the council and it’s precisely because of that that we appointed CIPFA [the Chartered Institute of Public Finance and Accountancy] to begin to do a programme to reverse that.
“It may be the case that something else is discovered but we are looking robustly and rigorously across the organisation to make sure that nothing has been missed.”
She continued: “I know for a fact as far back as 2004/05, there were concerns about a similar issue.
“There was an investigation that was undertaken and key conclusions recommendations were made and none of them seem to have been put in place.
“Otherwise, RMS wouldn’t have happened.”