Communities secretary Eric Pickles has stripped Tower Hamlets council in east London of its power to sell property after a PwC report alleged the council had accepted late bids that did not represent best value for council property.
Pickles has installed a three-man team of commissioners to oversee property sales in Tower Hamlets until 31 March 2017 after the report alleged a string of flaws in council procedure – including the sale of a town hall to a political ally of controversial mayor Lutfur Rahman.
PwC was appointed to investigate the council after the Evening Standard made a number of claims regarding potential fraud in April 2014.
Among major alleged administrative and governance flaws, PwC said the council had “failed to comply with its best-value duty” on a number of property transactions.
These related to the Sutton Street Depot, Mellish Street and Poplar Town Hall – where Tower Hamlets was said to have selected a bid that was received late, after other bids had been opened, and that did not represent the highest bid.
The Grade II-listed Poplar Town Hall was sold in 2011 to a local developer for £875,000. One of the company’s major stakeholders is the registered host of Rahman’s election campaign website.
The property company was also allowed to change the contract it had signed – though the report added that it was “unclear” whether the connection to the mayor was known within the authority at the time.
The Sutton Street Depot process was said by PwC to have ignored the recommendation of surveyor Strettons to grant a five-year lease on the property in 2011 to a party that was allowed to submit a revised bid, 21 days after bids were opened, for “unexplained” reasons.
The late and low bid was allegedly accepted 21 days after bids were opened, with “no evidence” that other bidders were asked to submit final bids or to outline the community benefits of their proposed schemes – which was given as the rationale for determining the winning bid.
A three-year lease on 111-113 Mellish Street, meanwhile, was allegedly granted to a third-sector bidder for less than half the estimated rent value of £55,000 pa. PwC said two bids were taken forward, with one bidder a consortium member of the winning bidder, leading the auditor to conclude that “there can be no assurance the best rental offer was achieved.”
The commissioners will also oversee the power to give grants and appoint and suspend senior council officers.
Pickles said the report painted “a deeply concerning picture of obfuscation, denial, secrecy, the breakdown of democratic scrutiny and accountability, a culture of cronyism risking the corrupt spending of public funds”.
In response, mayor Rahman said: “We need to be clear that there was no evidence of fraud or criminal activity identified in the PwC report published today.
“All governance issues identified in the PwC report have already been highlighted by our internal processes and are being rectified accordingly.
“Given that Tower Hamlets council is one of the highest-performing local authorities in London and the wider UK for service delivery to our residents, I am surprised at the secretary of state’s comments today in the House of Commons. I believe that there is a huge disparity between the detail of PwC’s report and the level of the secretary of state’s comments.
“We will be responding to Mr Pickles in due course.”
