If you cross the Thames from the London Borough of Westminster to its neighbour, Lambeth, the contrast is so striking it?s almost like moving countries, or maybe even continents. While the streets of Westminster take in such sights as the forbidding Houses of Parliament and Victoria Street, where the pin-striped suit is almost a uniform, a stroll from Brixton station to the headquarters of the Lambeth council, the appropriately named International House, is awash with the smells of Africa and the Caribbean, a multicultural, multiethnic borough that Vincent van Gogh once called home.
The contrast is particularly apt for Richard Ennis, 38 and CIMA-qualified, who made the trip across the Thames on St Patrick?s Day last year, going from the wealthiest local authority in the land to Lambeth council – one of the most problematic – to take over as executive director of finance.
Ennis is clearly up for a fight if necessary, and at the moment looks something like a middleweight boxer that has gone one too many rounds. A broken front tooth and some scars are visual reminders of a late-night motorbike accident last December, which put him in hospital for five days and bears witness to the long hours the job demands.
His battle-weary appearance and quiet demeanour hide the remarkable progress he has made turning around the finances of what was traditionally one of the UK’s most troubled local authorities, with its history of civil disobedience, fraud and mismanagement, and its central role in the infamous poll-tax riots of the early 1990s.
When Ennis spoke to Accountancy Age in February, his team were closing the accounts. ‘This will be the first time in nearly two decades that the accounts will be submitted on time,’ he says – an indication of how he has turned things around. But why give up the comforts of Westminster for the ‘horrors’ of Lambeth? Partly, he explains, it was to gain a promotion as he went from assistant director of finance at Westminster to financial director at Lambeth.
But he was also motivated by the ‘huge challenge’ of running and repairing the finances of a borough where ‘FDs seem to come and go pretty quickly’, and where he is determined to stick around to see some of his ideas ‘actually bed in, and that something sustainable is achieved in terms of finance’.
A quick look at the numbers makes for promising reading. In 2001/02 Lambeth council found itself £21m in the red, and only slightly better the next financial year, when losses topped £15m.
But the 2003/04 accounts, which have been under Ennis’ control, will show a healthy bottom line of £6m surplus, plus efficiency savings of £6m. Equally importantly, the council’s long-term debt has been eaten away by £100m during the year. A substantial sum, especially since its debt mountain is in the region of £500m.
Ennis’ approach to the job has been two-fold: firstly to improve the financial position and secondly to change the way in which the finance team operates. Lambeth’s budget stands at £380m, of which roughly a quarter comes from council taxes (£96m) and the rest from the government in the form of revenue support grants. The reality, though, is that Lambeth collects over £700m in taxes (both council taxes and business rates), but gets just a twelfth back from the government, in a bizarrely complicated system that leaves Ennis’ hands tied and also means that he, like other local council FDs, has very little influence over council tax rises.
Despite these frustrations, the collection of council taxes has improved significantly over the last year, rising from a level of 80% to around 91% this year. ‘The goal is to aim for a 1% improvement every year from here on in,’ he explains.
Ennis attributes this to the borough?s fruitful relationship with business support group Capita, and a zero-tolerance approach to those who don’t want to pay.
‘We have set up the contract with Capita in such a way that it incentivises them to improve the collection of council taxes.’
The zero-tolerance approach may be harsh but it is changing attitudes to council tax and is, he says, eroding a ‘culture going back decades, which says you can get away with not paying’.
‘We have demonstrated that this is something we are not prepared to accept. If you can afford to pay, then you should pay. If that means having to send the bailiffs in, then that is what we are prepared to do – we are no longer a soft touch,’ Ennis says.
Such has been the change in attitude that last year the borough collected around £7m in arrears payments. Council taxes aside, Ennis says that when he first arrived at Lambeth he found a very ‘flaky’ balance sheet, with many entries that were unsupported.
To tighten things up, he introduced his own system of financial controls, which first meant clearly defining the lines of responsibility for all the assistant directors of finance.
‘Assistant FDs across the authority now understand exactly what they are responsible for, so they know at which point to report to me if issues arise – not six months after they happen.’
Fraud is also something he has had to address. It was a massive problem for Lambeth in the mid-1990s, when the then far-left council was accused of wasting £50m of public money in, as one report at the time put it, a ‘catastrophic litany of fraud, corruption and mismanagement’.
According to Ennis, fraud is no longer rife in the borough, but there is still too much going on for his liking.To combat such abuses as benefits fraud, right-to-buy council house fraud and frauds across multi-governmental agencies, Ennis brought in PricewaterhouseCoopers (also internal auditors of Lambeth) to work with the police in what he terms a ‘multi-agency approach’.
In addition, he says there are now good systems in place for dealing with fraud.
‘All cases are dealt with in a strong and methodical way. If it means prosecution, then that is what we will do.’
Lambeth also has a corporate anti-fraud team, a small group of investigators and internal employees who look for various frauds and work under the internal audit team.
‘So far we have caught about £300,000 to £400,000, but you don’t know how much is out there. Some local authorities claim there is none, because they can’t find any. My view is that they are not looking hard enough.’
The council itself is subject to rigorous oversight. In addition to PwC as internal auditors, the accounts are monitored by the Audit Commission in the guise of the district auditor. Lambeth’s ‘poor’ rating by the commission means that it is also heavily scrutinised by the Office of the Deputy Prime Minister monitoring board, and an advisory forum made up of ‘key individuals who help the authority’ including somewhat ironically, Ennis?’ former boss at Westminster council.
‘Because of our ‘poor rating’ we have to produce an improvement plan – we produced one last year and have to produce one this year – which sets out what we are going to do and how we are going to do it. The monitoring board examines it every month.’
In January this year, the Office of the Deputy Prime Minister had this to say of Lambeth: ‘The council has turned itself around from a high-risk area into a source of strength underpinning the broad recovery programme.’
The accounts themselves only had one qualification dating back to 1992/93, which he insists will be sorted out before the next accounts are filed.
In addition, Ennis has also whittled down the number of Section 11 recommendations, (serious financial issues in the council worthy of the public interest) handed out by the district auditor in its management letter, from seven in 2001/02 to zero in 2002/03.
‘We set the target of getting it down to zero, which we achieved. I thought this was an amazing achievement.’
Looking ahead, Ennis seems to be sailing a steady course despite next month’s council tax rises and the talk of scrapping the existing system altogether, in favour of a new income-based alternative. Lambeth’s council tax rise will be modest – just 4.9% – meaning it will keep its position as the seventh lowest of the 33 London boroughs, but Ennis can?t help feeling frustrated that despite trimming the budget by £7m and steadily increasing collection rates, the tax will still have to rise.
He describes the new proposals as ‘an interesting set of ideas’, but until he sees the details he can?t say if they will be beneficial.
But he is clear that whatever scheme might replace council taxes, it must be a fair scheme: ‘From a pensioner’s point of view, this is not currently the case. They get relatively small increases in their pensions and yet the council tax is very high.’
Battle-scarred as he may be, Ennis will soldier on. ‘For me it’s about working in an area where you can make a big difference to people’s lives, because you are dealing with services that really matter, such as education, social services and mental health.’
And though his days are hectic, Ennis still finds time to manage a junior football side called the Mavericks on the other side of London in Hillingdon, in which his three young sons all play.
And if the moral cause were not enough to motivate him to succeed in Lambeth, there is his burning ambition to match a football hero who, he says, has taken his team to a ‘different level’. As Ennis says: ‘I want to be the Alex Ferguson of FDs.’
Does Darwin's theory apply to taxation? Colin ponders...
The EC has been instructed to draft a European Union (EU) directive authorising an EU financial transaction tax, which would apply to ten of the EU’s 28 member states
Accountancy watchdog the FRC has dropped its investigation into the former chief financial officer of Tesco, nearly two years after the supermarket was engulfed in an accounting scandal
Colin imagines how Apple's logo might change in the wake of the EC's ruling over its Irish tax arrangements