Stephen Byers, the new secretary of state for Transport, Local Government and the Regions, has wasted no time stepping into the row over Hackney Borough Council’s financial plight.
Under the Local Government Act 1999, Byers could be given wide-ranging powers, including the transfer of functions from the council to his department, the first time the Act has been used in this way.
His action results from clear warnings from senior Hackney officials that spending is in excess of income and that as a result no new spending commitments could be entered into.
This would lead to the non-renewal of all short term and agency contracts, affecting supply teachers, child protection workers, benefits officers and other key workers.
As a consequence, the DTLR said there would be severe disruption to the delivery of front line services.
Hackney has been dogged by recent financial scandals, including allegations of housing benefit fraud, and is trying to reduce a £40m shortfall.
Consultants from Deloitte & Touche have been drafted in to help with the operation.
Because of Hackney’s continual failure to generate a balanced budget, Byers believes action is needed to tackle the underlying financial control problems.He has asked the Audit Commission for advice and will decide on further action before the end of July.
In order to maintain essential services Hackney will be given permission to borrow money but will not receive additional grant from the government.
In a statement, councillor Jules Pipe, leader of Hackney Council, said: ‘We welcome the fact that the Secretary of State has today confirmed that we will be given permission to borrow money.’
He added: ‘Since the beginning of 2000 we have made significant progress in tackling the past failures of Hackney Council – failures which arose under previous management and during a period when there was no overall political control of the authority for five years.’
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