Finance: Council files that did the Lambeth walk

Accusations of incompetence and even corruption continue to dog Lambeth Council, which is now faced with repaying pounds 20m to the DSS. But will inter-party

co-operation help?

Paul Gosling reports.

Old memories are being rekindled for former Labour councillors in the London Borough of Lambeth as a result of the District Auditor being asked to investigate a decision to instal a complex and inefficient computer system. The move comes a decade after former Lambeth Labour leader Ted Knight and other councillors were surcharged and disqualified from public office.

Liberal Democrat councillors, who now form the largest group, allege that the borough opted for a system that would hamper the collection of the poll tax and also claim that the system was unable properly to administer the council's housing benefit applications, leading to a pounds 20m bill to repay the Department of Social Security for benefits which it paid, but cannot prove were correctly assessed.

The latest political row to afflict the south London borough comes after the District Auditor, made the unusual decision to publish a report that found widespread incompetence in the council's housing benefit section. Auditors who trawled through files going back to 1991 to check whether benefits payments were correct, found an astonishing lack of record-keeping. In thousands of cases it was impossible to establish whether the council was right to have paid housing benefit.

In the report, the District Auditor points to an official memo issued two years ago by a customer services manager which instructed officers to destroy all "unlinked" housing benefit correspondence other than application forms, which caused tens of thousands of letters to be shredded. A witness has talked of black bags stuffed with unanswered correspondence being sneaked out of council buildings and destroyed. At one point the locks were changed on buildings, it is claimed, to prevent staff coming in illicitly to take files home to burn.

Liberal Democrats say that the council should have had an integrated computer system, to enable information given for poll tax purposes to be cross-checked against that supporting housing benefit claims. Instead, there were four separate computer databases, which, the Liberal Democrats allege, failed to pick up a 60 per cent error rate on information held. Keith Fitchett, deputy leader of the Liberal Democrat group, says that the systems weakness was exacerbated by a refusal by staff to co-operate. "Housing officers took the view that their job was to house people, not to collect paperwork," he says.

Initially the District Auditor identified a possible pounds 50m liability for repayment to the DSS. Council officers have brought that figure down to pounds 20m, and hope to reduce it still further, by examining council tax benefit files which have shown evidence to justify housing benefit awards. Negotiations are currently taking place with the DSS to spread the repayment over 10 years. "We don't have any choice; we will have to pay it off by instalments," says Mr Fitchett. "If not, we'd have to close schools and all the old people's homes."

Predictably, given the historic animosity of Lambeth politics, other parties do not share the Liberal Democrat perspective. Labour says that the bulk of the problem relates to the year 1994/5, when the Liberal Democrats were in control. The Conservatives point to the current chief executive, Heather Rabbatts, who they claim has failed to get to grips with the borough.

"The steps the chief executive has taken have been insufficient, and have not recognised the sheer incompetence within the finance directorate," says Conservative housing spokesman David Green. "From the chief executive downwards there is a shrug of the municipal shoulders, but I have a lot of very frightened tenants. The housing benefits arrears are still mounting up."

Ms Rabbatts is defended by both the Labour and Liberal Democrat groups. Mr Fitchett says: "Heather Rabbatts has done a magnificent job. She said in her interview that she was brilliant at dealing with crises, and she has been proved right. We have had a lot of crises."

The most immediate of those crises is simply how to get through the next financial year. The council's main revenue account, the general fund, is in a dire situation. Councillors will eventually have to write off pounds 50m of uncollected poll tax and a possible pounds 70m of other debt, against a total annual revenue expenditure of pounds 600m. The council is also paying pounds 10m a year into its pension fund for employees who have already retired, because previous administrations under-funded it.

It will, it seems, take decades before its past problems cease to haunt Lambeth. Inter-party co-operation may help the now hung council to get out of its trap, but the latest bout of mud- slinging shows just how difficult such co-operation is to maintain.