Connaught collapse 'not linked to spending cuts', says minister

9 Sep 10
Local government minister Bob Neill has claimed there is not ‘a shred of evidence’ that this week’s collapse of social housing maintenance firm Connaught was linked to the scale and pace of government spending cuts.
By Lucy Phillips

9 September 2010

Local government minister Bob Neill has claimed there is not ‘a shred of evidence’ that this week’s collapse of social housing maintenance firm Connaught was linked to the scale and pace of government spending cuts.


Speaking to Public Finance after delivering a keynote speech at CIPFA’s Facing the Cuts conference on September 8, Neill said it was ‘premature for anyone to speculate on that particular company’s failure until the evidence is available’.        

The division of Connaught responsible for 150 social housing contracts went into administration on September 7. Other parts of the group are continuing to trade normally, but 4,400 jobs are at risk. The FTSE 250 company blamed its problems on public spending cuts.

Following the emergency Budget in June, it said £80m would be wiped from its revenues this year and 31 of its social housing contracts were likely to be hit by deferrals in capital spending. But questions have been raised over accounting practices.

Despite the high-profile collapse, Neill defended the government’s push for more competition in public service provision, saying ‘we should be cautious about reading too much into individual circumstances’. He added that local authorities ‘should not be deflected from the advantages which come from a better approach to [service] provision’.  

He dismissed calls from unions for essential outsourced services such as housing maintenance and repairs to be brought back in-house in case firms went out of business.  

Neill said it was for councils ‘to take an assessment of the services they feel are appropriate to contract’ and ‘it would not be right for government to try and impose a single top-down situation’. There had been instances of failure in the public sector too.

‘Let’s face it, there are plenty of other contractors out there potentially,’ he added.

The Local Government Association said councils always made contingency plans when outsourcing to the private sector. It was unlikely that the Connaught case would put councils off using private contractors in an environment where value for money was the priority.

In his conference address, Neill defended the government’s decision to scrap the Audit Commission. He condemned it ‘for behaving as a large corporate conglomerate’ and said it was wrong for councils to be paying ‘inflated fees’ to support its existence. ‘The audit function can be carried out perfectly sensibly by being moved to the private sector,’ he added.    

He refused to comment on claims that the Department for Communities and Local Government had made an early settlement with the Treasury that amounted to 35% cuts.

Neill added: ‘I do not accept the proposition that doing things with less money automatically has to mean lesser services for the public. If we are ambitious and determined we can get a better outcome despite the financial situation.’

The minister advocated a ‘twin-track approach’ to spending cuts, calling on councils to find ‘quick wins’ as well as ‘long-term transformational change.’  He praised local authorities that were taking ‘innovative approaches’ to ‘radically reconfigure services’, such as sharing chief executives.

He revealed that there were currently 11 shared council chief executives. Another 20 district councils are considering sharing their chief executives and senior management teams.    

The north London boroughs of Camden and Islington this week announced proposals to share their chief executive and management team.    

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