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Tuesday, 18 October 2011

Who Scrutinises The Scrutineers?

Cabinet Scrutiny Committee on 17th October

The main item on the Agenda was the failure of Chelsea Care, set up by Cabinet at their meeting in September 2008. Chelsea Care is currently in liquidation.


 left: everybody pointing fingers


Two reports were tabled. A liquidation report by the Director of Finance and a report by a special Working Group, Chaired by Cllr Palmer, to report on the reasons for failure. Amazingly, Cllr Palmer did not even turn up to the meeting. A clear dereliction of duty. But there was a huge and impassioned discussion, characterised by participants mostly out of their depth and/or trying to cover themselves. Sad for a Scrutiny Committee. But a picture did emerge through the fog for the finely tuned antenna…..

Cllr Lightfoot mentioned that the Cabinet were keen to set up Chelsea Care but the officers were not keen for politicians to get involved in business. There was quite a bit of arm twisting. Cllr Blakeman said that she opposed the second tranche of equity, £150k, but was overridden by the project champions Cllrs Ahern and Palmer. Cllr Blakeman also said that there are substantial and unreported hidden costs. 

Cllr Lindsay said that the special report by Cllr Palmer into the failure of the venture left out one vital point. The business plan was predicated on an operating margin of 16% but the industry works on a margin of 3%: something that any venture capitalist worth his salt would have known.

Cllr Forman made a number of contributions that showed he understands business. But the heavies (led by Cllr Molylan) quickly silenced him. Cllr Forman needs to try harder.

Finally there was quite an extraordinary contribution from Mr Myers, the Chief Executive, who said that the objective for Chelsea Care was to encourage competition in the market and lower costs. This was successful and the council is now buying care at a lower cost! And councillors should take comfort that even some of the big boys like Southern Cross get into trouble. Can this really be a Chief Executive?? And who is he trying to please? Does he know so little about the business that he can really think the problems of the two companies have any relativity? Southern Cross went down because it was loaded up with debt by financial engineers: Chelsea Care went down because, as Cllr Lindsay wisely pointed out,the business plan was based on wrong assumptions. For Myers to ingratiate himself with councillors by pretending that the business plan was un-flawed is not worthy of him.

The full Cabinet will discuss Chelsea Care on Thursday this week.Time to hold our breath.

26 comments:

  1. This is a disgraceful story and Labour must not allow it to be covered up.

    Another example of too many people in Hornton Street with not enough to do and too much money to spend.

    Chelsea Care was another train set for councillors to play with. Against the advice of officers.

    At the same Cabinet Committee in September 2008 Cllr Cockell and his mates were playing with yet another train set. They authorised Holland Park Opera (subsidised by K&C taxpayers to the tune of £1,000,000 per year) to put on a performance at the Richmond Theatre. Taxpayers underwrote the £80,000 cost. The business plan showed a sure fire profit of £20,000. Lots of excitement.

    Of course the venture lost £17,000
    Officers were not keen on this nonsense either

    ReplyDelete
  2. Retired Chief Executive18 October 2011 at 10:40

    Very odd that Cllr Palmer did not turn up to a meeting where the main aganda item was a discussion of his fact finding report into the reasons for the failure of Chelsea Care.

    In my organisation he would have been fired for such an act of incompetence and disrespect

    ReplyDelete
  3. Disgruntled Pensioner18 October 2011 at 10:59

    Cllr Palmer joined this Scrutiny Committee specifically to scrutinise Chelsea Care. At first he was fired up to close it down immediately and find out who was to blame for the catastrophe. He even wanted to involve Cllr Blakeman as Chairman of the Scrutiny Committee but was warned by the Town Clerk that she would not be permitted to have the detailed confidential behind the project and that her involvement could be damaging. Then somewhere down the line he was beguiled by those whose baby this was - and by the end he had come out fully in favour of continuing the project by throwing money at it and finally seeking to blame officers and not Cabinet members for the fiasco!

    ReplyDelete
  4. Thank you Disgruntled Pensioner.
    We need the sorts of insights that you have just offered...very illuminating. Though illumination is not something this lot thrive upon!
    More Please Sir

    ReplyDelete
  5. How sad! The one time the Driveller gets it right and then he has to kow tow to those in authority over him. No wonder he couldn't face going to the meeting.

    ReplyDelete
  6. District Auditor18 October 2011 at 11:56

    It is reported that Cllr Palmer was the Champion of Chelsea Care. It is very unusual for the same person to be commissioned to carry out a post mortem after failure.

    Cllr Lindsay also points out that the Cabinet approved a fantasy business plan based on 16% trading margins when the industry in fact works on 3% margins. A fact overlooked by Cllr Palmer

    ReplyDelete
  7. Kensington Resident18 October 2011 at 11:59

    I wrote to Cllr Cockell after the September 2008 Cabinet meeting objecting to the council using tax payers money to enter the risk business with Chelsea Care. And pointed out that Governments long ago had leant the folly of trying to pick winners. Certainly not something that a Conservative administration should contemplate

    Cllr Cockell did not even have the courtesy to acknowledge my communication

    ReplyDelete
  8. In Whitehall a debacle such as this would be scrutinised by the Public Accounts Committee (PAC), including evidence from witnesses and management. The report would point the finger clearly at the persons responsible for failure

    Clearly no such rigour exists in Kensington and Chelsea

    ReplyDelete
  9. Retired Chief Executive18 October 2011 at 12:07

    There is absolutely no information about who is responsible. I am sure that if the question was asked "Who prepared the business plan?" or another question "Who was the sponsor?" there would be blank looks. Just lots of people in a talking shop wanting to do good and not the first clue about business.

    Cllr Cockell should sharpen up his act. He needs to point the finger clearly at the sponsoring person and fire them. Multi million pound organisations (K&C spends £800 million every year) need to be very clear about where financial and management responsibility lie.

    ReplyDelete
  10. No Retired Chief Executive you are wrong, it is Cockell who should be fired along with Myers. Now they are on with Tri-Borough. In fact the take-over off K&C by H&F. Another disaster in the making.

    ReplyDelete
  11. When Cllr Palmer began his gung ho crusade against Chelsea Care he was told that:

    • the Company was delivering its full service under the core Council contract at a competitive price, although that did not contribute enough to the bottom line
    • there was a separate brokerage contract with the Council to help people with personal budgets make their own care arrangements
    • and a separate contract with Hammersmith and Fulham for a similar service.

    Chelsea Care was now going to focus on its original purpose of selling services to private clients at unsubsidised rates, creating a business enterprise able to sell in the open market.

    The following issues had also already been examined by a Cabinet caucus:

    • the original purpose of setting up the Company and whether this was still valid
    • the Company’s trading performance to date
    • the extent to which the Council had done its bit by providing clients to the volume originally anticipated
    • the confidence the Council had in the Board and its senior staff member
    • the likelihood that with additional financial support or a further equity injection the Company would trade successfully
    • the consequences of any decision not to offer financial support, meaning the Company closing and clients returning to in-house home care at a higher overall cost to the taxpayer
    • and the Company’s other business liabilities.

    The Cabinet caucus had already decided that closing the Company was not in the taxpayers’ interest and a more orderly report should be considered by the full Cabinet – and so Cllr Palmer fortuitously entered the fray as as their smokescreen. Cllr Palmer was also instructed to proceed with a degree of confidentiality because the future option for Chelsea Care, once it made real money, was a trade sale to put £000s into Council coffers.

    ReplyDelete
  12. This is a shoddy story that the Borough should be deeply ashamed of.

    Cllr Palmer joined the Scutiny Committee to scrutinise Chelsea Care and immediately sensed a basket case. But as chief gofer to Cllr Cockell (who sanctioned the project in the first place) he quickly figured out where his promotion prospects lie and became a mouthpiece and champion of the project. He urged VIPs (Cabinet members) to commit a further £150k of equity to the doomed venture and felt great as he basked in the visibility that the project gave him.

    And then his close friend Cllr Lightfoot, Cabinet Member for Finance, needed a post mortem report that was bland and avoided allocating blame. Again, stooge Palmer came up trumps, ending his pathetic report with the words "As with property purchase the three rules are location, location, location. For small companies the rules are Management, Management, Management". What pathetic fourth form stuff this is. But Lightfoot will reward him with some bauble or other.

    And then the curious Chief Executive, Derek Myers, recently appointed joint Chief Executive of K&C and Hammersmith, demonstrated that he has departed the ranks of management and has himself become the politician - "Cabinet should take comfort from the fact that big boys like Southern Cross fail too". Myers is clearly in the business of keeping friends with those who matter in the new accident prone Tri Borough environment.

    This is a corrupt organisation built by Merrick Cockell. The residents and tax payers of K&C deserve an independent report that clearly allocates blame and provides a path for punishment. Highly paid councillors and officials need to understand that the flip side of the coin is responsibility and accountability.

    Until the failed Cockell departs there is probably no hope for this talking shop in Hornton Street

    ReplyDelete
  13. Retired Council Employee18 October 2011 at 20:58

    As a retired employee who has worked for RBKC for a quarter of a century I am not in the least bit surprised by this story. The sad thing is it seems to be getting worse with so many people in such powerful positions and answerable to nobody. At least senior officers then seem to have what Myers and his cohorts lack....a conscience . Their arrogance is unbelievable made worse by the fact that for some strange reason their foibles never seem to make the national press!?

    ReplyDelete
  14. Retired Council Employee

    maybe an additional problem is that experienced officers are having to nanny councillors who just don't have the intellectual capability to do their job.It is time consuming and fraught with danger.

    ReplyDelete
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