Troubled services company ITNet last week lost its council tax and housing benefit contract with Hackney Council, but managed to sign a new heads of agreement for a revised contract with neighbouring Islington Council.
An Audit Commission report into Hackney Council published last November revealed a backlog of 17,000 housing benefit cases and council tax collection rates of just 50%. It also showed mounting levels of overpayment of housing and council tax benefit and declining levels of debt recovery.
Hackney Council served notices on ITNet requiring dramatic improvements in the service after talks on renegotiating the contract broke down.
Anticipating it would lose the £70m, seven-year contract, ITNet then wrote off £10m.
This week the company said it intends to achieve a “smooth hand over” of the service, which it anticipates will occur “within a short period of time”. However, negotiations on what will happen to the staff and systems as well as possible compensation will begin shortly.
Councillors Jules Pipe and Eric Ollerenshaw, joint vice-chairs of Hackney’s Policy and Resources Executive Committee, said, “Many difficulties have been caused for residents and staff alike and we believe that a line has now been drawn under this issue.”
An independent review of Hackney’s revenues and benefits service last year warned, “Contract termination would be complex, very expensive for all parties and uncertain in financial outcome.”
Hackney Council is not planning to re-tender the contract in its current form but will “bring in a range of expertise” to help, with the possibility of different contractors being brought in to cover different operations. In Islington, the heads of agreement increases the total value of the original 1998 contract by £17m, from £22m to £39m, and extends the contract term by 3.5 years to 2009.
Service delivery under the initial contract has been roundly condemned by the Government’s Benefits Fraud Inspectorate.
Islington council leader Steve Hitchins told Computer Weekly, “From now on it is payment by results. Unless ITNet delivers it won’t get a penny of that extra money.”