Hackney Council is to axe a £70m housing benefit and council tax outsourcing deal with ITNet, just three years into the troubled 10-year contract.
Hackney Council agreed to "move towards" terminating the contract earlier this week. It blamed ITNet for failing to deliver an effective service after IT problems with the benefits service created a £3m backlog in benefits payments earlier this year.
The announcement is an attempt to draw a line under one of the most high profile outsourcing debacles in the local authority sector.
In a written statement, the council claimed it was forced to end the contract after it was unable to agree a recovery plan with ITNet. It also warned that there would be further disruption to the housing benefits service as the complex system is moved back to council control.
The council added that it was in legal discussions with ITNet.
A joint statement from Hackney's Labour and Conservative groups described the "chaos and misery" caused by the ITNet service.
In an announcement to the stock exchange ITNet said it had not received a formal communication from Hackney Council announcing plans to terminate its outsourcing contract.