Hackney Council has still not terminated its contract with ITNet, its revenues and benefits outsourcer, some four weeks after councillors declared they were pulling the plug on the £70m, 10-year contract.
ITNet's stock market valuation has halved following the announcement, yet the company had to wait three weeks to be told the council believed it had grounds to end the contract, and no timetable was laid out for negotiations.
The escalating costs of the ITNet contract were cited by Max Caller, the new managing director of Hackney Council, as a factor in a draconian spending freeze imposed on the borough last week.
The council has identified a £3m hole in its revenues and benefits budget and called for £4.8m savings from the housing revenue account to plug a £13m overspend.
This will make it very difficult for the council to bring the revenues and benefits service back in-house, despite mounting calls from local residents who have endured severe delays in payments.
ITNet has pledged to stick to an improvement plan it agreed with Hackney Council to eliminate the backlog by January 2001, while waiting for negotiations. Meanwhile, the company said it had successfully retendered for £11m of business from other London councils.