I thought the looming budget debate in Tower Hamlets would be explosive – and I think I was right. It is in this area – the most important one there is – that we are going to see the serious problems of the split council set-up.

While Independent Lutfur Rahman may be the all-powerful mayor, it is the 51 councillors who have the decision when it comes to passing the budget. Lutfur and his cabinet will make their proposals, but they need a vote of the full council to have it approved. He therefore needs Labour, which has more than half of all councillors. Politically, therefore, Labour will want to make the budget their own. There are some interesting dynamics around this.

When I asked Labour’s Josh Peck, who spent the last four years in charge of budget-setting, what were the biggest concerns about the current proposals (as reported in my last post here), he said one was the amount Lutfur was hoping to set aside in the council’s reserves.

You’ll need to stay with me on this. In an attempt to dampen the effects of the spending cuts, the Coalition has provided transitional grants to those councils most in need. Tower Hamlets is one of them and has qualified for emergency funds of £3.7million for 2011/12 only (the details of the grant are explained here on p125 at paragraph 8.6).

Yet instead of using that to protect frontline services in 2011/12, Labour says Lutfur has effectively decided to pocket it by squirrelling £3million away in the council’s reserves to set up what Josh describes as a special mayoral “slush fund”. He suspects Lutfur will dip into that account during the next 12 months to hand out cash to the ‘third sector’ organisations (charities and the like) that will help take the Big Society strain of the Whitehall cuts.

Here are Josh’s own words:

“For the Mayor to pocket a £3million slush fund at precisely the time when he is abolishing 650 after-school childcare places and cutting services at Children’s Centres in one of London’s poorest boroughs beggars belief. It raises serious concerns about what he plans to do with this public money, or indeed who he intends to give it to.”

Here’s how the council describes the proposal in Lutfur’s budget document:

16.10.Having regard to the potential for volatility in the medium term financial outlook, the time-limited nature of the Collection Fund surplus (paragraph 17.3), and the strategic financial risks highlighted in this report, it is recommended that Cabinet seeks to maintain general reserves at between 5% and 7.5% of budget requirement. This broadly equates to a target range of £15.7m to £23.6m.

16.11. A projection of the level of general reserves anticipated as at 31st March 2011 is shown at Appendix G and indicates that reserves are currently expected to stand at £20.6m as at 31st March 2011, which is in the middle of the recommended range. However in view of the financial risks facing the Council over the next few years, in particular the need to identify further savings in 2012/13 and the delivery risk of achieving a £30m savings plan in 2011/12, it is recommended that the reserves need to be maintained at the upper end of the range. A contribution of £3.0m is therefore included as part of the budget strategy for 2011/12.

That’s just one area of disagreement and there are many others. For this reason, Josh and other Labour members have been trying to talk to senior council officers ahead of next month’s council meeting. Last Saturday, Josh published the following on his Twitter account:

“Mayor Rahman has banned council officers meeting Labour Cllrs to discuss the budget – what’s he got to hide? #RahmanFail“

When I talked to him about this, he went further. He said that officers appeared to be willing to meet (they have in previous years with other opposition councillors, I understand), but that Lutfur apparently intervened. And not only that, he said chief executive Kevan Collins had agreed to Lutfur’s demands.

And this is where it gets explosive: Josh and his Labour friends are now furious with Kevan. They have all but accused him of being Lutfur’s poodle . There is some history here: when Kevan’s predecessor Martin Smith (who had a good working relationship with Josh) was forced out by Lutfur and Cllr Marc Francis two years ago, there was a strong suspicion that Kevan had played a good game. However, Josh’s broadside is astonishing. Here it is:

“There is a growing perception that Dr Collins is not prepared to say no to the Mayor, regardless of his legal duty to do so in certain circumstances. He runs a serious risk of losing the confidence of the Council if he does not act with greater care.”

And if I haven’t yet exhausted you, here’s another interesting development. Josh is among those most opposed to Lutfur’s re-admission into the Labour group, an ambition the Mayor still holds. Lutfur is lobbying hard for it and, I’m told, held a long meeting with Jim Fitzpatrick earlier this month when the two discussed how to be “in it all together” against the Coalition cuts.

According to the Left Futures blog, Labour’s NEC yesterday decided some of the allegations in Helal Abbas’s explosive dossier in September were, well, a bit dodgy. They have decided to look into other elements of the controversy, but Lutfur’s supporters, including Ken Livingstone, see this as the first step in the rehabilitation process. All those who thought that October 21 was a major turning point in the Tower Hamlets Labour party might well have been wrong.

Here’s the Left Futures account – it’s written by Jon Lansman, a Bennite Lutfur supporter now living on the Isle of Dogs.

Tower Hamlets: membership inquiry reveals no conspiracy

Labour’s national executive yesterday received a report into “alleged membership abuse” into Tower Hamlets which contained nothing that could be regarded as evidence of a conspiracy by anyone. Complaints made against Lutfur Rahman, then the candidate chosen by Labour’s members as their candidate for Mayor, then debarred pending an investigation and subsequently elected as an independent candidate for Mayor, included allegations of membership abuse. However, the investigation produced no evidence of any wrong-doing by him and made clear that, if there were any irregularities,  they made no difference to the outcome.

The report reveals that, of the 1,217 members to be eligible to take part in the selection process, 149 had been found not to live at the address on the membership list. This finding was presented by complainants against Mr Rahman, allegedly on the basis of a canvass of less than half of the membership. However London borough migration figures reveal that, in Tower Hamlets, 9.5% of the population move out of the borough each year and a further 5.3% move within the borough. We should therefore expect 180 out of 1217 members who had paid their relevant subs on average a year previously to no longer live at the same address. No doubt this warranted further investigation, but it does not necessarily imply anything significantly wrong.

Out of those 149 members no longer living at the address on the membership list, the report claims there is “no evidence that 75 of them were ever registered as an elector at the address where they claimed their Labour Party membership at the time of the selection.” According to the Electoral Commission, about 18% of those eligible to vote in inner London are not registered, often because they have relatively recently moved in or live with their parents. Tenants of private landlords are less likely to be registered, students may be registered elsewhere, some members may not be eligible to vote. Labour Party members may be expected to be more likely to register than those uninterested in politics, but people who are more transitory (as these members appear to be) are less likely than others.

However, that whole matter is of little relevance since only 12 of these people actually voted in the selection which Lutfur Rahman won the selection by 25 votes over both other candidates in the final round, 182 over his nearest rival.  It was acknowledged at the national executive that, even if there were irregularities, they could have made no difference to the outcome, a view that had also ben shared by the NEC disputes panel.

The report, which was poorly written and failed to adequately explain what had happened, nevertheless sought, without any supporting evidence, to conclude:

It is membership abuse to claim to be a member at any address where you do not live. The number of cases strongly suggest that this would not have come about through accident or through individuals acting alone to abuse the system. The evidence outlined above is sufficient to suggest a concentred effort to add people to the membership list in Tower Hamlets was being undertaken by one or more individuals.

This conclusion was not agreed by the executive which called for a further more comprehensive report, and for an investigation into other aspects of the complaints made against Lutfur Rahman, as had been promised previously. Whilst the report fails to provide any firm evidence of widespread  membership abuse, some irregularities cannot be ruled out. However, no evidence of any conspiracy by any candidate for the mayoral selection has been found.

It is clearly a “membership abuse” to misrepresent one’s address in order to be a member where one doesn’t live. It is surely not necessarily wrong for people to delay transferring their membership for a little while after moving.