The Value for Money and Transformation Policy and Scrutiny Committee reviewed its work programme, received updates from the Cabinet Members for Value for Money and Innovation, and scrutinised the Council's Capital Programme. Key discussions included the 'Fit for the Future' transformation programme, transparency in financial reporting, major contract reviews, and the significant scale and funding of the Council's capital investments. The committee made recommendations regarding the Capital Review Group's role and the monitoring of capital funding streams.

Work Programme

The Committee reviewed its work programme for the municipal year. Members highlighted the 'Fit for the Future' programme, scheduled for scrutiny in September, as a topic that warrants regular revisiting. They also suggested adding an item concerning the management of the Council's commercial property portfolio, specifically focusing on how to avoid disturbing or burdening residents and how associated issues are addressed.

Update from the Cabinet Member for Value for Money

Councillor Paul Fisher, Cabinet Member for Value for Money and Finance, provided an overview of his portfolio's priorities. He emphasised a commitment to transparency in financial reporting, enabling residents to understand how Council Tax is spent. A review of major contracts is underway to assess their financial sustainability and value for money. Councillor Fisher also outlined the budgetary pressures facing local government, exacerbated by the government's Fairer Funding Review, and highlighted Westminster's unique challenge of serving a large daytime population alongside its residents.

During the discussion, councillors raised several points:

• Funding Variations: Questions were asked about how funding channels would be reviewed to optimise income, particularly concerning developer contributions and the planning process.
• Transparency and Performance Reporting: Members sought clarity on when performance data would be published, whether it would include over-budget or delayed projects, and how residents could provide feedback on the user interface.
• High-Risk Contracts: Councillors requested information on the number of high-risk contracts identified, the definition of platinum contracts, and the metrics used to assess value for money.
• Commercial Property Income: Concerns were raised about minimising disruption to residents and public spaces during commercial property acquisitions.
• Historic Contract Awards: The committee questioned how subjective assessments in previous contract tendering processes would be addressed across all contracts, not just high-risk ones.
• Property Investment: Confirmation was sought that no additional capital properties had been approved and purchased in the last four years, with questions about the reasons for this and whether procurement priorities had impacted potential rental revenues. The possibility of seeking external advice on property investment was also raised.
• Director Recruitment Pause: Clarity was requested on the implications of a pause in director recruitment and the number of potential candidates affected.
• Directorate Savings: Members inquired whether specific savings targets had been set for each directorate.
• Use of Reserves: Confirmation was sought on the commitment to avoid relying on reserves.
• Contract Review Process: Questions were posed about how contract evaluations would be measured, the basis for the review, and how it would differ from the work of other oversight bodies. Members also asked if the Cabinet Member had pre-determined findings.
• Business Rate Write-offs: Trends and contributing factors to the high level of business rate write-offs were explored.
• Resident Engagement: The extent of resident involvement in transformation proposals affecting their services was discussed.
• National Non-Domestic/Business Rate Write-offs: Further information was requested regarding the twenty-two debts exceeding £100,000 and future monitoring to prevent similar occurrences.

The committee requested more data on business rate write-off trends and information on monitoring to prevent an increase in high-value non-domestic rate write-offs.

Update from the Cabinet Member for Innovation

Councillor Mark Shearer, Cabinet Member for Innovation, introduced the 'Fit for the Future' transformation programme, aimed at improving services and achieving savings. Tamara Jarvis, Director of Strategic Change, provided supplementary information.

Key discussion points included:

• Planned Diagnostics: Clarification was sought on the meaning of diagnostic in this context.
• 'Fit for the Future' Programme: Members questioned how the Council would measure improvements in service quality for residents, beyond simply cost reduction.
• AI in Contact Centres: Confirmation was requested regarding the type of AI used in the contact centre and the safeguards in place.
• Cyber Security: An assessment of remaining cyber risks, particularly concerning shared IT systems with other local authorities, was requested. Members asked for a timeline for the full separation of joint IT infrastructure with the Royal Borough of Kensington and Chelsea.
• Future Reports: For the substantive report on the 'Fit for Future' programme in September, Members requested the inclusion of key area prioritisation, RAG ratings, costs, performance monitoring, delivery details, and substantive risks.
• Data Captured in Cyber Incident: Specific details were requested on the files and data compromised during the cyber security incident.
• Achieving Savings: Concerns were raised about whether sufficient political resource was dedicated to delivering the ambitious savings projected by the 'Fit for Future' programme, and how new tools would be utilised, staff retained, and progress monitored.
• Connectivity: Discussions with network providers regarding improving internet coverage and speeds across Westminster were highlighted, along with questions about wayleave agreements and their approval process.
• Communication and Preparedness: Learning from the cyber security incident, the committee explored improvements in communication with residents and stakeholders, as well as enhanced cybersecurity training for Members and officers, including the use of phishing tests.
• Joined-Up Spending: Members inquired about applying lateral thinking to various funding streams and identifying external funding opportunities, such as Corporate Social Responsibility and Third Sector grants, to align with the Council's spending.

The committee agreed to incorporate these comments into the scope of the 'Fit for Future' report scheduled for September. Information requests were made regarding the use of generative AI in the contact centre, the timeline for IT infrastructure separation, and a breakdown of data captured during the cyber security incident.

Capital Programme

Councillor Paul Fisher, Cabinet Member for Value for Money and Finance, introduced the report on the Capital Programme, welcoming the opportunity for early scrutiny. Senior finance officers provided support during the discussion.

Key areas of focus and questions raised included:

• Annual Borrowing Costs: The committee highlighted the need to address the forecasted increase in annual borrowing costs and its implications.
• External Funding Sources: The importance of risk-rating external funding sources and ensuring their materialisation was stressed. Members suggested external review of the capital programme by experts in major developments and the use of RAG ratings for funding certainty.
• Budget Gaps: Questions were raised about how budget gaps would be managed and whether major risks were adequately identified, given funding uncertainties.
• Programme Timelines: Concerns were expressed about controlling timeframes, given historical programme slippage, and whether external experts could improve delivery.
• Capital Receipts: Clarity was sought on the underlying assumptions for the £881 million forecast for capital receipts, including market expectations, property prices, and inflation. The potential variability in Community Infrastructure Levy (CIL) and Section 106 revenue and their impact on borrowing were also discussed.
• Project Prioritisation: The committee asked how projects would be prioritised and potentially cut back if necessary.
• Borrowing Requirement Rationale: The basis for determining the borrowing requirement as a percentage of gross spend for individual projects and categories was questioned.
• Corporate Programme Management Office (CPMO): The committee inquired whether the implementation of the CPMO contributed to the recent increases in capital spending.
• External Funding Schemes: The monitoring of external funding schemes to ensure alignment, particularly as capital receipts were previously the primary funding source, was discussed.
• Capital Review Group: Concerns were raised that the Capital Review Group might be involved too late in the process, after Cabinet Members had approved spending, potentially limiting officer scrutiny. Questions were also asked about existing approvals and gateways.
• Strategic CIL: The benefit of adding strategic CIL to general capital financing before retrospective application was questioned.
• Impact of Assumptions: The committee asked about the impact of interest rate and inflation forecasts on delayed projects and the Council's preparedness.
• High-Risk Project Reporting: Members requested enhanced reporting on high-risk projects to improve Member oversight, given the high volume of projects exceeding initial budgets.
• Expenditure Auditing: The breakdown and justification of expenditure were discussed, with a specific example of temporary accommodation acquisitions within and outside Westminster.
• Security and Oversight of Capital Receipts: Questions were raised about the security of totals and capital receipts, noting potential discrepancies between analysis and graphical data, and the omission of known schemes.
• PDHU Costs: Clarity was sought on the basis for merging ongoing costs and indicative future replacement costs into a single line item.

The committee requested a RAG-rated overview of the Council's principal capital programmes and key funding sources, along with any changes to those ratings.

Recommendations:

• The committee recommended a review of the Capital Review Group's role, suggesting earlier meetings, better identification of major risks, and the potential inclusion of independent external experts to enhance challenge and scrutiny of expenditure proposals.
• The committee recommended that by 30 September 2026, the Finance team introduce a consolidated monitoring framework for all capital funding streams, including market property sales, Section 106 contributions, Affordable Housing Fund (AHF), and CIL receipts. This framework should provide bi-annual scrutiny of funding assumptions, expected receipt dates, variances against forecasts, and mitigation actions for delays or shortfalls.