Liverpool Council: No malpractice over energy contract, report says

The council's cabinet was unaware Scottish Power had withdrawn from the commercial market

Lack of oversight, poor communication and staff too afraid to raise the alarm caused Liverpool City Council's energy bill to soar by £10m, an inquiry has found.

Accountants Mazars examined what led to the council signing off an energy contract which turned out to be void.

However, the report found "no evidence of malpractice or a cover-up" by any council employee.

There was also no evidence of staff "playing the market", it added.

The specialist accountants said a combination of factors led to the council's cabinet signing off on an extension to its electricity contract with Scottish Power at a meeting on 4 March, despite the firm having already withdrawn from the commercial market.

As a result, the council was placed on a more expensive tariff. This has impacted schools and Merseyside Fire and Rescue Service (MFRS), which get their energy via council contracts.

'Systematic problems'

The cabinet had not been informed of the company's market withdrawal before it was asked to agree to the deal and the mayor and senior councillors were not made aware of the error until it was too late, the report said.

The council's chief executive, Tony Reeves, resigned earlier this month. The report said the "chief executive officer did not have controls in place to flag major risks ahead of time".

It added that he had "insufficient knowledge of the detail of major contracts" and that he was "not aware of the significant work pressures of council employees".

Tony Reeves stood down as chief executive earlier this month

Mr Reeves previously told a council committee that he could not "be expected to have granular knowledge of each council contract... and he acted as soon as he was alerted to the problem".

Cabinet member and culture change lead, Frazer Lake, said the council's internal processes had been tightened because "the control measures in place weren't robust enough".

"There was confusion around roles and responsibilities," he said.

Government-appointed commissioners were brought in to run parts of the council in March 2021 after inspectors found a "serious breakdown of governance" and "multiple apparent failures".

Lead commissioner Mike Cunningham said the contracts issue was symptomatic of the problems at the council.

"There are human errors here. But the things that need sorting out are systematic and organisational rather than one or two mistakes," he said.

'Public money'

Mr Cunningham added: "Liverpool City Council is still emerging from a culture where openness and transparency and clarity were not things that were celebrated, and many people operated in a culture where it wasn't safe to speak out and where you got into trouble for speaking truth to power."

The report does not say exactly how much money the mistake will have cost the council, something which Liberal Democrat leader Richard Kemp said meant the whole exercise had been a "complete waste of money".

"For over £100,000, we have learned nothing that we didn't know from the Caller report," he said.

"Meanwhile schools are on holiday and will return in September having to set their budgets still not knowing what impact this will have".

Mr Lake said: "Schools and the fire service had already budgeted for an increase due to the volatility of the energy market", but he said any decision to pay any extra costs from council reserves would have to be made by the cabinet at a later date.

Mr Cunningham said the council needed to operate with "a greater sense of urgency", adding: "What we are saying is the pace of change is not what it should be and that needs to alter."

"This is a big organisation spending a lot of public money. It's going to be tough to turn the tanker around, it's not for the faint-hearted," he said.

A council spokeswoman said: "The city council has since approved a new energy contract with Crown Commercial Services, which will run until March 2025.

"This final cost to the council, the Merseyside Fire and Rescue Service and the city's schools, of being on a variable tariff between 1 April and 30 June is expected to be reported to the council in August."

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