Mayor Rahman’s budget: anti-austerity triumph or expensive gamble for Tower Hamlets

Lutfur Rahman has unveiled an extraordinary budget to pump £40 million into public services in 2023 alone. But is it sustainable?

In his 2023 budget, Lutfur Rahman, Tower Hamlets mayor, laid out spending plans of £40 million in 2023, almost double the £21 million John Biggs’s previous Labour administration spent at most in any year from 2015 to 2022, according to figures from Andrew Wood, former Conservative Councillor for Canary Wharf.

Rahman also plans to spend £33 million in 2024 which will require huge savings. Tower Hamlets Council detailed in its budget that it will look to save £37 million from 2024 to 2025. But it is unclear where the money will come from.

Responses from local residents are varied, with some praising Rahman for his spending plans, notably making free school meals universal, and others questioning how he will afford such measures.

It is notoriously hard to get a grip on figures so we have dug around to clarify the budget for our readers.

Abul Zubair, local resident, tweeted: ‘Excellent start Mayor, this will help locals immensely. Keep up the great work.’

Jas Bhangal, another local, was pleased about free school meals, but less convinced on the Council’s ability to save. He tweeted: ‘The continuation and extension of the food programme for schoolchildren is good to hear.

‘But as you are freezing council tax, how are you going to pay for this and the other improvements you have said you will make?’ he asked.

Rahman’s Council tax reduction scheme makes Tower Hamlets the sixth most affordable Council in England, but costs an estimated £30 million.

In terms of savings, £2.5 million will be raised by a 2% adult social care precept, an additional charge on residents’ Council tax bills that will help deal with increased demands on services for older and vulnerable residents. But is this enough?

While most have welcomed investment into areas such as housing, youth services and free school meals, questions remain over how the Council will afford it in its second and third years.

Puru Miah, former Labour Councillor for Mile End, said Council saving plans must be published to show the budget is backed by data.

‘Any money spent is beneficial to people in Tower Hamlets, it just has to be done correctly,’ said Miah.

‘There needs to be published research, that’s the challenge to the Aspire administration – put your money where your mouth is.’

The Council benefited from vast reserves amassed by Biggs, which stood at over £600 million when Rahman first came in, said Wood. While not all of it can be spent, as £336 million is ring-fenced capital reserves, £23 million has been withdrawn this year alone.

Wood’s projections show that under the planned budget, £86 million of the Council’s available reserves that have no spending restrictions will fall to £56 million in 2024, £30 million in 2025 and £19 million in 2026. He said reserves take a long time to build up and once they are spent, they are gone for good.

Moving key services back in-house

One of Rahman’s bold moves has been to bring key services such as housing, youth and leisure back under Council control.

The Council announced on 1 March it would invest £11.5 million on youth services and £275,000 on leisure services. But we found substantially more, over £1.9 million, allocated to leisure services in the Council’s budget papers.

The Council will take over all seven Tower Hamlets leisure centres from Greater London Leisure in May 2024.

These are John Orwell Sports Centre, Mile End Park Leisure Centre and Stadium, Poplar Baths, St George’s Leisure Centre, Tiller Leisure Centre, Whitechapel Sports Centre and York Hall Leisure Centre.

It will also bring housing back under its remit, a move that would save money, it said, namely £35.5 million in 2023/24 that would have gone to Tower Hamlets Homes, the former housing provider.

Marc Francis, Labour Councillor for Bow East, said bringing housing back under Council control would help residents.

‘You get more control over the quality of service, instead of having to build things into a contract, you [as a Council] do it yourself,’ he said.

This would allow local residents to go directly to the Council for housing problems, such as overcrowding and mould, instead of going to Tower Hamlets Homes.

But Nathalie Bienfait, Green Councillor for Bow West, said that there needed to be more scrutiny on the Council’s housing team.

‘This [more scrutiny meetings] would allow the committee to properly challenge the Council’s poorly performing housing team, housing associations, and the process of bringing Tower Hamlets Homes back under council control,’ she said.

Francis also said that not all in-house expenses were justified. ‘There’s been a big expansion of in-house youth services, that does raise some questions.

‘Why do we need to have 200 youth workers on the Council’s payroll?’ he said.

Making free school meals universal & boosting children’s social services

Another significant area of Rahman’s spending has been £5.7 million on making free school meals universal.

In comparison, former mayor Biggs announced an investment of over £3 million per year on free school meals in a 2021 budget proposal, extending the government’s Universal Infant Free School Meal scheme to cover KS2 children.

Rahman was praised for going a step further by offering free school meals to all primary and secondary school pupils. 

Tower Hamlets Council became the first in England to do so before Sadiq Khan, Mayor of London, extended the move citywide, saving Rahman an estimated £1.4 million, said Wood.

Most of Rahman’s spending, £19 million, has been on young people, which includes free school meals and bringing youth services in-house. This is a difficult area to cut, said Wood, if savings need to be made a few years from now.

‘Children’s services and adult social care are driven by demand which the Council doesn’t control directly and can be very expensive [long term],’ said Wood.

Rahman’s £11.5 million investment into youth services marks a substantial increase from Biggs, who agreed to spend £460,000 in 2022. This entails targeted support for vulnerable youths, a team to deal with violence and exploitation and safe spaces staffed by skilled youth workers.

However, much of Biggs’s spending was focused on the pandemic, namely a £3 million Covid Recovery Fund, saving in anticipation of government cuts and balancing the books after Rahman was mayor from 2010 to 2015.

When Biggs came in he inherited a significant deficit from Rahman. In 2016, the Council predicted a budget shortfall of £59 million over the next four years and had to introduce drastic measures, such as a 4% council tax increase, to find savings. Years of government austerity also led Biggs to believe more cuts were on the way.

But the cuts never came, as Miah explains. ‘Labour gave Aspire a double bubble – Rahman benefitted from savings made by Biggs and continued funding from central government.’

Abundant reserves have allowed Rahman to invest heavily, notably on youth services to tackle child poverty, a critical issue in Tower Hamlets which has the highest rate in London. However, Francis said there are concerns about the pace of expansion.

‘A bit of extra money was put in [to youth services] this time last year by Biggs, but Rahman is putting in significantly more than that and there were a lot of issues previously with misuse of public money in that area,’ he said.

Hires to Rahman’s private office

While youth services, free school meals and bringing housing back under Council control received a positive reception, hires in Rahman’s private office have been contentious.

Francis, on the Council’s Overview and Scrutiny Committee, said: ‘An extra £1.5 million was spent on increasing the size of his own office, going from 11 members to 38 members of staff.

‘That’s not a good use of public money, it would be better spent on face-to-face services for all residents,’ he said.

Some of these recruits were justified, said Wood. ‘Taking Tower Hamlets Homes in-house means a lot more work for Kabir Ahmed [Cabinet Member for Housing], so I definitely see a lot more support needed for him.

‘But there’s been a huge increase in his personal staff, including eight consultants, and that’s unjustified,’ he said. 

Tower Hamlets Council said all spending is accounted for and its plans are not unusual.

A spokesperson for the Mayor’s Office said: ‘These positions are limited to a small number of expert advisory roles, so that the administration can fulfil its promises to the people of Tower Hamlets.’

With criticism of this spending, there are also fears capital programmes, such as schools, community gardens and libraries, have been neglected. Roman Road Market and Bancroft Local History Library in Bow, for example, have not received funding.

The deprioritisation of funding for highways and traffic management has also been a concern, said Bienfait.

‘It was disappointing that the administration has not taken the opportunity to invest in cycling infrastructure and to reduce road danger from speeding vehicles, nor to expand the low traffic neighbourhood areas,’ she said.

With Rahman doubling down on popular policies that his peers and punters say are difficult to save on, councillors and residents alike will hope Aspire is on top of its spending plans.

Biggs, former Tower Hamlets mayor, added: ‘He won the election and I wish him [Rahman] well. He did however make a lot of expensive promises that he will have trouble keeping.

‘I genuinely wish him well, for the sake of everyone.’

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