Kemi Badenoch calls for Westminster councillors to be sanctioned over £27m 'catastrophic mess'

The Conservative leader accused the Labour council, led by Adam Hug, of wasting "hard-working" taxpayers' money by awarding Geoffrey Osborne Ltd lucrative housing contracts, despite clear warnings about the firm’s "poor performance" and bankruptcy risks.

The construction company would eventually file for administration in April 2024, leaving taxpayers in the London borough with a £27 million bill.

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"This is just shocking. It's carelessness from people who have never had to run anything before," Ms Badenoch told LBC's Iain Dale.

"What you want in councillors are people who run their own business and know what to look out for.

"A lot of people who run councils for Labour have never had to do that and they miss these sort of things.

"But it's not fair. I feel very sorry for hard-working Westminster residents. They are now going to have pay for the mess created by this Labour council."

Asked whether councillors should be sanctioned or sacked over the scandal, the Tory leader said: "Yes. I don't think that we will ever have change at local or national government level if people make catastrophic decisions and don't suffer for it.

"They should be held accountable, penalised in some way and possibly be sacked."

In 2022, an internal memo was circulated among councillors detailing the extent of Geoffrey Osborne’s financial woes.

The memo was circulated after the firm received £40million of contracts from Westminster City Council to build 64 social homes in Maida Vale, Little Venice and Queens Park.

The briefing note, uncovered by LBC, shows councillors were warned the firm was at “risk of ultimate supplier failure”, after recording a loss of nearly £14 million in the 18 months leading to September 2020.

It concluded that there were “early warning signs for major concern” which could result in the company’s collapse.

The Labour-led council argues the decision to award additional contracts to Geoffrey Osborne was in line with the guidance provided by executives at the council.

Following the collapse, the council was forced to allocate an additional £22m worth of funding to the new contractor, Wilmott Dixon, to complete the project.

The contract was issued without being put up for competitive tender, and the local authority later earmarked a further £5.67million to remedy work carried out by Geoffrey Osborne.

The council blames the firm’s failure for falling behind in its targets for delivering affordable housing units, despite the Labour administration previously promising a "revolution in social housing”.

Opposition councillors argue that the warning signs about Geoffrey Osborne’s financial frailty were laid bare by the internal memo, and that the consequences of the firm’s failure lay with the Labour leadership.

Tory councillor Paul Fisher, who was elected as a Labour councillor in 2022 before crossing the floor to join the Conservatives, said the council lacked political leadership and was bounced into a “reckless” decision by officials.

“As councillors, it's our job to interrogate advice that we receive. And that's even more important when you're in the position of a Cabinet member with responsibility for millions of pounds’ worth of public works contracts,” Mr Fisher told LBC.

“Unfortunately, in this scenario, there was clearly a failure to push back on that advice and to interrogate the advice so as to protect taxpayer money.”

Mr Fisher believes the “egregious” waste could have been spent on other priorities, such as crime reduction, with the £5.6million spent on remedial works being enough to pay for over 130 full-time police officers.

“Every day when I knock on doors in the West End and across Westminster, I hear residents’ concerns about crime,” he added. “People want to see more people on the streets.”

“While it is not the council’s responsibility to fund police officers, there have been instances of council members using ward budgets to fund overtime for officers in our areas - so we could have used that money better than the administration.”

According to data from the Metropolitan Police, Westminster has the highest rates of theft, violence, sexual and drug offences of any London borough.

The Labour-run council has faced significant scrutiny of its spending decisions in recent years.

In 2023, Westminster's six cabinet members received criticism for receiving a 45% increase to their yearly allowances, which was justified on the grounds that it brought their expenses into line with other councils.

According to their latest accounts, 92 members of staff at Westminster City Council earn a salary of over £100,000 - more than twice the number just four years ago.

A Westminster City Council spokesperson said: "The entire building industry faced significant financial challenges in the wake of the pandemic. Geoffrey Osborne Ltd were one of many firms facing difficulties at that time.

"The council followed a robust process before awarding this contract. Osborne had successfully completed large schemes for Westminster previously, including the initial phase of this project, demonstrating they could deliver on time and on budget.

"All large development projects carry a risk so when Osborne went bust at a critical time, the council acted quickly and responsibly in appointing Wilmott Dixon to complete the work and create much-needed council homes in central London.

"Regrettably, this carried additional cost. The alternative was leaving half-built council homes across the city.

"Lessons have been learnt. We’ve invested in our procurement processes to give the council earlier warning signs and ensure this never happens again."