Whitehall commissioners look set to take over running parts of Liverpool City Council as a corruption probe into the town hall continues.
Communities secretary Robert Jenrick announced the proposal after a report by local government inspector Max Caller uncovered a “serious breakdown of governance” at the authority.
The report, published on Wednesday, followed five arrests, including that of elected mayor Joe Anderson on suspicion of conspiracy to commit bribery and witness intimidation.
Jenrick told MPs the council was “failing to comply” with its commitment to taxpayers and inspectors had uncovered “a worrying lack of record-keeping” and the “awarding of dubious contracts”.
The minister said the report was “not a verdict” on the authority’s staff, but that evidence of an “overall atmosphere of intimidation” had been found.
Jenrick said he was writing to the council to outline an intervention package “centred on putting in place commissioners who I will appoint” to run aspects of the council for three years.
He told the Commons: “I am also proposing that the council will, under the oversight of the commissioners, prepare and implement an improvement plan.”
Outlining a “deeply concerning picture of mismanagement, breakdown of scrutiny and accountability” at the council, he said: “As a whole, the report is unequivocal – that Liverpool City Council has failed in numerous respects to comply with its best value duty.
“It concludes that the council consistently failed to meet its statutory and managerial responsibilities and that the pervasive culture appeared to be rule avoidance.
“It further concludes that changes need to be radical, delivered at pace, and there was no confidence that the council itself would be able to implement these to any sensible timescale.
“There may also be further issues of which we are not yet aware, and the report is careful not to speak to matters that might compromise the ongoing police investigation.”
The council’s director of regeneration, Nick Kavanagh, was also arrested as part of the police probe into building and development contracts in the city, and this week it was confirmed he had been dismissed from his role at the authority.
In a statement to the Liverpool Echo, he said he intended to clear his name at a tribunal.
Anderson, 63, has also denied any wrongdoing.
Merseyside Police said all suspects remain under investigation but bail has not been extended.
Jenrick said a programme of “cultural change” is expected to ensure members and officers “understand their roles”, adding he hopes Liverpool City Council will “take the lead in the path to improvement”.
He said: “Given the gravity of the inspection findings, I must consider what would happen if the council fails to deliver the necessary changes at the necessary speed.
“I’m consequently proposing to direct the transfer of all executive functions associated with regeneration, highways and property management at the authority to the commissioners. These are for use should the council not satisfy the commissioners in their improvement processes.
“I hope it won’t be necessary for the commissioners to use these powers, but they must be – in my view – empowered to do so to deliver the reforms that are required.”
Jenrick said he is proposing Liverpool City Council will move to “whole council” elections from 2023, along with a proposal for a reduced number of councillors elected on single member wards.
He said he expects to receive representations in response to the report by May 24 and the forthcoming elections will proceed as planned in May.
Responding to Jenrick, shadow communities secretary Steve Reed said it was wrong to characterise the move as a “Tory takeover” of Liverpool.
He told the Commons: “This report raises grave and serious concerns about decision-making in key functions of Liverpool City Council. All councils are under an obligation to meet their best-value duty to ensure value for money at all times. In these respects, Liverpool City Council has been found severely wanting. Labour, both here and our leadership at the city council, accept this report in full.
“The council will respond to (Jenrick’s) letter in detail but we support his intention to appoint commissioners, not at this stage to run the council, as he says, but to advise and support elected representatives in strengthening the council’s systems. This is a measured and appropriate approach.
“I want to reassure people in Liverpool that this does not mean Government ministers are coming in to run their city directly. This is not, as some would put it, a Tory takeover.
Liverpool has become a byword for anti-Tory sentiment – the city last had a Conservative MP 38 years ago and its last Conservative councillor lost his seat 23 years ago.
Derek Hatton, who was a member of Labour’s Militant faction and deputy mayor of the city council in the 1980s, said on Twitter: “Today could see the most outrageous and politically corrupt front to local democracy any of [us] have ever witnessed.
“Even in the ’80s Thatcher stopped short of imposing commissioners [...] after she threw 47 of us out, local elections allowed 47 new Labour councillors to be then elected.”
Tom Crone, leader of the city’s Green Party group, said on Twitter: “If the government takes over Liverpool Council, that would be a disaster for the city. That we are even talking about it is a shocking indictment of this Labour administration.”
The focus of Caller’s investigation is on property management, regeneration, highways, contracts and planning at the council over the past five years.
Local elections, including a vote to elect Anderson’s successor, are due to take place in May.