Communities Secretary Eric Pickles has this morning started an investigation into the London Borough of Tower Hamlets, following allegations that its mayor gave out charity grants to gain electoral success.

Pickles has appointed PricewaterhouseCoopers to look into allegations of poor financial management, involving charity grants, at Tower Hamlets council.

Tower Hamlets council has been informed and PricewaterhouseCoopers is already on site. The inspectors have a legal right to access all premises and documents belonging to the authority which appear necessary for the purposes of inspection.

It follows a Panorama investigation this week into the mayor of Tower Hamlets council, who it alleges doubled grants awarded to Bengali-run charities in return for votes.

Tower Hamlets mayor Lutfur Rahman has denied all of the allegations levelled at him by BBC Panorama. He says the programme is being used for political campaigning and electioneering purposes weeks before local and mayoral elections in May.

Rahman has been mayor of Tower Hamlets since 2010, and is the borough’s first directly elected Asian mayor. He won as an independent with 13 per cent of the vote.

He has also said it has racist and Islamophobic overtones targeting the Bangladeshi Muslim community in Tower Hamlets.

In response, a BBC spokesperson said: “We are satisfied with the accuracy of our findings and stand by the integrity of our investigation which uncovered serious concerns about the misuse of public money by the mayor, which the government is now considering investigating. We continue to reject any allegations of racial or political motivation.”

Auditors to investigate payment of grants

Today Communities Secretary Eric Pickles has announced that he has appointed inspectors to look into allegations of governance failure, poor financial management and fraud at the London Borough of Tower Hamlets.

Under new laws, that come into effect today, Pickles has appointed PricewaterhouseCoopers to carry out an inspection of the council. A file is also being passed onto the Metropolitan Police for consideration.

The PwC inspection will look into a range of things, including the authority’s payment of grants.

The BBC Panaroma programme said that opposition councillors believed the grants were made in return for electoral support.

Panorama found that council officers in Tower Hamlets proposed that Bengali and Somali groups receive £1.5m. But a review by Panorama of 362 grants approved by the mayor found that he increased funding to these organisations by nearly two-and-a-half times - to £3.6m.

To pay for it he used funds from the council's reserves and reduced what was left for other organisations by 25 per cent overall, it says.

The mayor denies the allegations and insists the council’s grants process was robust.

Pickles 'long been concerned about Tower Hamlets'

Pickles said: “It is a matter of public record that I have long been concerned about a worrying pattern of divisive community politics and alleged mismanagement of public money by the mayoral administration in Tower Hamlets.

“I hope this sends a strong signal that robust processes are in place to investigate allegations of failures in financial management and governance in local government, under the new regime introduced by the Local Audit and Accountability Act which replaces the Audit Commission.

“This central action is not undertaken lightly, but localism requires local transparency, scrutiny and accountability, and these vital checks and balances must be upheld.”

A Tower Hamlets Council spokesman said: “We welcome the opportunity to demonstrate that council processes have been run appropriately and to date we have seen no evidence to suggest otherwise. This inspection affords the council the best opportunity to demonstrate that the borough has acted in the best interests of all residents.”

These steps have been taken using statutory powers under the Local Government Act 1999, as amended by the new Local Audit and Accountability Act 2014, which relate to a local authority’s functions in respect of governance. The new provisions commenced today, as part of the wider abolition of the Audit Commission.