Former South Tyneside Council leader's 'spending spree from the public purse' branded 'horrific'

It comes after an investigation, dating back to 2020, relating to corporate credit card use by the former leader of South Tyneside Council Iain Malcolm, who left the authority and resigned from the Labour Party in November 2020.

Findings included how in May 2020, when Mr Malcolm requested an update on how much was owed for personal use of the credit card, he was told there was an outstanding amount of £18,909.86.

While he initially queried the figure, payment was made three days later, council officers said.

On Friday (March 15), the authority’s audit committee discussed the findings and reviewed the effectiveness of governance, risk management and control matters now in place in this area. 

Stuart Reid, council director of business and resources, said they “regret this wasn’t spotted earlier”, and stressed much more robust processes are now in place.

He added there were no other instances of this nature found during their investigation. 

Speaking at the meeting, Labour’s councillor Anne Walsh said Mr Malcolm “went on a spending spree from the public purse” which was “absolutely appalling” to both her and her residents.

She added: “The amount of money he has spent for personal use, and it expands massively across the board, has shone a light on a lifestyle the ex-leader of this council led.

“The new leadership has had a massive task to turn this borough, this council around.

“The culture has completely changed in the council, completely changed, and it is a better place to work… it is refreshing to see and long may it continue.”

She added the amount of “intimidation and bullying” which took place in the previous regime was “absolutely appalling”.

Councillor Andrew Guy, Green Party representative, said the “absolutely sickening” findings made for “horrific reading”.

He said: “Austerity came in and we had so many cuts – shutting vital services, telling residents we couldn’t support them, putting their council tax up, and meanwhile, someone in this building was running around, at their expense, on a shopping spree.

“Buying designer clothes, eating out at restaurants that some of us can only dream of. It’s absolutely appalling.

“He has tarnished the reputation of this entire council and every councillor. It cannot ever happen again.”

Labour’s councillor Shane Smith added “the actions have damaged public trust in the council and have damaged democracy”, but he stressed the “leadership and the culture of the council has changed for the better”.

Council officers at the meeting outlined how several measures have been implemented since the findings, including all council credit cards held by employees being replaced with procurement cards, which are limited to specific categories of spend.

Users have to sign a condition of use form, along with retaining receipts and giving a full description of all transactions, with independent spending checks also carried out.

Meanwhile, it was outlined no other elected member, past or present, other than Mr Malcolm holds or has held a credit or procurement card, and that this would not be permitted in the future.

Mr Reid said: “There was clearly a weakness in the control system that allowed this to happen and it was exploited.

“Since then in order to improve systems a number of measures have now been put into place.”

Receive a news round-up, as well as breaking news alerts, when you sign up to the Shields Gazette’s newsletters

Officers added as part of the investigation 600 monthly statements of credit cards used by employees were analysed, and none were found to have been misused.

Councillors at Friday’s meeting also agreed to additional steps to boost the internal control framework in this area.

These included a review of their whistleblowing policy, requesting further information from Northumbria Police and an investigation into Mr Malcolm’s business involvements and interests relating to council contracts during the period.

Labour’s councillor Ken Dawes, chair of the audit committee, said: “I do feel quite reassured that we do have much tighter controls prevalent within the audit system, certainly since 2020.”

Internal audit reviewed all credit card transactions and associated documentation for the initial period April 2011 to March 2016 relating to Mr Malcolm’s council credit card to reconcile the amounts identified as personal use to the cheques paid in by him to cover these amounts.

Total credit card spend amounted to £23,272.11 of which 46 per cent, equating to £10,797.55, was identified by Mr Malcolm as personal use, according to council officers.

They added the value of the cheques reimbursed was £5,807.88 less than the declared personal spend for the period April 2011 to March 2016.

In addition, reports stated there were transactions totalling £3,023 that were identified on the corporate credit card for those months where a schedule of expenditure document was not completed, some of which could be related to personal expenditure.

This includes for example expenditure at Seaham Hall, and on clothing and petrol.

Cllr Guy, speaking at Friday’s meeting, said: “I’m glad that this has seen the light now, I’m disappointed that there is more coming, but I’m hoping that there is light at the end of the tunnel.”

A council standards committee hearing is scheduled for Wednesday, March 20, at 12.30pm following the conclusion of an investigation into a formal complaint submitted in July 2020 over the behaviour of the then council leader Iain Malcolm.

A written representation from Mr Malcolm to go before the hearing states he “has no confidence in the ability of the council to run a fair and procedurally correct complaints investigation process” and he “will not be in attendance” at the meeting.

The Local Democracy Reporting Service has attempted to contact Mr Malcolm for comment.