Councillors and unions have demanded a review of Lambeth’s decision to award a £60m revenue collection and call-centre contract to a company it previously branded “unacceptable”.

Councillor Kingsley Abrahams ‘called-in’ the deal with private service provider Capita earlier this month, claiming the deal would damage the local economy and committed the council to a long term relationship with a company that “in the past, failed to perform satisfactorily for the people of Lambeth”.

Capita was in charge of housing and council tax services in Lambeth between 1997 and 2001, but the service had to be bought in-house after the council declared Capita’s service to be “unacceptable”.

The 10-year deal involves Capita running the council’s revenue collection and call centres, which would move to Southampton.

Lambeth Living, (LL) the council’s housing arm, has opted out of the deal, a move seen by some as a vote of no confidence.

In response to Coun Abrahams’ concerns, the council said Capita was in a far more “robust” position now, and stressed the deal would save £1m a year, as well as delivering better services.

It also said there would be “minimal redundancies”, and Capita would invest £500,000 in training support and apprenticeships.

The council's cabinet member for finance, Councillor Paul McGlone, said: “It is going to cut waiting times on the phone, but it will also allow people to get in touch with the council at times that suit them through new technology, online, or by text.

“So rather than drag up the distant past, we are looking to the future because this is exactly the kind of innovative and value for money approach that residents expect from us, and that Lambeth Council is developing a national reputation for.”

But Unison’s Lambeth branch secretary Jon Rogers said: “I’m not at all convinced the services will be better. Who thinks people based in Southampton are the best placed to help you navigate Lambeth Council?

“Forty-three full-time jobs would disappear to Southampton. A lot spend money in the borough so there would be a knock-on effect for the local economy.

“It seems bizarre the council wants to move jobs out of the borough. All we’re asking is if there’s an option to keep the work in the borough.”

Liberal Democrat councillor Alex Davies also expressed doubts. He said: “It’s quite telling LL has decided not to go in on it. It doesn’t have confidence in the decision.

“The council is supposed to be interested in social enterprise, but clearly on this occasion they are not being true to it.”

The finance and scrutiny committee will meet tomorrow to review the decision and Lambeth Save Our Services plan to lobby the meeting at Lambeth Town Hall at 6pm.