Given recent experience, Croydon councillors more than most should realise that using public money to gamble rarely ends happily.
But like a losing punter chasing after his losses, Croydon Council, now under a Labour administration, is going back to the banks to borrow yet more money to play the property market with what can only be described as the “Son of CCURV”.
CCURV – or the Croydon Council Urban Regeneration Vehicle – is the joint venture, the details of which remain secret even today, which was set up between the then Tory council and the builders John Laing and which saw Croydon’s ratepayers saddled with £80million-worth of loans to pay off on the overly expensive £140 million Fisher’s Folly council offices. And that was just the worst example of how the CCURV gamble proved to be a massive loser.
Labour’s version, unveiled in a report being presented to the council cabinet next week, is called a “Revolving Investment Fund”. It even sounds like something involving a whizzing roulette wheel, though there’s probably an ageing hippy sitting in Fisher’s Folly who’s already playing air guitar and referring to the scheme in the latest council-speak acronym of “the RIF”.
The 17-page council report comes together with a glossy 60-page brochure that looks like it’s straight from a West End estate agency, and is entitled The Croydon Promise. A bit better than a Glasgow kiss, perhaps…
The introduction to the brochure sees Tony Newman, the Labour council leader, talking of “over £9 billion of investment in five years” coming to Croydon. But no where in the next 58 pages does it explain where all that money is to come from. We know that Hammersfield – the massive redevelopment of the town’s retail centre – is supposed to be a £1 billion investment. So where are the other eight Hammersfields coming from? The Croydon Promise doesn’t say.
When London staged the 2012 Olympics, the overall spend then was £9 billion, and that was spread across seven years, not just five, with the money committed before the financial crash, and it was used to deliver an 80,000-seat stadium, the Aquatics Centre, Velodrome and the rest of the Olympic Park, and infrastructure dotted around the country. So the sort of regeneration which could be delivered with those sort of sums is immense.
The official report to cabinet does warn that RIF, “will have significant financial implications associated with the individual decisions made on investment”.
More than once, the report states “‘Business as Usual’ is not an option”, which is fair enough, given the abject failure to deliver worthwhile schemes over the last eight years, or more.
“We are very ambitious about the growth agenda and there are all sorts of levers that can be pulled to make that happen,” one Katharine Street source told Inside Croydon today, “rather than ‘leaving it to the market’ as the Tories did.”
The big risk for the borough’s Council Tax-payers, though, is that the odds are loaded in favour of the big boys of the housing market and office developments, up against a local Labour leadership which has little experience in brokering major business deals.
The council is already burdened by the debts accrued by Mike Fisher and Tim Pollard’s previous Conservative administration. The previous Tory council’s timetable takes Croydon Council’s debt to over £1 billion by April 2017 – that’s nearly £7,000 for every household in the borough, already an unsustainable debt load for a council with just £130million of Council Tax annual revenue. In part, by firing the starting gun on a race for growth in the borough, as the economy emerges from the recession, the Labour leadership is looking to bring in more businesses and residents, who will increase the council’s annual income.
Placing the chips on the table on Council Tax-payers’ behalf will be two councillors – Simon Hall, the cabinet member responsible for finance, and Alison Butler, who is in charge of housing policy – and two unelected officials – the council’s planning boss Jo Negrini and finance chief Richard Simpson. Decisions made will be noted at cabinet meetings but will be taken by the foursome “in order to ensure that we are able to respond at the right pace”. Councillors Hall and Butler are hard-working and well-intentioned individuals, but such a set-up leaves no room for debate or accountability.
Having failed to crack down on budgets bequeathed by the previous Conservative council which have proved to be works of fiction worthy of Raymond Chandler, the Town Hall is already running at an overspend of £11.5 million. So are these really the right people to be borrowing even more money to play a property market that is already at historic highs in Croydon?
In a report to Cabinet festooned with numbers with lots of zeros, the Labour council claims that they need to get into the property game when there is to be a “£5,250,000,000 construction programme within the metropolitan centre”. The gross exaggeration of yet-to-be-delivered regeneration spending by the private sector is of itself a worry. What if they back the wrong horse – as the secretive Tories assuredly did with CCURV – and make some really bad investments?
The council will be subsidising the private development of Ruskin Square, next to East Croydon – good news if you are a shareholder in Stanhope or Schroders, the long-suffering owners of the site. Indeed, RIF will specifically set out to subsidise loss-making projects with the hope that profit from other parts of schemes can cover the losses. Ed Balls would surely be going in elbows flailing when he gets whiff of this.
A significant amount of council assets – buildings and land, just as with CCURV – will also be thrown into the pot, in what might be more accurately entitled as the Revolving Roulette Fund.
The council report says this matters because it “can provide a psychologically important statement of intent” in supporting Croydon’s development. This is a most inventive justification for passing Council Tax-payers’ money – or rather money borrowed on behalf of Council Tax-payers – on to those friends of the Tories, the developers.
Having adopted an ethical investment policy for the council’s pension funds, divesting the fund of tobacco stocks, for instance, money from the pension fund will now be used in the Revolving Roulette Fund, with the laudable intention of making the money work locally. For the council’s pensioners’ sakes, let’s hope that the returns are significant.
Nathan Elvery, who was appointed as the council’s chief executive without the job ever being advertised or the appointment discussed at full council, is to chair a “Croydon Strategic Board” whose members will include representatives of Schroders, Westfield and Hammerson, but not any Croydon residents or voters. This board will direct Croydon Council’s five-year “Integrated Delivery Plan”, presumably to suit their corporate needs.
And while the council is staking loss-making office developments, it will also be under-cutting all other commercial landlords by providing rent-free offices to tech companies in the council-owned Davis House. Davis House is one of the great failures of CCURV, the council having borrowed millions to buy at the top of the market at more than £15 million. The latest council report – Report to Cabinet Sep 29 2014 – Growth – underlines what a bad punt Davis House was, by stating that the place so worthless now that “the use of vacant space in Davis House is expected to have nil additional cost to the council”.
The council says that there might be some loss of rent, however “… the space has proved difficult to lease over the last few years”.
And the self-same team of council officials who made such bad investments in the past are now going back to the roulette table, armed with more public money to play on red or black.
The council is also to review whether there should be a major step up in its role as financiers to small and medium-sized businesses that are not credit worthy enough to get loans from High Street banks. The council will take on the big boys in the house building game by setting up its own housing company and will look at getting involved in the private rented sector and houses for general sale. Joint ventures with private companies will also be pursued.
There’s probably been Grand National favourites that have been safer bets than this Son of CCURV scheme. For the sake of Croydon, its Labour councillors must prove to be better gamblers than the previous Conservatives.
- Read The Croydon Promise: Croydon Growth report
- East Croydon’s new platforms to put borough on track for growth
- Building a new Croydon won’t be boring, promises Negrini
Coming to Croydon
- Activity to Work back-to-work workshops, Sep 23
- David Lean Cinema: Jimmy’s Hall, Sep 25
- Streatham Common 6M race, Sep 27
- Fancy dress family funday, Sep 28
- Ukrainian choir concert, St John’s Shirley, Sep 29
- Tree Sides, Spread Eagle Theatre, Oct 2-4
- The Goon Show, Spread Eagle Theatre, Oct 8-11
- Norwood Society Talk: From Fire Station to Theatre, Oct 16
- Cinema Ruskin film show, Oct 18
- South Croydon business breakfast, Oct 18
- Croydon 10km road race, Oct 19
- This Was The World and I Was King, Spread Eagle, Oct 23-25
- Albert Einstein – Relativity Speaking, Spread Eagle, Nov 12-15
- South Croydon business breakfast, Nov 15
- Norwood Society Talk: Lambeth’s Archives, Nov 20
- Choose Your Own Documentary, Spread Eagle Theatre, Nov 21-22
- The Last Sense of Sudden, Spread Eagle Theatre, Nov 27-29
- Ghost Stories for Christmas, Spread Eagle Theatre, Dec 3
- Fog Horn Funnies, Spread Eagle Theatre, Dec 6
- South Croydon business breakfast, Dec 13
- South Croydon business breakfast, Jan 24
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