CROYDON COMMENTARY: The Price Waterhouse Coopers report confirms that the council-owned house-builders have been badly mismanaged, putting at risk millions of pounds of public funds. As one reader asks – why wasn’t something done much sooner?
It confirms concerns about Brick by Brick which have been expressed by many outside the council for a long time, and which have been well-reported by Inside Croydon.
The consultants Price Waterhouse Coopers say, “The depth of our work has been limited by the unavailability of robust financial information from [Brick by Brick]. The lack of management accounts and a 13-week rolling cash flow is concerning.”
With more than £200million loaned to Brick by Brick since it was formed in 2015 and £110million-worth of homes, profits and interest repayments due to the council, but none of which has ever been paid, the issue now is to protect and salvage as much of the value in Brick by Brick as possible for the people of Croydon.
PwC set out three main options for the company’s future: Close it Down, Continue to Trade or Sell it off. They say it is not possible to make firm recommendations until they have been able to look into the company’s finances more deeply.
They recommend that a Director of Finance for Brick by Brick should be appointed – extraordinarily, there was no one on the board of directors with that kind of expertise. Changes to the board membership are also proposed, with managing director Colm Lacey to be removed. Both of these recommendations are expected to be approved at a council cabinet meeting tomorrow night.
All of this is seriously bad news for the council, which is already effectively bankrupt following the service of the Section 114 notice a fortnight ago.
But they should have seen it coming – plenty of us did.
I believe the council had the right motives when they started Brick by Brick. There is a desperate need for housing in the borough, particularly socially rented housing. The Tory government was making it almost impossible for councils to build council homes in the usual way.
The trouble was, Brick by Brick never intended to build homes for social rent. Half of the properties it was to deliver would go on the private market – the proceeds from which, so the plan went, would fund its other builds and give the council some cash for other services.
Of the 50 per cent affordable homes Brick by Brick was supposed to deliver, the vast majority were intended to be for shared ownership – a particularly unaffordable form of “affordable” housing. In nearly five years, Brick by Brick only built three one-bed flats for social rent – what most people recognise or understand as council homes.
And then, a year ago, Inside Croydon was the first to expose the latest failings of the company, when it failed to register itself as a recognised provider of shared ownership homes.
Brick by Brick was not managed efficiently from the start. Lacey was a disastrous choice as chief executive. Brick by Brick typically had to build on difficult sites, often small pieces of council-owned land, sites which commercial developers would have dismissed as not viable.
This approach increased costs pressures on Brick by Brick. Often the sites were on existing council estates, taking pieces of green land or garage areas and so alienating existing residents. Public trust in Brick by Brick was never established.
Constant delays meant the building programme fell drastically behind schedule.
Council oversight over Brick by Brick’s finances and performance was inadequate. When Lacey attended a scrutiny committee meeting in February, he delivered a business plan for the coming year with all the relevant figures withheld from the councillors he was supposed to be accountable to. Asked about the notorious purchases of sites from the council for £1 each, Lacey lied to the councillors.
Had Brick by Brick delivered the housing that was promised, and the £110million that it owed, the fate of Croydon Council today might have been very different.
As it is, they contributed greatly to a perfect storm which is now likely to lead to financial losses for the council and very little in the way of housing for those most in need.
Croydon Commentary is a platform for all our readers to offer their personal views about what matters to them in and around the borough. It is usually by a named author, although on this occasion our contributor, with decades of experience in local government, has asked, with good cause, to remain anonymous. To submit a Commentary article for publication, just email us at email@example.com, or post your comment to an Inside Croydon article that has caught your attention
Read more: Brick by Brick has paid nothing to council
Read more: ‘An accountant could have foreseen this more than a year ago’
Read more: Council forced to declare itself bankrupt
Read more: Officials to investigate possible wrong-doing at council
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