CROYDON IN CRISIS: Making Brick by Brick an attractive proposition to a corporate buyer is a Mission Impossible which would defeat Tom Cruise. Croydon’s solution? A package of deals that could cost another £110m.
EXCLUSIVE by STEVEN DOWNES
Chris Buss, the Town Hall executive who was parachuted into Croydon last year with the mission impossible to “fix” Brick by Brick, is going for a hat-trick of proposals at a meeting on Monday which will see a grand total of at least £110million chucked at the council-owned loss-making housing developer.
Buss has a buyer lined up for Brick by Brick, in Manchester-based Urban Splash, a company with its own corporate history of broken loan covenants and multi-million-pound bail-outs.
But it seems that they won’t seal the deal until Buss has thrown even more public money at Brick by Brick, which has received more than £200million in council loans since it was set up in 2015, amounts which ultimately brought about Croydon Council’s financial collapse last November.
The official report ahead of next Monday’s Town Hall cabinet meeting includes a third dynamite proposal – recommending that the council buys 104 homes from Brick by Brick, in a deal that would see the council paying more than £30million for properties that have been built on what was council land and where many millions of council cash has already been used to fund the development.
As Inside Croydon was first to reveal, Buss’s cabinet papers also recommend that the cash-strapped council should make a £10million loan to Brick by Brick (the second such loan this year) just to avoid the company going bust.
Buss’s masterplan will also see £69.2million in over-run costs incurred by Brick by Brick in their bungled refurbishment of the Fairfield Halls arts centre wiped off their balance sheet, the costs transferred to the already heavily indebted council.
The purchase of homes from Brick by Brick is no less controversial.
The proposal resurrects a £30million dodgy deal which was first floated in the summer of 2020 by the then cabinet member for housing, Alison Butler, who in the middle of the council’s rapidly worsening financial crisis was eager to shovel yet more public cash at the loss-making housing developer to keep the business afloat.
That purchase was blocked by external auditors, who expressed serious concerns about the “circular” nature of the council buying up properties from the housing company that had already borrowed so heavily from the authority.
According to the cabinet meeting papers, the auditors, Grant Thornton, at recent meetings with Buss and his boss, council CEO Katherine Kerswell, have repeated their reservations about the “circular” nature of the proposed purchase.
But Buss says, “It is the council’s contention that acquiring those units are in both the council’s and Brick by Brick’s best interests and they are not ‘double paying’ for those units.” Pah… what do Grant Thornton know about bookkeeping anyway?
Unlike the new loan to Brick by Brick and the Fairfield Halls write-off, the money for the purchase of the homes is to come from the council’s Housing Revenue Account, a ring-fenced pot of money, much of it drawn from council rents, which the council is supposed to use for the maintenance of its housing stock and to provide new homes.
Paragraph 3.12 of the council report says, “The expansion of the council’s stock of social housing for rent is a key objective. In the February 2021 report the cabinet agreed that the Housing Revenue Account (HRA) could acquire residential units from Brick By Brick, subject to a review of affordability and HRA revenue implications…
“… As part of the Report in the Public Interest, the external auditor has expressed the view that the council needs to consider how these units are acquired, if at all… the cabinet are recommended to agree that the council continue to purchase the 104 units on a cash sale basis.”
The report goes on to “recommend” that delegated authority to spend tens of millions of pounds on these homes, and others if they become available, should be passed to the “interim director of finance”, namely Buss himself, and the interim CEO, Kerswell. That is, without any further need for the borough’s elected representatives to have any say in the matter.
“The circular nature of purchasing properties from Brick by Brick in July 2020 was a concern in the Report In The Public Interest and that decision was paused in November 2020,” the auditor wrote.
They then criticise Buss’s previous report on Brick by Brick, from February this year, for failing to set out:
- Conflict of interests – “the paper needs to set out what is in the interests of the council and what is in the interests of Brick by Brick and how that conflict of interest has been addressed”; and
- Full financial impact assessment – “the revenue implications have been appraised as you note in your response. The part that has not been addressed in the papers I have seen is how the financial assessment considers how much the council has already spent (in borrowing) to build the properties that the council is now buying back.”
Grant Thornton, whose RIPI was what forced Tony Newman from office as council leader, are clearly unimpressed.
“Given our previous criticism of this decision under the previous leadership, my reflection is that the new leadership should consider carefully the transparency of the decision to continue with the July 2020 decision, particularly with regard to the legal and financial considerations to purchase properties you have already paid to build.”
Katharine Street sources also suggest that Tony McArdle, who chairs the government-appointed improvement board that is looking over the shoulder of all council decision-making and spending, is also concerned at the valuations Brick by Brick has placed on the homes it is looking to sell back to the council.
But Buss’s response to the Grant Thornton reservations was to write, “Financially, the interests of Brick by Brick and the council are intertwined, as sole shareholder and sole funder.
“The council’s overall financial interest is best served by Brick by Brick maximising income to enable it to repay as much of the loans made to it by the Council as is practically possible and to minimise losses to the public purse.”
Though achieving that by the council’s handing over another £110million just might be seen as undermining all of those objectives.
Read more: Massive discounts on land sales raise more questions on BxB
Read more: Kakistocracy: Butler forced into £6m bail-out of Brick by Brick
Read more: A level of ineptitude which would be tolerated nowhere else
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