CROYDON IN CRISIS: Jenrick’s improvement board raises serious questions over whether the quick sale of the council’s failed development company could end up costing tax-payers many millions of pounds, while its latest report criticises borough officials’ ‘lack of self-awareness’.
By STEVEN DOWNES
The government-appointed chair of the improvement panel that is overseeing Croydon’s battle with bankruptcy has suggested that the council’s choice of a single preferred bidder to buy loss-making development firm Brick by Brick could cost tax-payers millions.
Tony McArdle, who last weekend was awarded the OBE in the Queen’s Birthday Honours for services to local government, has been checking Croydon’s recovery plans for the past six months. At the end of April, he submitted his second progress report to Robert Jenrick, the Secretary of State for Housing, Communities and Local Government.
Last night, MHCLG published McArdle’s report, and Jenrick’s response to it, in which the Tory minister warned that it is “essential” that “the affairs surrounding key assets and investment vehicles… are unravelled”.
Brick by Brick is the housing development company established by Croydon’s Labour-run council in 2015, since when it has borrowed more than £200million, delivered precious few new homes, and failed to repay a penny of the loans, interest or profits.
Inside Croydon has learned that a key investigation into “value for money” over the redevelopment of the Fairfield Halls now probably will not be published before September this year. The project was awarded by the council to Brick by Brick, without any competitive tendering, with disastrous results. Brick by Brick was given a £30million budget for the Fairfield Halls project, which has so far cost at least £69million.
So contentious are the issues uncovered that, according to McArdle’s report, the auditors conducting the investigation, Grant Thornton, have had to engage a Queen’s Counsel to review their findings. Such thorough external legal expertise has already cost £10,000.
Inside Croydon reported last month how the council’s interim finance director, Chris Buss, was pushing through a quick fire-sale of Brick by Brick, its various sites and part-complete buildings to a preferred bidder, Manchester-based developers Urban Splash.
To sweeten the deal, Buss has been given approval by the council cabinet for a £10million cashflow loan to loss-making Brick by Brick (the second such loan of 2021 so far), as well as agreeing to buy 104 BxB flats that the council has, in effect, already paid for (estimated cost: another £30million), and to take nearly £70million of debt off the troubled developers’ balance sheet.
Sources inside the council have been suggesting that McArdle and his “improvement and assurance panel” have not been entirely won over by Buss’s arguments for the quick sale.
Now, McArdle’s concerns are there in his report, in black and white.
“The council was approached by a property developer about the potential to acquire [Brick by Brick] and they entered into a 28-day exclusivity period with this supplier on 26 February 2021,” McArdle advised Jenrick.
“This has subsequently been extended to allow for further negotiation after an initial offer was rejected by the council.” Which is an interesting detail that Buss and his boss, Katherine Kerswell, the council’s newly confirmed chief executive, had forgotten to share in public meetings.
McArdle then confirms what Inside Croydon has been reporting for the past two months. “There have been approaches by a number of others interested in acquiring some or all of [Brick by Brick] or providing management support, but these have been put on hold due to the non-disclosure agreement in place.”
McArdle manages to give voice to a statement of the beedin’ obvious: “Dialogue with these and other third parties and therefore the exploration of alternative exit strategies would have helped to provide an assessment of the relative value of the offer now on the table.”
But as the Urban Splash sale appears to be such a done deal, “This means that the council will have to explore other means of gaining assurance that a deal offers good value for money for it and taxpayers, such as working with Homes England, should they decide to pursue it further in these circumstances.”
There’s strong suggestions in McArdle’s 10-page report that while the council’s new leadership is making all the right noises, even with a record-breaking £120million bail-out loan from government, Kerswell and council leader Hamida Ali, are capable of repeating many of the council’s old mistakes.
In his response, Jenrick, who is not averse to arranging cosy deals with millionaire developers himself, writes, “I have noted the concerns that you describe centring on the continuing impact of past failings in the management of key assets and investment vehicles. It remains essential that these are unravelled, and credible plans are implemented to enable the council to minimise the adverse implications for its finances whilst continuing to secure value for money.”
Of course, Buss and the council’s intention is to get a chunk of money back to help balance the books for this and future years. But having already juggled more than £100million of outlays in additional loans and bail-outs for Brick by Brick in the past few weeks, it could become even less acceptable if, say, £200million-worth of BxB land, property and assets is flogged off for half its true worth.
Jenrick has told McArdle that he expects “to form a clear view as to the credibility and deliverability” of Croydon Council’s future budgets in his next report, which is due in July.
In April, McArdle’s report noted – though failed to detail – how Kerswell had conducted a ruthless clear-out of the phalanx of directors and executive directors who populated Fisher’s Folly under previous council chief Jo “Negreedy” Negrini.
“The council’s senior management has been through considerable upheaval during this period, with interim post-holders occupying all of the statutory and many of the senior operational roles,” McArdle’s report states.
“It is imperative that the council moves quickly to put a substantive management team in place, and one that staff can be confident will be part of the future. Measures are being taken to fill these roles as quickly as the need for an open and transparent process allows.”
Katharine Street sources are suggesting that Kerswell & Co are struggling to meet that recruitment imperative, and with a revision of the council’s management structure months overdue.
And McArdle also makes the observation that the scandal of slum-like conditions in council flats in South Norwood was a consequence of all of the previous failings of the failed council.
He states that the situation at Regina Road is being addressed, but he is far from impressed. “For now, the council is making the proper response to a situation that had surprised it. That issues such as this come as a surprise is a further indication of the lack of self-awareness that has set in.”
And the council’s reliance on external contractors, and its poor record in supervising their work, which can be traced back all the way to when Nathan Elvery was in charge of procurement, is also about to be further exposed.
“Most of the council’s services are delivered extensively through external contracts,” McArdle states.
“In total there are estimated to be some 503 contracts with 313 of these either expired or due to expire in this year, with a total annual current value of around £200million. Some two-thirds of these are within the Health, Wellbeing and Adults area.
“The council’s arrangements for ensuring that contracts deliver value is poor. There has been a lack of a strategic approach to securing contracts, confusion in commissioning intent and a lack of a systematic approach to monitoring performance.
“The council has recognised this and has produced a Contracts Improvement Plan… This plan will put in place sound governance arrangements, an annual set of commissioning intentions that will align with budgets and effective performance management.” Which would be nice.
- Given the remarks made by McArdle over contracts and performance, MHCLG has named a fourth member of the Croydon improvement panel, Jon Wilson, from Leicestershire County Council, “specialising in adult social care”.
- Read Tony McArdle’s April 2021 report to MHCLG in full by clicking here
- Read the Secretary of State’s reply by clicking here
Read more: Investigation finds systemic failure and incompetence in council
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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