People’s Audit 12 – £4 MILLION OF ‘RING-FENCED’ HOUSING REVENUE ACCOUNT MONEY SPENT ON NEW TOWN HALL – WITH A FURTHER £8.3 MILLION LINED UP
“Residents whose council homes are facing demolition under Lambeth’s regeneration programme are understandably asking why their rents are being put into a reserve of this size – instead of paying for refurbishment of their homes, something Lambeth have stated they don’t have the funds to do.”
“Your New Town Hall” is a controversial project to refurbish Lambeth’s town hall. The scheme has been promoted by Lambeth council as a project that will save at least £4.5M a year by reducing the council’s offices from 14 to two.
To date there has been little transparency to prove the veracity of this claim.
Of particular note is that the calculations provided by Lambeth to back this claim up concentrate solely on savings in running costs without taking into consideration the money that will be spent building the new town hall.
A Freedom of Information request to Lambeth as to which properties they will be losing in order to achieve the savings was rejected by Lambeth.
But we do know that many of the existing buildings were vacated years ago and are obviously surplus to requirements: Wynne Road. Brixton; Hopton House, Streatham High Road (lease); 205 Stockwell Road, Brixton (lease) and Blue Star House, Brixton (lease).
Furthermore, Lambeth have had to spend a considerable amount of money to buy the freehold of properties they did not own in order for the project to proceed:
Hambrook House, Porden Road SW2 (Cost: £2.29m freehold); Fridge Bar, Town Hall Parade, Brixton (CPO costing £1.69m); Olive Morris House, Brixton Hill (Lambeth council had been leasing this building and so had to spend £8.74m to buy the freehold in order that the building can be demolished to build new flats.)
Whereas the council argue that the savings come from a consolidation of office space into new modern facilities which are cheaper to run, it appears that in reality most of the savings come from the council getting rid of excess office space.
In 2013 Lambeth’s 14 council office buildings housed nearly 3,500 desk spaces. In 2015 Lambeth’s workforce was less than 2,500. Since then over 500 people have been made redundant.
An article in Construction News puts the number of people working in the new civic centre at just 1,800.
In a revealing response to a query Lambeth stated, “The project will pay for itself through reducing the estate including disposals and vacating buildings, and will also secure the forecast £4.5m p/a savings.
This savings number was based on our actual running costs of the original 14 buildings together with prudent estimates of the future running costs of the eventual two buildings.
We have already achieved £3.5m of these planned savings as a result of exiting eight buildings and the final £1m balance will come when we move out of Blue Star House, International House (Canterbury Crescent Brixton), Phoenix House (Wandsworth Road SW8) and Olive Morris House and into the refurbished town hall and the new civic building.”
This clearly suggests that the savings claimed by Lambeth council have nothing to do with the construction of the new town hall. The savings are a result of selling off excess office space.
The Peoples’ Audit also uncovered some worrying black holes in the finances of this scheme. We asked to see the budget that was originally signed off in 2013 and any changes to that budget since.
It took two months of lobbying to get a response, which didn’t answer our question but did raise a range of other concerns.
Significantly the information wasn’t released until the day after Lambeth’s budget meeting in February 2017 where cabinet passed a budget approving £55M of cuts which it said that it had to carry out as a result of central government cuts to their funding.
Had the information about the town hall budget been in the public domain it would have been a lot harder to explain these decisions.
Lambeth council has consistently told the public that the town hall will cost £50M. However, the small print on the council website says “The construction cost of Your New Town Hall will be approximately £50 million”.
This conveniently omits to mention all the other costs that go into the development, including for example land payments.
When you take all the extra items that make up the budget the total project cost adds up to an eye watering £104 million.
The report includes a table below shows how much costs escalated in the space of just a few months.
Lambeth provided a commentary with the figures to try to justify why the budget had increased by £8 million in a few months. This included telling us that costs rose due to excessive inflation in the construction market.
But it is our view that such costs should have already have been built into the budget. Due to the over-heated construction market, construction industry experts have been forecasting annual increases to tenders of five pc to seven and a half pc for several years now.
The council also attributes £5 million of the increase to the fact that the bid that they accepted from Muse only allowed for 20 pc affordable housing.
This is despite the fact that the project is being built on council owned land and in the November 2013 decision to approve the scheme it was stated “In summing up the cabinet member for finance and resources said that the scheme would allow the council to use its assets and the Council would achieve 40pc affordable housing.”
It also raises the question as to why the council accepted a bid from Muse which did not comply with the council’s requirement to achieve 40pc affordable housing. The council’s response also suggested that there would be further price increases down the track.
For example they explained: “a high proportion of this cost relates to asbestos removal and ground conditions which were difficult to fully investigate while the offices remained in use”.
Groundworks on the project started after April 2016, after the date the figures above relate to, so these costs would not have been captured in the figures provided. Regardless of the explanation the fact remains that the project costs had increased by £8m before the project had hardly even started.
So just where is the extra £8m is going to come from to fund this short-fall? A response from Lambeth told us that £6.8m of this was being funded by internal borrowing and that BOLD £1M was being taken from the Housing Revenue Account (HRA).
The HRA is supposed to be ring-fenced, with the principle being that council tenants’ rent is held in a separate account which is then used to pay for future up-keep of their homes.
Lambeth justify using this money to pay for the town hall cost over-runs on the basis that some of its housing staff will be based in the new town hall.
MORE QUESTIONS ON THE TOWN HALL
There are still plenty of question about the town hall that remain unanswered, which we will be chasing up.
Here are just a few: a) We still don’t have an answer to our original question which was: What was the budget when the town hall project was originally approved by cabinet in November 2013? The project has always been sold to the public as costing £50M. The chances are that during the lifetime of the project the budget has increased by far more than £8 million. We note that recent hoardings outside the town hall declared that the project is a £165M investment.
b) We were told in Lambeth’s initial Freedom of Information response that the town hall was being funded by £20m from land payments from developers across the borough and £39.7m from items such as sale of offices and savings from monies set aside for works to the existing offices.23 As the overall budget is now £104m we naturally asked the question where the balance of the funding was coming from. We were told that the £104m budget was being funded by £66.2m of temporary investment of the Council’s cash balances, repayable in full with interest, £11.1m Right To Buy receipts, £3.1m of land receipts from the developer, £4.2m from the sale of council premises and £19.4m of ear marked council reserves. Given that some of these figure contradict the figures that we were previously given, this answer from Lambeth raises more questions than it answers.
c) We are curious to find out if further monies have been taken from the HRA account. A reserve of £8.3m has been earmarked in the HRA section of the accounts. We have been chasing Lambeth for months as to what this reserve is for.
Lambeth have refused to answer this question and the matter now rests with the Information Commissioner.
Residents whose council homes are facing demolition under Lambeth’s regeneration programme are understandably asking why their rents are being put into a reserve of this size – instead of paying for refurbishment of their homes, something Lambeth have stated they don’t have the funds to do.
d) In February 2017 Lambeth entered into an agreement with Muse to carry out the 2 nd phase of the works, the residential works to Hambrook House and Ivor House. Why did Lambeth commit to the town hall scheme without having all the costs agreed before-hand? The report authorising the 2nd phase shows build costs for Hambrook House as being £2,120/m².26 This is in stark contrast to the figures put forward by Muse in their viability study which gives build costs at between £1,500 and £1,570/m² 27 – and viability studies tend to overstate costs. Is there going to be another hike in the budget that hasn’t been declared yet?
e) Lambeth will be selling land to Muse as part of the Town Hall development for something in the region of £3.1m.
We have yet to be told what is being sold and on what basis. Given that Lambeth spent over £12m acquiring land in order for the project to go ahead we would like to know exactly what they are selling to Muse. (Source: Lambeth Peoples’ Audit report).