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An Olympic-sized black hole

17 Oct

The London Stadium

Tomorrow (Wednesday 18 October) the Budget Monitoring Sub-Committee of the London Assembly will question the London Legacy Development Corporation (LLDC) and GLA representatives on the long-term financial sustainability of the London Stadium.

They will ask if it Is fundamentally un-profitable and try to find out what has happened to Sadiq Khan’s investigation into the Stadium.

The discussion will include the Stadium itself, the cultural and education district, affordable housing and overall financial sustainability.

The meeting starts at 2.30pm in The Chamber at City Hall (The Queen’s Walk, London SE1) and is open to the public and media. It will also be streamed live via webcast and YouTube.

Papers for the meeting are available online.

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Less than zero

9 Oct

Not paying a penny

West Ham United has yet to hand over a penny in business rates for its London Stadium home, according to a report in London freesheet City AM.

Some 16 months after settling into what was called Olympic Stadium, the body responsible for setting UK business rates is yet to decide whether the Premier League club must pay anything, the Press Association first reported.

Earlier this year it was revealed that West Ham only had to pay rates on retail and office space it lets, rather than the entire stadium. This left landlord E20 Stadium to foot the remainder of annual £2.3m business rate bill. (emphasis added)

West Ham’s annual rent for the stadium is £2.5 million a year (halved if the club is relegated from the Premier League).

Newham loaned £40 million to the stadium partnership to help meet the cost of turning it into a football ground. The hope was that future profits would repay the loan and more. That loan has since been ‘impaired’ and the council’s finance director estimates its current value as zero. It will almost certainly never be repaid.

Adding insult to injury, a multi-millionaire owned football club, playing in the world’s richest league, is having its business rates paid by taxpayers too.

UPDATE

One of the supposed benefits of Newham ‘investing’ in the stadium was the prospect of jobs for local residents. ‘Up to 75%’ of new jobs created would go to local people, they mayor claimed.

A recent FOI response shows what a dismal failure this has been (percentages added):

The total number of jobs created at the stadium currently is 1,531 jobs. The number of Newham residents employed on full time contracts is 15 out of 70 jobs (21.4%) and the number of Newham residents employed on casual contracts is 469 out of 1,461 jobs (32.1%).

15 full-time jobs and 469 casual jobs. For £40 million.

Resigning matters

25 Sep

Forest Gate North councillor Rachel Tripp has resigned from cabinet.

Speaking to the Newham Recorder, she said:

“As Robin knows, I have been unhappy for some time about our direction of travel as a council on specific issues. Despite the fact that I have hugely enjoyed my cabinet work in both equalities and the small business programme, I have decided to stand down.

“I remain fully committed to working as a local councillor in the very best interests of the residents and everyone else in the wonderful place that is Forest Gate North as well as wider Newham.”

Resigning on a matter of principle: I can’t remember anyone doing this before in Newham, at least not in the Wales era.

It would have been so much easier for Cllr Tripp to sit back, shut up and collect the cash, as others have done (and many still do). This is a brave and principled decision.

Spot the Difference (part 94)

25 Sep

The draft Statement of Accounts originally published in July, which set off a furore once people spotted the words ‘written-off’ in the section dealing with the Olympic Stadium loan:

DSoA Original

The version being considered by the Audit Board/Investment and Accounts committee meeting on Wednesday :

DSoA audit board

Did they think no-one would notice?

Long-serving councillor Conor McAuley (Custom House) has devoted his September ward report to the Stadium loan write-off. The report is worth reading in full. But here is the conclusion:

The Mayor and one or two other councillors are arguing that an ‘impairment’ is not a ‘write off’ but they are contradicted by the very next line in the accounts which states that these charges are subsequently written off.

I am appalled not only by the loss itself but by the fact that we had to study the annual accounts to find this information.

Such a fanfare was made about the original investment, one might think that the Council was seeking to bury the loss

It tends to remind me of the £4.3+ million lost in the Council’s investment in 2012 in the London Pleasure Gardens project that was supposed to animate the Silvertown Quays area south of the Royal Docks. The Council lost every penny of this investment and it even had to pay the winding up costs of the company.

As I understand it, Newham’s Overiew & Scrutiny Committee has never looked at this loss, so I doubt their commitment to look at the Stadium debacle.

The Council’s draft accounts will be discussed further at the Council’s Audit Board on 27 September. It could be a difficult meeting.

That final sentence is a masterpiece of understatement.

Stadium latest

11 Sep

IMG 0365

A stone’s throw from the Olympic stadium…

Not just a river in Egypt

8 Sep

My blog post yesterday prompted a flurry of media interest, which resulted in the following statement being issued (my emphasis added):

A Newham Council spokesperson said: 

“The Council’s draft accounts for 2016/17 were first published on our website on 3 July and were then open to the normal period of public scrutiny until 11 August. These draft accounts are currently with our auditors for their review. The finalised accounts are due to be considered at a scheduled meeting of our Investment and Accounts Committee on 20 September.” 

“Our draft accounts, which are subject to change and approval, show a prudent, responsible and regulatory compliant treatment of a Council loan related to the London Stadium. The loan is shown, for accounting purposes, as currently ‘impaired’, or damaged, due to the current financial performance of the Stadium. It is not a write off of the loan.”

The draft statement of accounts, which I linked to in my post, says on page 12 (again, my emphasis added):

“These charges are subsequently written-off to the Capital Adjustment Account.”

If Newham don’t want people thinking they’ve written things off they should probably avoid using the words ‘written-off’ in the accounts.

But let’s not split hairs. Let’s accept that the loan is indeed, as that spokesman says, “‘impaired’, or damaged, due to the current financial performance of the Stadium.” And then compare that to what Sir Robin said when the loan was first taken out (my emphasis added):

“Even on the most disastrous figures, even if everything goes wrong, we still make a profit on this.

“The risk is really, really minimal.

“The debt, which costs our residents nothing, will be repaid and then we start to share in the profit.“

Just one season into the operation of the stadium and it turns out that not a word of this true.

The Investment and Accounts Committee meeting on 20 September is a joint meeting with the Audit Board. It is public and details are on the council website. I predict the public gallery will be busier than usual.

UPDATE (13/09/2017): The meeting has been moved to Wednesday 27th September. Same venue: Committee Room 2, Newham Town Hall, East Ham, E6 2RP.

Down the drain

7 Sep

Sir Robin Wales is about to flush £40 million of council taxpayers’ money down the toilet.

Detail hidden in the draft accounts due to be signed off by cabinet tonight shows that the ‘loan’ made to help transform the 2012 Olympic stadium into West Ham United’s new ground is being written off.

Newham Council ‘invested’ £40m via a special subsidiary company called Newham Legacy Investments Ltd.

At the time, Mayor of Newham, Sir Robin Wales stated:

“Our investment of £40 million secures that legacy by transforming the Olympic Stadium into a world class attraction […]. This will provide us with a share of the profits generated over the long-term and a range of community benefits for Newham residents.”  

After just one season of operation as a football stadium the council is now ‘writing off’ that £40m investment. A line in the Draft Statement of Accounts 2016/17 states:

“Impairment totalling £44.4m of a Long Term Debtor in one of the Council’s group undertaking, Newham Legacy Investments Ltd” (page 12, item 7) 

and 

“The company’s 2016/17 financial results disclosed a loss of £2.5m (2015/16: loss of £41.6m), and net liabilities of £44.4m (£41.9m of net liabilities as at 31 March 2016).” (page 88, item 39)

Newham Legacy Investments Ltd has had a number of directors over the last five years including senior council officer Zoe Power (Head of Projects and Programmes, Newham) and Cllr Lester Hudson (deputy Mayor, Cabinet member for Finances and Chair of Audit board). Given that the audit board should scrutinise decisions made by cabinet, council and council-owned subsidiaries this combination of roles was a massive conflict of interests.

While Newham handed over £40m to convert the stadium, West Ham United themselves only contributed £15m, despite being owned by two multi-millionaires and the Premier League being the richest in the world.

The £40m being written off is double the amount of ‘savings and efficiencies’ being made this year. Residents were promised the investment would provide Newham with a share of the profits generated over the long term. It turned out be a gift to Messrs Sullivan and Gold. The money, borrowed by the council from the Treasury, will now have to be re-paid by local taxpayers.

This blog has regularly cast doubts on whether the other commitments including local jobs and tickets for residents have been delivered.

This is not Newham’s first Olympic investment to back fire. In 2012 it also had to write off more than £3m invested into London Pleasure Gardens. With additional liabilities added on, taxpayers were left close to £5m out-of-pocket.

All-in-all, Sir Robin’s track record on finance (under the ‘scrutiny’ of the double-jobbing Cllr Hudson) is not impressive.

Which makes this week’s news that Newham council has bought a multi-let office block in Redhill, Surrey for £25m all the more worrying.