Cabinet Rejects Recommendations from Scrutiny
The Overview and Scrutiny Committee has been working.
On 29th March, they met to discuss James Riley Point and the escalation in costs.
Councillors were concerned:
That the escalation in costs indicated that the viability of the whole scheme was threatened.
The governance measures for the programme were inadequate, (code for Mayor Fiaz should relinquish control to a designated cabinet member).
That the costs of compulsory purchase were excessive.
They considered that the escalating costs threatened the viability of the redevelopment programme.
Inflation. Newham has no control of inflation in the national or the international market
Changes in Specification. This was something that Newham does (did) have control over, (see also below). It is not clear to what degree changes to the spec part way through the design process inflated the costs.
Additional community facilities. James Riley Point will have additional investment to provide facilities to serve the estate. These costs are unlikely to be replicated in another block.
What became evident was the way in which the costs are to be managed. James Riley Point will be administered within the Housing Revenue Account (HRA). The rest of the estate will not.
James Riley Point will not generate the revenue necessary to cover the costs of building it. The assertion is that the other parts of the Carpenters’ development will generate a surplus. However, this surplus will not, it seems go to offset the costs of James Riley Point. Because James Riley will be administered under the HRA it is ALL THE OTHER NEWHAM TENANTS who will be subsidising the costs of the new James Riley Point.
This is fine, whilst the HRA has a surplus, but what happens when the HRA runs short of cash as it is very likely to. For the answer we only have to look at Rochdale Council (widespread damp and mould in housing stock) Peabody Housing (ditto), and One Housing (took one year to change £82m surplus to £8m deficit) to find that some of the early hits are to repairs and maintenance.
More worrying are the assumptions underpinning the financial projections.
In order to show the scheme as financially viable ‘Rental’ inflation has been shown at a lower rate than inflation for salaries, management and maintenance. This is a seriously risky approach and one that councillors should continue to address.
We are being asked to believe that the income from rents, in a block which is entirely let at social or subsidised rates will rise higher and faster than the costs.
It beggars belief.
Cabinet subsequently decided to reject most of the proposals from OSC. This scheme now has the potential to become a millstone for the next three decades.
Agenda Item 5: Progressing James Riley Point It was agreed that the Cabinet Decision, having been considered by the Committee in accordance with the Call In procedure, should be referred to Cabinet for reconsideration, along with the Committee’s main concerns and recommendations.
RESOLVED:
1. That the Cabinet Decision be referred to the Cabinet for reconsideration.
2. That the following key concerns and recommendations be submitted to Cabinet:
(i) That an updated external review be carried out by a suitably qualified accountancy firm on the Carpenters regeneration programme. (Reject)
(ii) That CPO (Compulsory Purchase Order) arrangements be value for money tested for the public purse. The process should be looked at by a suitably qualified accountancy firm. (Reject)
(iii) That viability of Carpenters regeneration programme, excluding JRP (James Riley Point) redevelopment, be reassessed by a suitably qualified accountancy firm using more prudent assumptions. (Reject)
(iv) Of the five governance and oversight bodies that relate to the Carpenters programme outlined to the Committee, three are currently chaired by the Mayor, who is also the portfolio holder. The Committee is concerned that this is a conflict of interest, inconsistent with the Cabinet Accountability Model. In the interests of greater independence, governance and accountability, we recommend that a Cabinet member be given responsibility for the regeneration portfolio, whom the Mayor can then hold to account. This separation of duties will provide openness, transparency and accountability. Reject but the recommendation is noted.
(v) Review the policy for negotiating settlements with tenants and leaseholders for future programmes, taking into account lessons learnt. Accept
(vi) Assess the risks of CPOs (Compulsory Purchase Orders) in current and future development schemes and further assess the Council’s likely reaction to this challenge. Accept
(vii) It is the Committee’s belief that an additional governance and oversight committee should be set up with an independent chair, as this will further enhance the governance of projects such as Carpenters regeneration programme and other larger regeneration programmes. Reject but the recommendation is noted
Interestingly, Mayor Fiaz vacated the chair for the discussion. However, any conflict of interest that she felt was not sufficient to stop her from remaining in the room and participating in the meeting.