Haringey mulls £3m cost to scrap controversial HDV
0Scrapping London Borough of Haringey’s disputed regeneration vehicle is set to cost taxpayers more than £3m — including a payment of half a million pounds to its preferred joint venture partner — according to a council report.
The council’s cabinet will meet next week to consider an internal document that recommends discontinuation of procurement processes for the Haringey Development Vehicle, which was set to redevelop council housing and provide a long-term income stream for the borough.
A report by officers said that if councillors approve the move, the authority will be liable to pay £520,275 to Lendlease, the company selected as the preferred partner for the HDV.
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The report said that: “…during the preferred bidder stage, it was agreed that certain work needed to be undertaken in advance of the project agreements being entered into, referred to as ‘agreed costs’ and that these agreed costs would be met by Lendlease prior to establishment of the HDV and then be rolled into the HDV once established.
“If cabinet agrees the recommendations, the council’s share of the agreed costs will therefore need to be reimbursed to Lendlease.”
According to the report, the council’s draft statement of accounts for 2017–18 includes recognition of a contingent liability in relation to the potential closure of the HDV.
However, this was not a provision, and the council is proposing to meet its £520,000 share of agreed costs from increased income to the general fund, “arising from the actioned transfer of commercial properties from the HRA, which was not incorporated in to the 2018–19 budget”.
The report also said that Haringey has spent an additional £2.5m, excluding staff costs, on commercial advice, legal support, project management and other expenditure relating to the HDV since 2014.
However, the report added that “some of this spend will have resulted in useful outputs for the future, notably in promoting greater efficiencies, debt recoveries and safety and other compliance of its commercial property portfolio”.
In addition to the £2.5m costs and £520,000 payment to Lendlease, the council would need to make cuts of £250,000 a year from its regeneration, planning and development directorate to make up a shortfall arising from any decision to scrap the HDV, the report said.
This was the amount that the council originally budgeted as a saving on management of the council’s commercial portfolio, which was earmarked for transfer to the HDV.
Separately, the council also racked up a £250,000 legal bill to fight a legal challenge against the HDV brought by a local group opposing the proposals.
The HDV was a key battle in May’s local elections, leading to the deselection and resignation of a number of Labour councillors who had supported the proposals.
The council’s new leadership, which was backed by Momentum during the election, is keen to see the back of the vehicle.
The report said: “The new administration does not object to outcomes anticipated by the HDV programme, nor does it object to the principle of partnerships with the private sector.
“But it takes a different view on the acceptability of the risks. In particular, the new administration is not prepared to accept the scale and nature of risk implied by the aggregated volume of the proposed HDV programme.”
In a letter sent to the council, Lendlease has warned the council to be careful over the proposal to scrap the HDV.
“The council will be aware that it must follow due process in fully and properly considering its obligations arising from this procurement,” Lendlease said.
“It must not take any decision which would be irrational, in particular in the context of the borough’s urgent need for housing — which requires very significant investment and capability.
“As the council, over a number of years, undertook a very extensive process, including consideration of various delivery options, we would have to question how the new cabinet, which has been in place for only a matter of weeks, could be in a position to be ready and able to make any significant change of direction.”
The council says that under the terms of the procurement it is legally entitled not to proceed with the HDV, because the final contract with Lendlease had not been signed.
