HOMES FOR LAMBETH “BUSINESS PLAN” – CLLR ELLIOTT’S QUESTIONS TO CABINET MEMBER FOR NEW HOMES:

Green party Cllr Pete Elliott (Gipsy Hill) posed a long list of questions on the Homes for Lambeth business plan at Monday afternoon’s cabinet meeting to Cllr Matthew Bennett (Lab, Gipsy Hill) who is Lambeth’s cabinet member for planning, investment and new homes: 

Question
The business plan provides no visibility of the anticipated outcomes of the schemes being proposed. Please provide detailed costings, cashflows and sensitivity analysis to demonstrate that the proposed schemes will be viable. Otherwise Lambeth are being asked to sign a blank cheque.
There is no indication of how HFL have performed against the targets set for it for 2018/2019. Please provide these.
Given the delays to date on schemes and the lack of maintenance to estates as a result of regeneration, what are the anticipated costs for disrepair claims/further maintenance?
Lambeth will be paying HFL for achieving vacant possession (ie carrying out the CPO process) and for providing consultancy services. What budget will this cost come from and how will this money be paid back by HFL to Lambeth?
HFL are acting as landlords for buy backs. On what basis is this being carried out and what is the anticipated income for Lambeth?
Item 2.10 identifies some major risks. How are these risks being managed and where is the sensitivity analysis?
£22.6m of losses are predicted subject to delivery of all associated forecasts. Where is the sensitivity analysis of the effect if all associated forecasts are not met?
It is stated that ” It is possible that this process will result in changes to the design and objectives of the scheme”. Please clarify what is the council’s acceptable threshold for changes to the design and objectives. ie at what point would the council no longer wish to proceed with a scheme?
How can the cost of £2m each for Cressingham, Central Hill & Fenwick be justified when these schemes have (or will have) consultants already appointed to carry out the development management? Or have all of those appointments (Mace etc.) now been cancelled?
The projected spends bear no relation to the projected spends included on Page 26 of the Business Plan approved by cabinet in January 2018. Please explain why and what effect this has on cash-flow and profitability.
Please explain the statement with regard to “The recovery and timing of sunk costs in relation to land values”. Does this mean that the council will be writing off costs against existing loans against the estates or will this cost be borne by HFL?
Why have the parameters for cross-charging between Lambeth and HFL not been agreed? This is crucial to understanding the viability of a scheme.
Risk management. It is assumed that VAT and SDLT is not payable. This should be known by now. Please state if VAT and SDLT is payable or not.
One year is a very short period for an organisation looking to take very long term decisions (as is implicitly recognised in para 6.1 which talks about a three year period). Why has the five year plan presented last year not been extended? What is the relationship between the 5 year BP approved last year and the one year plan being approved today? How is the HfL BP reflected in the LBL HRA 30 year BP?
Why is there no systematic assessment of achievement against the 5 year plan’s first 15 months? What comparison between planned and actual outcomes will be made available in the future?
According to the table in section 5.2 of the 5YBP (which doesn’t actually add up!), construction expenditure on the first three estates should have reached £7.543m by March 2019 and £19.5m by March 2020, of which £3.077m and £7.562m relate to South Lambeth and £0.703m and £7.539m to Knights Walk. The 1YBP shows figures of £0.3m and £6.9m for Knights Walk and £0.0m and £14.1m for South Lambeth. Given the general delays experienced over the last year, how are:
– the overall acceleration of South Lambeth; and
– the reversal of the delay at Knights Walk,
to be achieved?
Why is the Risk Management section in the 1YBP so much less detailed than in the 5YBP?
Why have the KPIs listed in the 5YBP as coming into use in 2018/19 not been reported against in the 1YBP?
HfL Group is classed as a commercial company. Why does the 1YBP not include the detailed financial history and forecasts for P&L, Balance Sheet and Cash Flow that are conventional for commercial companies?
According to the BP para 2.7 HfL will have spent £22.8m by the end of March 2020 and incurred additional liabilities of £2.6m . How would this be presented using LBL’s accounting policies. However, para 5.1 (pg 11) shows expenditure of £21.5m on construction and £9.1m on Feasibility studies, total £30.6m. Assuming the WCF drawing of £1.3m is funding net current expenditure, this leaves a gap of £6.5m between expenditure and funding. Where is this money coming from?
At present HfL is completely dependent on LBL financially and is 100% owned by LBL, which means that LBL has total control over HfL. Why then is it not being consolidated with LBL for financial and other reporting purposes?
LBL’s intention to borrow and then lend on money whilst taking a turn on the interest rates charged sees the Council behaving like a bank. How will this income be recorded in LBL’s accounts? How will the interest rate charged to HfL be determined? Who at LBL is responsible for assessing the recoverability of loans made to HfL? What security will LBL take for its loans?
Will HfL staff be included in the numbers reported by LBL. What control does LBL intend to exercise over salaries and especially bonuses? Will any Lambeth Officers’ time be required to administer, scrutinise or audit HfL accounts and performance? How will this time be accounted for?
What values will be attributed to assets transferred from LBL to HfL: Full market value or Carrying value in LBL’s accounts? What consideration has been given to the risk of transfers at an undervalue giving rise to inflated profits and a misleading perception of success at a cost to the council?
The business plan makes no references to the residents on estates planned for demolition, the poor states of their homes and how the homes are going to be brought up to a legally acceptable standard over the coming years. What steps will be taken to make those homes and the estate infrastuure fit for purpose? Is money budgeted for this or will major works be expected to be covered by the HRA despite the delays being caused by the lack of delivery from the Regen programme. If funding is coming from another budget then where is that accounted for?
A key goal is to identify and develop sites within the strategic pipeline, does this mean that HfL will be lining up other estates to demolish?
A target satisfaction for residents is to be set at >80%. Why is this so low? Managed properly with residents at the heart of decision making then much more should be strived for.
Where are the 100 AST homes by March 2020 coming from? Is this the buybacks from leaseholders? What if leaseholders don’t sell? What is the budget for this?
The plan states a goal will be to ‘Support the delivery of the Key Guarantees’ Should this not read ‘Implement’ as the key guarantees have already been signed off by council or is HfL/Lambeth Council setting themselves to renege on the Key Guarantees?
Another goal is to Research Market Rent Tenure Options by Jun 2019 – shouldn’t this already have been done?
It also states that HfL will ‘Optimise grant funding & recycle local grants for local people’. What does this mean as there is no explanation?
The total mention of the environment in the report and Business Plan is “Environmental sustainability will be a key consideration for any proposed interventions and the Council will seek the highest possible standards with the resources available.” At the last Council Meeting a climate emergency was declared in Lambeth where it was agreed for the borough to be carbon neutral by 2030. From the Architects for Environmental Impact Assessment Report a conservative estimate for the Embodied Carbon of Central Hill estate would be around 7000 tonnes of CO2 which is released when homes are demolished. How is a completely ignoring the environment squared away with a Climate Emergency? What specific steps and actions are going to be taken to minimise carbon emissions and the environmental impact of regeneration?
Air quality is also not mentioned in the report or business plan which also will be heavily impacted with increased numbers of vehicles, demolition works and rebuilding, Is there a reason for not acknowledging the risks to public health that this causes and some actions that will be done to mitigate them?
Scrutiny in Lambeth has been an ongoing issue with the public. How is the public going to be able to scrutinise the finances and plans to at least the standard that it was able to scrutinise the HRA accounts and the General fund prior to HfL? Ideally we would like to see systems are better with all this public money being invested.
It was stated at the February meeting of the Central Hill Residents Project Group that Mace were no longer working on Central Hill and that the process would be managed by HFL. Does this not firstly mean that a new decision is needed to award to HFL and secondly would not such a decision be a breach of the constitution as it would be single sourcing?
We now know that the contract with MACE on the Central Hill Estate is not going ahead. How much money was wasted on that exercise from tendering the contract through to the exhibitions and any other related costs? Did you have to pay MACE any money?
One of the stated problems that is used to justify all these decisions is that there are 28-30,000 people on the housing waiting list. Despite that, there is no mention of how the plans here will bring that number down, nor are there any targets set against it. Can we have a predicted number of people on the housing waiting list for the next 10 years if we implement the HfL Business Plan?
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