Like talking to a Brick by Brick wall

By - Friday 10th March, 2017

The cabinet’s response to important questions about the council’s new wholly-owned property company was deeply concerning

Artwork by the Croydon Citizen.

Croydon Labour wants to convince us that it does a great job running council finances. Council video clips now routinely include a reference to its financial acumen.

Unsurprising, since financial competence is a Labour weak point in the mind of the electorate. A glimpse of why was Monday 20th February’s cabinet session on the business plan for Brick by Brick, the council’s vehicle for housing development.

A business plan is a simple concept. It maps out what a company will do and how. Part of the ‘how’ is where resources (financial and human) will come from, who’s in charge of what and how money will flow in and out of the company over time.

The Brick by Brick (BxB) business plan has glaring omissions

Since business is uncertain, managing risk is crucial. Seeing bad things coming and mitigating their effects protects value, and can prevent you going bust. For a property company, typical project risks are delays and increased costs, addressed by active project management and contingencies. Corporate level risks are the likes of a drop in the housing market or increasing interest rates.

The Brick by Brick (BxB) business plan has glaring omissions. There’s no mention of when money will come in and how quickly. Project risk is mentioned, but corporate risks and who is responsible for managing them is not.

At the cabinet meeting, questions were asked to plug these gaps. Questions like ‘when will money start coming in to pay back the approaching £300 million that will have been spent by the end of 2018?’ ‘How much debt is the council prepared to saddle us with?’ ‘Who has board-level responsibility for risk management?’ ‘How robust is the plan against falling house prices?’ All these were brushed aside by council leader Tony Newman.

Tim Pollard asked how the plan had been tested against possible downsides

I wouldn’t recommend that you listen in yourself as that will be twenty-five minutes of your life that you’ll never get back, but if you do want to, click here. Here’s my précis.

Everyone agrees there’s a housing shortage. That’s a Statement of the Blindingly Obvious™. The council has decided to use a wholly-owned development company, BxB, as part of the solution.

The questions started with Conservative group leader councillor Tim Pollard, who asked how the plan had been tested against possible downsides. Council leader Tony Newman didn’t answer, saying BxB is different.

It is almost impossible for BxB to go bust, at least in the short or medium term

As far as I can figure, the gist is that BxB gets some very valuable assets (housing land) that it doesn’t have to pay for until the housing is built and sold. These assets become even more valuable when the council grants planning permission (that’s where there’s a potential conflict of interest).

With access to cheap borrowing, it is almost impossible for BxB to go bust, at least in the short or medium term. This does not mean that BxB can’t destroy value if it gets things wrong, although it will take a long time to find that out.

It was the question from councillor Cummings that took us through the looking glass, when he politely asked if an earlier remark calling the opposition ‘extremists’ was appropriate. This seems to be a second line from a Labour strategy meeting – paint local Tories as extremists. Extreme what remains unclear. ‘Don’t mention Jeremy Corbyn’ is probably a third.

Councillor Newman, these are exactly the questions that should be being asked

Councillor Lynne Hale asked for the gaps in the business plan to be plugged: those already mentioned, plus performance indicators and borrowing limits. Cue outrage from councillor Newman. How could the opposition cast aspersions on the integrity of council officers by asking such questions?

Councillor Newman, those are exactly the questions that should be being asked. That’s what financial management is. Making assertions of your own brilliance in video clips just isn’t the same thing.

Councillor Sean Fitzsimons, chair of the Scrutiny Committee, was then brought in to add his thoughts. He bemoaned the Tories’ failure to ask questions behind closed doors rather than at public meetings. Given the responses in the public meetings, I am not surprised. He then gave a Statement of the Blindingly Obvious™ speech.

We learned that Croydon Labour doesn’t want to provide any information that might enable us to judge how BxB is performing

Some small clarifications were then provided by apolitical council officers, but large gaps remained. Somewhere in there, councillor Fitzsimons intervened to correct a figure he had previously given. From the look on his face, he thought this was a towering tour-de-force, but it merely corrected an irrelevant number in his Statement of the Blindingly Obvious™.

The excuses of ‘there’s a whole wealth of detail behind this too lengthy to include’ and ‘commercial confidentiality’ were also trotted out. Both are spurious. The business plan had pages of irrelevant padding, and aggregated revenue forecasts are no more commercially sensitive than debt and spending forecasts. What revenue forecasts do is risk exposing failure to deliver, a different thing altogether.

So we had learned something in twenty-five minutes. We’d learned that Croydon Labour’s strategy is to claim sound financial management, paint local Tories as extremists and not mention Jeremy Corbyn. We’d also learned that Croydon Labour doesn’t want to provide any information that might enable us to judge how BxB is performing.

What we didn’t learn is whether BxB is set up to succeed. On this evidence, Croydon’s voters should start to feel nervous, irrespective of assertions in council video clips.

Were you at 20th February’s cabinet meeting? Do you agree with Robert’s view? The Citizen is always looking for new contributors, both to offer their opinions and to report back on public meetings. Sign up as a contributor here.

Robert Ward

Robert Ward

Engineer and project manager, started work on the railway but most of career in oil exploration and production. For the last fifteen years specialised in helping businesses improve their performance. Conservative Party candidate to represent Selsdon and Addington Village on Croydon Council. He tweets as @moguloilman.

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  • trypewriter

    Is there not any ‘moolah’ left over from the Riesco ‘Cash In The Attic’ sale overseen by the previous, fiscally prudent, council? Where DID that all go?

    • Mark Johnson

      It was spent on the Fairfield Halls as was always the plan.