Supplementary Cabinet Report: Comments of Overview and Scrutiny Board on Upheld Requisitions

Report summary: Following the upholding of two requisitions of recent Executive Decisions relating to Mercury Land Holdings, the views of the Board and its reasons for upholding the requisitions are attached for response by Cabinet.

Recommendations:

1.    That Cabinet considers the comments made by the Overview and Scrutiny Board (attached) and decides whether or not to proceed with the original decisions as planned.

2.    That Cabinet gives the reasons for its responses to the upheld requisitions of the Executive Decisions and these are recorded in the minutes.

At its meeting on 7 May 2024, the Overview and Scrutiny Board upheld requisitions of the following Executive Decisions:

1.    Authorisation to provide additional equity funding to Mercury Land Holdings Ltd to enable the purchase of sites in accordance with the approved 2023-26 MLH Business Plan

2.    Disposal of Council-owned sites to Mercury Land Holdings

Under Overview and Scrutiny Procedure Rule 17 (g) of the Council’s Constitution, the Cabinet is required to consider the comments of the Board on these matters and to provide a response to them. A summary of the views of the Board is therefore attached to this report, as are the original Executive Decision reports (exempt appendices not available to press or public).

It was clarified that Cabinet is free to continue with the original decisions or to amend the decisions as it wishes.

Cabinet considered the report submitted to Cabinet, in relation to two executive decisions; namely:

1.    A decision dated 5 April 2024 made by Cllr Williamson entitled: “Authorisation to provide additional equity funding to Mercury Land Holdings Ltd to enable the purchase of sites in accordance with the approved 2023-26 MLH Business Plan”; and

2.    A decision dated 8 April 2024 made by Mark Butler entitled: “Disposal of Council-owned sites to Mercury Land Holdings Ltd.”

Cabinet considered the underlying grounds of requisition in open session of Cabinet by way of officer presentation and subsequent questioning of the appropriate officers.

Having considered the matter, Cabinet hereby endorses the decisions referred to above and resolves to proceed with the original decisions as planned.

The decision is made for the following reasons, by reference to the points of requisition:

1.    By combining all sites into one Executive Decision, Members were unable to ascertain if the project was viable and offered value for money for Havering residents.

As outlined in the officer presentation, it is not practical to undertake a viability assessment at this stage pending planning permission being determined, confirming detail of the final development on a site by site basis.

2.    MLH will subsequently submit business cases for consideration by the Council, at which point further scrutiny can be applied.

Provide a detailed business case where possible for each site in order that an informed decision regarding the viability of the project can be made.

      As per the response to Recommendation 1 above

3.    From discussions held on the night, it became apparent to the Board that the quest for capital receipts was the overriding goal of the project at this time. Please could an explanation be provided as to why this is?

The Council has been transparent since February 2023 regarding the need to generate capital receipts through asset disposal, as part of its wider Capital Strategy. This approach was further endorsed within the Budget report, approved by Full Council earlier this year.

4.    Sound reasoning should be provided as to why the Council cannot pursue planning permission for the sites directly itself rather than via Mercury Land Holdings.

The Council would need to initiate procurement of a multi-disciplinary team  of advisers to undertake the diverse range of assessments and studies to accompany the planning applications for each site.

MLH is the Council’s wholly-owned development company with a range of pre-approved advisers already appointed, providing a quicker route to submitting planning applications, thereby accelerating the capital receipts. 

5.    A business case should be developed for the appropriation of Housing Revenue Account funds and the Council developing the sites in its own right as it has done in for example its Joint Venture with Wates.

The HRA does not have the financial headroom to acquire the sites by appropriation and this approach would not generate a receipt.

6.    A separate decision to approve the disposal of each site should be put forward, if this is practicable.

A site by site breakdown of the initial receipt is provided within the Exempt Appendix to the Executive Decisions, but a more detailed viability assessment is impractical at this stage, for the reasons already set out in response to Recommendation

7.    A corroborated statement of valuation for each site should be drawn up. The existing external valuations could be used as a starting point but these would need to be corroborated independently. This would provide clarification of whether the figures for value of the sites, given in the Executive Decision reports, reflected the true, current market value.

An independent, external valuation has already been provided to quantify the initial receipt for each site. A further independent valuation will be commissioned for each site once planning permission has been achieved and the precise scheme details are known, fulfilling the Council’s statutory requirements under S.123 of the Local Government Act 1972