Friday, July 07, 2006

The Legacy Business

Gaseous Legacy Man

"A triumph of confidence over cynicism, boldness over blandness, excellence over mediocrity" (T. Blair December 1999)

"I have done nothing wrong" (J Prescott July 2006)

Even with the New Labour project imploding under its own incompetence, the Dome still stands out as a signature dish.

Now, I know it's painful, but let's just remind ourselves of the financial facts. According to the National Audit Office, in May 1997 it was budgeted to cost taxpayers £399m. Bad enough for a big tent, but by September 2000- after both commercial sponsors and visitors had failed to materialise- that had escalated to £628m.

Since then, it's cost even more. In 2001, taxpayers shelled out a further £28m to decommission the wretched thing, and English Partnerships- the regeneration quango- has spent £30m since 2001. Ballpark, we're looking at £700m.

Given this background, and quite rightly, the government tried to flog it off. Easy you'd think. Right next door to booming Canary Wharf and on a swish new tube line (cost to taxpayers well over £3bn).

Actually, not easy at all. The NAO documented the attempts:

  • The first attempt collapsed in 2000 when the buyer- Dome Europe- withdrew citing "unacceptable commercial uncertainties"
  • The second attempt collapsed in 2001 when the preferred bidder- Legacy plc- was dropped after advice to ministers of "grave doubts that Legacy had secured sufficient pre-lets and financial backing, and that their scheme would give the taxpayer a good deal from shared profits over the lifetime of the project." In an uncanny parallel with recent events, John Prescott was heavily criticised for his role in securing Legacy preferred bidder status in the first place. It turned out he'd had several private meetings with Legacy's head, Robert Bourne, who coincidentally had given £100,000 to the Labour Party
  • The third attempt succeeded in 2002, with the deal going to a consortium of Meridian Delta Limited and Anschutz Entertainment Group. The estimated present value to taxpayers was put at £240m, later reduced to £220m. But- and this could be a BIG BUT- there are considerable uncertainties and most of the projected taxpayer returns do not come for another decade: 60% of the early gains go to Meridian Delta.

And now we have this messy business with Prezza and the casino king. The fact seems to be that the project only makes commercial sense for Anschutz if they can get permission to build a Super Casino. Evidently it's so important that poor old fatty has been prepared to shoot himself in both feet and his much loved privy member trying to get it for them.

How can this be? Surely the Greenwich peninsula is ideally located to benefit from the boom in riverside living, particularly with that tube line. And being right next door to Canary Wharf with all its cash-rich time-poor investment bankers, it ought to be a license to print money.

And of course it would be, but for one simple fact. The fundamental reason taxpayers have struggled to get a good deal is the government's insistence that any developer has to keep the wretched Dome itself. Instead of being able to bulldoze it and replace it with something useful, they have to keep it and find some way of making it pay. It's part of New Labour's LEGACY to a grateful nation.

And it's costing us a fortune. Originally the quangocrats at English Partnerships- which owned the Dome and much of the peninsula- thought that developers might be able to build inside the Dome. Guh? As the NAO drily observed, that tent sort of limits the possible height of buildings, and there'd be a lack of natural light. Certainly no river views.

Slowly- very slowly- it dawned on the quangocrats that out in the real world developers would only take on the Dome if they were also given vast swathes of the surrounding land to build flats for investment bankers. And this is exactly what's happened in the the final deal: the Dome has been bundled with nearly 200 acres of prime development land. Land which would have undoubtedly raised us much more had it not been encumbered with the Dome. In effect, the Dome is being retained at the cost of a heavy cross-subsidy from the other land. Money which should have been used more usefully - like to cut our taxes.

Sadly, the Legacy Business doesn't end with the Dome. Bigger by far will be the 2012 Olympics, where costs are ballooning by the day and Tess Jowell is now talking excitedly of an Eternal City. And all over Britain, Socialist Councils are being encouraged to build their own arenas and complexes, often, like Greenwich, on the sites of old gasworks, and always costing taxpayers a fortune (see this post and comments for what's happened in Coventry).

PS Those Victorian gasworks gobbled up and despoiled vast amounts of prime real estate in all our big cities. The photo shows my Great Great Grandfather, William Newland, a member of the "respectable working class", who was a yard foreman for the London Gaslight & Coke Company at their giant Kensal Green works. Since by all accounts he was a bit of a swine, I'm sure he'd be delighted to know his industry left such an expensive legacy and is still causing such problems 130 years later.

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