Tuesday 11 September 2018

Thameslink Brent Cross South Station - The risks to Barnet Taxpayers mount

Next Monday, we see the Barnet Council Assets, Regeneration and Growth Committee meet to discuss the proposal to build a new Thameslink Station at Brent Cross South. As Hammersons (The developer of the shopping centre scheme) has put the shopping centre on hold, this has created a massive funding black hole as described in Section 1.2 of the Council report. It says
1.2 - It also outlines the work being undertaken by the Council following Hammerson’s
announcement to defer start on site on the Brent Cross Shopping Centre as set out in paragraph 1.4 of this report. Whilst the preferred station funding strategy set out in the Full Business Case approved by Policy & Resources Committee and HM Government is based on the ringfencing of business rates growth from the shopping centre development to date, the FBC also addresses the risk of delay by Hammerson and identifies possible mitigations. The public sector partners have agreed to work together to find an alternative funding solution by end of October 2018 to secure delivery of the station and BXS. The public sector partners agreed to continue to commit MHCLG grant to maintain momentum and in the expectation that a solution will be found as set out in paragraph 1.41 of this report. 
To summarise, it appears from the papers that the public sector are now pulling together a funding package. Later in the report the following statement is made

Impact of Hammerson deferral on the Thameslink Station
1.41 The Committee will recall that the Council’s investment in the station is dependent on the BXL Partners commencing the shopping centre development (which secures the business rates growth that will support the borrowing costs). Following Hammerson’s announcement to defer Brent Cross as set out in paragraph 1.4 of this report, this funding is not expected to be confirmed by December 2018, when the Council needs to enter into contract with Network Rail to maintain May 2022 opening date. Thus, an alternative funding solution needs to be agreed with HM Government and the GLA for the station. This scenario was identified as a risk in the Full Business Case approved by Policy and Resources Committee and HM Government in 2016. On 1 August 2018, the Government Assurance Board, comprising the Council, MHCLG, HM Treasury and GLA:
1. Reaffirmed public sector commitment to delivery of BX South and Thameslink
2. Confirmed commitment to finding a solution to the funding challenge
3. Confirmed that LBB can continue to commit MHCLG grant, to maintain momentum and in the expectation that a solution will be found.
Whilst I am a big fan of rail infrastructure projects, this one is starting to ring alarm bells. What particularly concerns me is that for the project to proceed, funding will have to be secured by December. Once this is done and dusted, what is to stop Hammersons coming back and building the shopping centre with no financial commitments at all. As the station will hugely improve the scheme, they will in effect have secured a massive win.

The big question for me is where will the extra dosh come from. Barnet Council can't put up council tax any higher without a public referendum, as the Tory administration is already committed to the maximum permitted rise without funding Brent Cross. So where else can the council find the dosh? One would have rather hoped that if there were grants and subsidies available, these would have already been tapped up to ensure the project proceeded without the risk of the rates guarantee. The other possible source that comes to mind is stealth taxes. Typically we are talking about parking charges. Barnet Council has fallen foul of the law on this before, but presumably the station can be sold as a transport enhancement.

I have asked two questions of the committee. I await the responses with interest

1. Please can the council explain how the funding for the new station at BXS will be achieved. In particular I am concerned that it appears that alternative funding is being sought, wheras the original business case envisaged a ring fencing of Business Rates from the Brent Cross expansion. Once this funding has been identified, is there a realistic prospect that the developers will be able to reactivate their plans and dodge their previously rig fenced commitments.

2. In light of the current problems facing retailers, there has been talk of a complete review of the system of business rates (a proposal I fully support). What plans are in place to ensure that such a change to legislation would prevent the Barnet Taxpayer having to pick up the bill if Business rates are abolished and another method of business taxation used? I note that this is not mentioned in the risk register.

I will keep you updated with what happens. Just to give some idea of the scale of this scheme the papers state

5.1.9 The current total approved Capital Budget for Thameslink is £70.516m Current spend to date (including expenditure committed but not yet paid) is £30.7m.
What is encouraging in the papers is that there is a firm commitment to improve the West London Orbital Railway Scheme and improve access between the station and the Thameslink Station. Sadly like many schemes, this one seems to have become one where the public sector takes all the risk and the private sector reaps all the rewards.

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