The BBC announced yesterday that Saracens RFC are being relegated from the Premiership of Rugby Union for breaches of salary cap regulations. This is a catastrophe for the London Borough of Barnet and especially for Mill Hill, the area where the club are based. Saracens RFC have brought many benefits to the area, way beyond that for Rugby lovers. Businesses such as The Bridge Tavern and The Mill Hill Tandoori restaurant have had a huge cash injection, with the regular army of fans needing to be fed and 'watered'. Local Rugby clubs, such as Mill Hill RFC and Hendon RFC, based in the Copthall playing fields have also seen a huge benefit from Rugby fans using their facilities for pre match refreshments. Mill Hill were promoted last season as a result of renewed interest in the game. I have many friends who work for the club in various capacities and they are all fearful for the future. I am not a Rugby fan, I've attended a couple of games, but the club have been active supporters of the community and this must be recognised. The club kindly allowed the Mill Hill Music Festival to use their facilities free of charge when they opened, to help launch the venue. We had three amazing nights there. They have also been involved in all manner of community initiatives and were very supportive of the Mill Hill Neighbourhood Forums attempts to put a neighbourhood plan together for Mill Hill. All of this must be recognised and I've been a robust defender of the contribution the club has made to the area.
However, the club is a business. It has to be run on sound business principles and conform to the rules of the market place it operates in. On the 19th July 2018, I addressed the members of the Barnet Council Policy and Resources committee on the subject of a £22 million loan that Barnet Council were making to Saracens. I also emailed all members of the committee, this is what I said
The position of this blog has been consistent and hasn't changed since the Saracens move to Copthall was first mooted. The site should have been used to house Barnet FC and keep them in the Borough. Once Saracens RFC moved in we have been supportive of the club, but do not believe it should have had any of the subsidies it has received from the public purse. Whilst a commercial business like Saracens seems to have open access to the chequebook for the Barnet Taxpayer, a whole host of other local, well established sports clubs have been forced to close or forced out of the Borough by Barnet Council. These include Watling Boys Club, Copthall diving club, Hendon FC and Barnet FC to name a few. None of this is Saracens fault. It is the fault of the Barnet Conservatives, who have played fast and loose with taxpayers cash and the truth.
I am emailing you in relation to your role as a member of the Barnet Council Policy and Resources committee. Having read the papers, there are three issues of major concern to me, that I urgently request you consider prior to the meeting and ensure that any vote you may cast is made in the best interests of Barnet residents.
1. Loan to Saracens
The Summary states the following:
"The report seeks agreement in principle to make a loan of £22.9 million to Saracens at a commercial rate for a period of 30 years to enable the construction of a new West Stand as part of their Allianz Park stadium at Copthall. It outlines the benefits of the project for the council and the wider Barnet community, and summarises the findings of a preliminary due diligence exercise. The report sets out the further due diligence and assurances required in order for the council to satisfy itself that it is prudent to make the loan. It seeks authority for the Deputy Chief Executive to oversee this work and subject to its satisfactory conclusion to enter, in consultation with Members, into a loan agreement with Saracens Ltd."
As a resident, a Council Tax payer, a Business rates payer, a local business owner and a resident of Mill Hill, I am truly alarmed at this proposal. This is not because I do not wish Saracens to build a new stand, which is a proposal I fully support, but because I do not believe that the function of a Council is to act as a bank. As a businessman, I have sought and would expect other businesses to seek loans on a commercial basis from traditional lenders.
I must ask why Saracens have not been able to secure such a loan for their project? Interest rates are competitive and I would have assumed that if there was a secure business case, then such a loan would not be difficult to obtain. This begs the question as to whether the business case is sound? Have Saracens sought finance and been refused elsewhere? Such decisions are based on the risk profile of the proposal.
The papers give some clue as to why a commercial loan has not been forthcoming. They note:
Saracens made an operating loss of £2.73m in 2016/17. The loss has been declining over recent years, and the club has a clear business plan to move to a profit position. The assumptions in the business plan are reasonable. At the time of writing the due diligence report, the club had total net liabilities of £45.1m in the form of intercompany loans. The club has since confirmed that these were restructured as at 30 June 2018 to leave the club in a position of having net positive assets. This will be verified during the next stage of due diligence. The security offered is independent of the success of the club but the council should test further its robustness through due diligence, and should consider asking for additional security.
A business which lost £2.73 million in the last accounting period, has net liabilities of £45.1 million, which seems to have magically disappeared due to an unverified restructuring surely is not something which taxpayers money should be used to back. In the event of the "business plan" not turning the business around, Barnet Council will be left with a huge stadium and no club to house. Given the problems with The Olympics stadium in Stratford, is it really wise to take the Barnet taxpayer on such a journey.
I have no issue at all with all of the good work Saracens are doing in the Borough. This is to be encouraged and to be supported, but I do not believe that the way to support any business is for local authorities to step in and offer commercial loans. I am quite surprised that a Conservative lead administration is following such a course.
If it is now council policy to give generous loans to local businesses that do "good work", as a local the owner of a local business doing such things, I would like to have some clarification of the criteria for applying for such funding. I run Mill Hill Music Complex Studios, We have been based in Mill Hill since 1979 and we see approx 1,400 artists a week using our facilities many of whom are youths and teenagers, who have no other facilities for miles for such creative activities. We currently are seeking to construct a new building to increase our provision, but due to the inordinate amount of time it took the council to approve the planning permission, we have had to put plans on hold, due to the withdrawal of our partners, who found alternative accommodation in Brookmans Park. If the council is actively subsidising such schemes, then I would like some documentation to see what are the criteria for applying for such finance. I would be more than happy to host the committee and give them a tour of our facilities. If there is no such criteria and this is just being done as a one off favour to Saracens, a commercial company, then I worry about the legality of the scheme and whether it is actually discriminatory against businesses such as mine, which do not have the opportunity for taxpayer funded finance in a transparent manner.
Sadly, when you don't do due diligence this is what happens. I just hope Saracens can survive and eventually Barnet will see some benefits from this loan and the new stand, should it ever actually get built. Most of all I hope that the staff who work for the club keep their jobs. It would be nice for the Policy and Resources committee to resign en mass for ignoring all their warnings, but there is as much chance of that as me becoming the next Pope.