Elephant & Castle regeneration deal: the £26 million question

Last week Southwark's new Labour cabinet voted to approve a deal with Australian developers Lend Lease for the regeneration of the Elephant & Castle and the sale of the council's land at the Heygate Estate.

On Wednesday the opposition Liberal Democrat group tabled a late motion at Council Assembly (a meeting of the full council) expressing their concern that the deal is "no longer in the public interest as it fails to meet the expectations of local taxpayers or of local residents".

The motion was proposed by Cllr Catherine Bowman who warned that Southwark residents have been "sold down the river" by the new Labour administration.

Cllr Bowman prompted an intervention by the council's legal officer when she told the chamber that Labour had "squandered a £26 million capital receipt" from Lend Lease in exchange for a guarantee of 25 per cent affordable housing on the redeveloped site.

Cllr Bowman was warned that she should not disclose confidential information about the Elephant deal while the meeting was in public session. She said that she believed that the £26 million figure was in the public domain and was being widely discussed in the area.

Sources close to the previous Lib Dem administration say that the deal they were preparing to sign before the local elections in May would guarantee a lump sum payment to the council of £26 million in 13 years' time. They claim that the latest version of the deal forgoes this payment in exchange for a commitment to at least 25 per cent affordable housing on the redeveloped site.

Lib Dems argue that the same level of affordable housing – or more – could have been achieved through the planning process without any need to bind Lend Lease to a particular figure during the commercial negotiations.

The £26 million figure would be just part of a much larger total receipt for the council – in the high tens of millions – for the overall sale of the Heygate Estate land.

Seconding the Lib Dem motion, new Cathedrals ward councillor Geoffrey Thornton told the meeting that the Lend Lease deal is "the result of a rash political decision".

He highlighted the lack of certainty about how – or when – the shopping centre will be redeveloped: "shoppers are confused and traders are unsure," he said.

Cllr Thornton also pointed to the absence of any firm guarantee that a new leisure centre would include all the facilities currently existing, including reinstatement of the long-closed swimming pool.

Responding to the Lib Dem speeches, council leader Peter John said that in May voters at the Elephant & Castle had rejected the "eight years of dither and delay" under the previous administration.

To cheers from the Labour benches, Cllr John said of the Lib Dems: "dither and delay are in their DNA". He added: "We've delivered in eight weeks what the Lib Dems failed to deliver in eight years."

Cllr Fiona Colley, cabinet member for regeneration, accused the Lib Dems of touting "deliberately misleading nonsense" about the regeneration deal.

She insisted that there was every prospect that more than 25 per cent affordable housing could be delivered at the Elephant, and the financial return to the council would match the "previously guaranteed levels and more".

She also told the meeting that Lend Lease and St Modwen are close to signing a memorandum of understanding about the future of the land occupied by the Elephant & Castle Shopping Centre.

Lib Dem Cllr Lisa Rajan, chair of the Overview & Scrutiny Committee, told councillors that the Labour cabinet had failed to ask vital questions before approving the "naive and financially unsound" Lend Lease deal.

Lend Lease must be "thrilled at the deal they got at the expense of council tax payers," she added.

Cllr Tim McNally, who as executive member for resources in the previous administration was familiar with the details of the Lend Lease negotiations, warned that the Labour cabinet had left itself open to legal challenge from unsuccessful bidders for the Elephant regeneration as the deal agreed by Labour does not comply with the best and final offer tabled by Lend Lease in July 2007.

The legal officer again intervened to censure Cllr McNally for referring to confidential legal advice in a public meeting. Responding to shouts from the Labour benches, Cllr McNally replied: "You just don't want to talk about it, do you?"

Cllr Barrie Hargrove responded to Lib Dem claims that Labour has dropped its commitment to the multi-utility services company that is intended to provide green power to new developments in the regeneration area: "We are committed to a carbon-neutral Elephant & Castle. Make no mistake about that," he said.

Cllr David Noakes stressed that councillors of all parties were keen to see a deal agreed at the Elephant & Castle, so long as it was the right deal.

He said: "I hope for my constituents' sake that they will not be disappointed as a result of Labour's rush to sign a deal."

Former council leader Nick Stanton, speaking from the back benches for the first time in eight years, warned Labour against taking too much credit for a deal that had been substantively negotiated during the previous administration. "In eight weeks they cannot possibly have done more than tweak a few clauses," he said

This stood in contrast to his colleagues' claims that the deal agreed by Labour was significantly at odds with the draft deal that was on the table before the change of power.

Cllr Linda Manchester used a sporting analogy to sum up her impression of the deal with Lend Lease. "The Australians: we can't beat them at cricket, we can't beat them at rugby and we certainly haven't beaten them at the negotiating table."