Council Apologises For Its Commercial Property Investment Strategy

Kensington and Chelsea Council has apologised for making money from its property assets to pay for frontline services.

The apology, which is in response to an independent report into four locally controversial property transactions, comes in the wake of the 2017 Grenfell Tower fire that severely dented local confidence in the council’s approach to property (and everything else).

The dispute turns on what councillors have been told is “widespread confusion” about a local authority's responsibilities when it is handling its property portfolio.

Kroll & Associates was commissioned to undertake an independent forensic examination of four historic property transactions at the council. The review focussed on the lease of the Isaac Newton Professional Development Centre; the lease of the North Kensington Library; the lease of the Westway Information Centre; and the purchase from and lease-back of the Wornington Road site to Kensington and Chelsea College. 

Two of these transactions involved re-leasing public assets so that they could gain commercial rental income. The other two involved reconfiguring publicly used facilities to reshape their use and gain commercial rental income.

The Kroll report “shows that previous decisions, in the period from 2011 to 2016, were based on a strategic rationale to maximise rental income so as to support the Council’s revenue base,” councillors have been told in a report.

The report examines the corporate property strategy that was in place at the time of the key transactions, deals that followed a report by King Sturge that led to these properties being declared surplus to operational requirements.

The Kroll report stated that there was “evidence that the transactions were in good faith and founded on the overall intention to maintain the provision of front-line services to benefit all parts of the community.”

The dispute boils down to what a report to councillors calls “widespread confusion” about the responsibility councils have to secure ‘best value’.

“It is not confined to the responsibility for pursuing ‘best consideration’ in the sale or lease of an asset. Instead it is a first order responsibility for ensuring that a broad range of matters are drawn into consideration," the report said.

Midway through the time period over which these transactions occurred, the Government issued revised statutory guidance on best value in March 2015, which explicitly encouraged authorities to involve and collaborate more with local voluntary and community organisations.

By 2014, the Council had achieved some £9.2M a year income from its property portfolio. At the time, senior officers advised that the target for raising income from property and achieving savings could be raised to £20M a year.

The report concluded that “the culture of attempting to achieve best consideration and make the best use of the asset base was ultimately driven by the strategy and the context surrounding the funding difficulties which the Council was under. There were, however, some community groups who felt that their voices were not heard.” 

The funding difficulties were, however, sufficiently mild for the council to announce in February 2014 a fifth year of council tax freezes plus a £100 one-off rebate “thanks to an overachieving efficiency drive.”

“It is clear to me that before 2017, the Council did not find the right balance between financial benefits and social benefits. Too often the council put the narrow goal of generating commercial income above the broader aim of delivering benefits to our wider community," Council leader Elizabeth Campbell said.

“However, those financial considerations should never automatically come first. We fell below the bar on consultation, transparency, scrutiny and policy. We cannot say hand on heart that residents were involved every step of the way, or that the Council put their interests first and foremost, and for that we apologise.

“In short, no wrongdoing does not mean you were doing everything right.

“We will continue to shift our focus so that, wherever possible, we put social value and community interests first, beyond property, and in all we do.”