Transcript

75% of funds must be used for local projects and 25% for infrastructure. We're suggesting and proposing some alternative approaches for the 1.6 million. This will still allow for people to convene and vote and will still retain the spirit of PPP. Our first proposal relates to direct infrastructure investments. We would suggest establishing a neighbourhood improvement fund focused on tangible local infrastructure. This could, for example, include voting on local parks and playground upgrades, community facility renovations, street lighting improvements, and accessibility modifications to public spaces. We believe this would provide clear, measurable outcomes and permanent community assets. Thank you, and Councilor Masters will now read the recommendation of the targeted grant program. So, as you say, Chair, targeted grant program, rather than broad participatory budgeting, we would create specific funding streams aligned with Council priorities, which could include youth facilities fund, which could include youth facilities fund, community safety infrastructure, health and wellbeing centre improvements, environment improvements fund. This could provide more strategic alignment while maintaining community input. Thank you, and that now brings us to recommendation three, which is match funding approach, and Councilor Lee Parkway would be presenting that recommendation. Thank you, Chair. So, third proposal is match funding approach, partner with established organisations who can match NCIL funding, such as housing associations, local businesses, and other grant-making bodies. This will double the impact of NCIL funds while ensuring project sustainability. Thank you, and that takes us to consider next to the Hudson and Community Asset Transfer Programme. Thank you, Chair. Number four, Community Asset Transfer Programme. Use the funds to support community ownership of local assets, such as support community groups to take over management of facilities, funding feasibility studies and business planning, and providing capital improvements before transfer. This could create sustainable community infrastructure with clear ownership. Thank you, Chair. Thank you. Thank you. And now we go to Councilor George Garfield to do recommendation five and six. So, basically, when you finish five, if you... I can do that. Thank you. And that will be Commissioned Services Model. Councilor Garfield. Number five, recommendation. Implement a Commissioned Services Model that would identify specific neighbourhood needs through consultation, commission targeted services through competitive tender, and ensure clear outcomes and accountability. And ensure clear outcomes and accountability, which can provide better value for money while maintaining community focus. And the sixth recommendation. That following implementation, recorded outputs cannot be outside of the scope of NCIL stipulations. Namely, outputs have to be physically tangible and measurable in terms of infrastructure delivery. Thank you all for your contribution. Basically, what this means is that the executive has issued in the cabinet paper on the 4th of February a completely different way of delivery and a way of modeling this. What we're suggesting, what we're suggesting, the effect of what our suggestions means that the executive would have to pause and they would have to now remodel and if they take on board our recommendation. So, basically, we're recommending stop what you're going to be doing next year and take into consideration what we're saying. And what we're saying is that if you do it the way, it's with me suggesting there would be value for money and there will be more engagements and maybe more efficiency and effectiveness of the program. So, simply stop and remodel to get a better outcome in the longer term for the people power places. That's what we're saying. Is that agreed by all? Agreed, Chair. Agreed. Thank you. And can I thank you all for partaking in this first aspect of the calling this evening, which is a people power places that was decided upon on the 4th of February. I now bring this meeting to a close and the time is now 7.740. Good evening, everyone. And this meeting of the London Barrier Opinion, Opinion and Spritney meeting is being held at Dockside. This meeting is being live streamed on YouTube. So, welcome to everyone viewing online and welcome to everyone present here in Crocson. Members who have joined us remotely, if there's any, will not be eligible and their attendees will not be officially recorded, though it will be in the minutes. Can everyone present hear me? Yes. Yes. Concern or meeting etiquette, please direct what questions answered via myself as Chair. Please indicate you wish to speak by raising your hands. For the benefit of members of the public when you're speaking for the course, then please and give your name. name may also remind members and officers to speak clearly so that the clerk and members of the public can hear of what you are saying concerning the order of the agenda i intend to take it as presented and having said that this meeting of the london bar of newham ophiris committee is now called the order to air to consider the calling of the carpenters program my name is anthony mccommon member for royal albert and chair of the view and scrutiny committee on my left is the director of corporate services and business support council leadership kennie tendals councillor susan most disease time south and chair of health and adult social care scrutiny councillor carling lee parkway class day south um councillor hudson warden ward council i shall go off your strap on board i would say i mean scrutiny officer uh rachel mccoy director of law and governance wonderful officer conrad hall i'm the corporate director of resources darren macken director of community wealth building for kitson director of inclusive economy housing and culture um um portfolio need for inclusive economy uh councillor blossom young uh bexing ward and cabinet member for housing and landlords sophie carly gallery for finance and grocery and the platform council as said before hey yeah brian i'm sorry i i can see you on my right here my apologies okay thank you everyone um apologies for absence are there any apologies so i've got councillor paul councillor shaw councillor godfrey and councillor marza are we loading those okay decoration of interest are there any members wishing to declare any interest oh only share that the site is in my ward okay um that's noted and we know that no other member has declared an interest and that is for information boxes because it doesn't affect cool yes okay thank you um um thank you very much but colleagues they are um we will be looking at um the carpenters and there's lots of paper um i am mindful that there's some information and the green paper um and we may be asking um questions now we need to um decide when um if there's any questions arising from this paper can we leave it um for the second half of the meeting because i would have to do this in two if you need to ask any questions in the green um paper so that we can exclude the press and the public and then we have the one of the largest um um agenda that i've seen yeah everything here we can do um now in looking this off is that um agree agree okay thank you um for everyone present the way this is going to the meeting is going to be conducted is that the signatories to the call-in which is myself consular masters consular artson and consular lee parkway um are the signatories although we were not already speaking i know consular masters is exhausted but having said that she's never weary of speaking but that was meant in the um the kindest way but how's the master sorry okay right the signatories would be speaking for us to see why we are calling in this um report this decision that was made on the 4th of february after then the signatories would um you are allowed any of us in this room are allowed to ask um questions i don't intend that to be a long process five minutes or so because we need to move on um then we would be passing i would be passing over to the executive the executive would be um presenting no more than five minutes or so to present and then um um script me would be asking the executive questions after that is concluded which i'm hoping that it will be concluded by eight o'clock we would then nine nine o'clock nine o'clock we would then go into deliberation the first part of our deliberation is to ask ourselves whether whether we should uphold the calling if we decide um not to then that's the end of the process the matter and we all go home and have a wonderful night if we decide that we are going to uphold the call in there we would then go into deliberation terms of the recommendation what it is that we would want the executive to do and that will be communicated to the executive at the audience convenience is that to understand that's good okay thank you um very much so i will begin the um the process by asking um councillor or councillor Watson to um be the first speaker and why we're calling in this report um thank you very much um chair um the rationale for the calling firstly there's been an increase of 20 million pounds in costs since september um 2023 um we'd like to know what's driving these cost increases and why these were not picked up in the 2023 modeling and why they were not picked up um sooner we would also like to note that previously um james james um riley point has come to committee i think about two years ago where there was also another 20 million pounds um increase so we really are looking at 40 million pounds increase over over over three years um there's there's a question about how this will affect both the hra and revenue budgets um there's insufficient in impact um information on that in the report um given that james riley point is sitting within the hra account there's the issue about maintenance on existing stock and works on new stock um next question are on the modeling assumptions and there are questions on the modeling assumptions about optimism bias um i will refer you to um in the report um page 36 um big print um big print small print 26 where they're more prudent assumptions and the prudent assumptions um would indicate that the scheme is not viable and there are questions the assumption of um real rental increases of 3.5 over 50 years and whether that is a realistic or viable um assumption um also questions on the assumptions about interest rates and inflation and the effect upon the reserves um has consideration been given in the specification of the homes we refuse to amend the specifications not to reflect unadumpt um current financial realities um generally what is the finance appraisal actually telling us as i said earlier in the main report we i believe there's optimism bias um in section 8.1.5 we have realistic assumptions what's the impact upon um the main balance sheet of newham council and and watch on and in terms of rental values what changes to the financial estimates to the rental values and how can we mitigate this about in the future and that's just for starters thank you councillor lee barfrey thank you chair um so just following on from council hudson so we're calling in this cabinet decision of the 4th of february um on the carpenter's estate regeneration project a decision that demands greater scrutiny greater accountability and the greater honesty with the people of newham this 1.4 billion pound regeneration project is one of the most significant undertakings in our bible's history yet it is in its current form it ranges it raises serious financial strategic and ethical concerns that our council must not ignore we all want to see carpenter's estate restored vitalized and thrive once again but we cannot accept it we could not accept is a plan that is ridded we cannot accept is a plan that is riddled with financial mismanagement weak safeguards and an ever-growing risk of failure today we asked the council cabinet to pause reflect and reconsider before our committee and residence to a decade of unnecessary debt delays and broken promises thank you chair okay thank you director masters um do you enter anything i'm very glad to that i mean i've some slightly different concerns that haven't been mentioned yet um the lack of clarity around how much of it is owned our assets will be owned by popular how much by the council and then also the vacant possession strategy uh which might take us into green paper waters or might not but um the level of risk thank you and i would come in with a level of delay since i was a little counselor carpenters that were being mentioned um and it was going to be regenerated um as long ago as the olympic time and that was a long long time ago and so on it's still um ongoing now we still haven't seen any substantive um progress i know work was done um by the previous administration regarding this and i suppose um that as this current administration is in seventh year is taking an awfully long time for um for us to see tangible results and anything that is delayed for this amount of time cost is going to be incurred and we have seen from a project that was going to be 800 million or thereabouts to a 1.4 million um pounds now billion billion pounds now it is only today the cabinet passed a budget and we in of u.s with me so i'm very aware of our financial situation and knowing that we cannot afford these kind of costs increases so if we're going to do this we have to get on and do it as quickly as possible now one of the um issues with this i suppose is the viability of the scheme as a whole and the tenure currently is 50 50 50 50 percent social housing and 50 um private rented um i suppose there's something to be said about that whether um the executive would revisit the tenure in terms of making this scheme more um valuable and i would end just to give some um context in terms of the cost um in the delay jane reilly point i remember came to us in march 2023 two years on we made a number of recommendations and for this evening one of the questions i would ask is what has become of those recommendations how many of them as the ones that was agreed to be implemented how many of those were implemented and the outcome of those have they born any um fruit but we see the 45 in the james reilly um and then in the carpenter project as a whole we've seen a 320 million so a 45 increase in the james reilly and the entire program 23 percent that is a lot of money 23 percent and those are costs that we can in the effort to bear at this um current um time so we need to um focus and if this is going to be called in um or if this um we're going to uphold this call in then i suppose um something would be said regarding the course regarding and respecting this if we need to just to keep the cost um done and manageable and being in mind it's only today that we consider or um within days we consider that scrutiny is saying cause we think some of our capital spend because we cannot afford to be spending at the level we're spending especially when it's impacting the revenue budget and i'm sure it's going to have some impact on the hra thank you yes okay um before um is there any question for the signatories or for the scrutiny scrutiny any questions if no we then um go over to the executive by way of induction and we give about five minutes or so to the executive um present and then i will ask that questions be put to yourselves so um i think that um may you be i'll do some introductory remarks because there's several substantive points um that have been made and overall i wanted to start by saying that as part of the transparency journey around cards state and indeed our entire homes for noon program and our regeneration screen schemes uh the cabinet report that you've called in is a prime example of us being ethical in our demonstration of transparency and bringing to the fall challenges as are normal in any scheme of this size and complexity i have noted some of the comments relating to strategic financial issues the members of open scrutiny have particularly those that have called it in and i would welcome further clarification as to what is meant by that um but suffice to say the paper in line with our transparency good governance agenda has presented to cabinet a realistic assessment of the net present value of the carpenter's estate scheme uh based on information now known taking to account of issues that have impacted the entirety of the housing sector as it relates to both public and private budget-led schemes as a consequence of cost construction inflation and as a consequence of a heightened regulatory environment particularly as it pertains to fire safety if you note table table just under the section 4.2 on small page i'm looking at six of the substantive main cabinet report you'll known uh you'll note um that it sets out the um viability model um and we can go through that in more detail um but in summary the table transparently presented to cabinet uh on the 4th of february that the screen as a consequence of um issues and drivers around cost uh construction inflation has stayed higher for longer uh as i mentioned uh a heightened regulatory regime as it relates to fire safety uh particularly for high-rise buildings uh but also taking into account of the increased number of housing units um happy to take um through officers some of the specific questions as it relates to implications for the hra uh alongside um the question asked lack of um by councillors and masters as to the lack of clarity within the report as to and i assume the line of questioning is in essence once the scheme is completed who owns the properties and the assets uh popular living is the wholly owned company of the london borough of newham um and its structure um which um has as part of its own governance a board of directors of which there's lbn council representation um also needs to conform to the requirements of the london borough of newham council um i think i'm just going to pause there because it will probably require um some more detailed explanation across some of the specific points that have been set out but i just really wanted to um reinforce that the net present value of the scheme as set out in the cabinet report and in conformity with our good governance uh agenda and being transparent and in line with our strategic intent in response to the housing crisis facing this borough as it is the case elsewhere uh and again with regards to financial efficacy and good use of public money uh we've been very transparent in this report and it also states in the substantive main report um and more further detail in the appendices but there is the ability for the council at a future point over the lifetime of the scheme to maintain the viability of the scheme through um making adjustments to the social rent and private sector unit um private sense private sector units in order to maintain viability this is a situational position as as it is now based on the information that's available to us we don't have a crystal ball we all know that economic cycles are such that you can't look long into the future but we're being prudent we're being rational we're being logical in our decision making if that's a fundamental query that's being raised i didn't quite understand the delays debt and broken promises on the debt issue again i just draw your attention to section 4.2 on the table that is contained within that section and if there's no one that's on the expected one that i have to write that number straight over um this good thing it benefits and i was sitting across the charter but before i've been in contact the charter just for the benefit of the viewing um public especially those who live in the stratford area especially those who um have been decanted from the carpenter estate um this is simply a question we want to know why is it taking so long it's a 28 acre site that has gone through a detailed co-production co-design process with residents as is normal and in conformity to the gla estate regeneration principles and process um it will be remiss of me not to flag that during the period from the point at which we announced in november 2018 that we were not going to proceed with the joint venture proposition that had originally and initially been um promoted and taken to account the 15 years plus delay on the scheme itself when we made that announcement and the paper was approved at cabinet um we began to mobilize our work with local residents and began to engage with those residents that have been moved off the estate but had the right to return and we also had not long after we commenced that process code 19 and we have to pause at the point at which despite covert 19 and not being able to meet in person we continued our engagement online with residents living on this state and it will be remiss of me at this juncture not to cite the 73 42 percent approval of the outline master plan that we managed to achieve once we took its ballot the residents remain engaged there is the activation on the estate through meanwhile projects and we've also opened up a well used and flourishing community and space for local residents to use and can i just ask quickly in terms of a private development of this scale would have taken this long i suspect it would have taken this long and probably would have taken longer i think if there was a public private partnership that was focused on a complicated estate generation project like carpenters which included a master planning process complicated commercial process and land assembly in other words um seeking to acquire people's homes and um following all due process you need to then evidence seems to show chair that this generation projects do take this long uh from looking at similar projects around london and elsewhere we're kind of not familiar with they tend to take 10 to 15 years to really get some momentum and there needs to be balanced up between uh allowing everybody to participate fully in the process and then getting to a point where i think you're hinting at with the rat at the moment which is once we've decided to do something to really move the pace to minimize the inconvenience but i personally haven't seen much difference between either holy council led or a public private partnership in the length of time these projects come to fruition um okay thanks for um that response because delay means cost implications and one of the thing is is that um um we have seen the course mr james reilly point and i think consular hudson alluded to that when james reilly came to um call in in 2023 it was moving from 58 million if i remember to 78 million at that time we thought that was enormous and we decided it must be called in um except we called it in then and now it's gone by another um 20 million and what is known now that wasn't known in 2023 and i suppose that question goes um and i know construction costs goes up but apart from construction costs and if it's going to take what you say in terms of 10 15 maybe how many years um i suppose there is enough there are enough industrial experts out there who are going to say you know what if this is going to cost because um because people model these things all the time it's going to cost x amount to do this so that we can get our modeling as near enough right as possible but then just keep going up um yeah so the question is what is it that we know now that we didn't know then because grenfills had happened before so we know there would have been fire safety and all this stuff and we would have had to improve our respect so in 2023 we would have known all of that i'm happy to come in and respond to that question thank you and i think the key table in the um the cabinet report is at 4.52 people want to go to that in the report so yeah like you said there was an increase from 2023 september 2023 to the january 2025 cabinet paper of 20 million pounds the table sets out the main cause of that and and you've mentioned two of those causes already councillor inflation in the construction market has continued to rise and therefore that's continuing to impact on the cost estimate because we haven't signed the contract for this yet obviously because we haven't had the approval from from the cpo or from cabinet yet to do that the regulatory changes yes they were expected anticipated but they didn't feed through into what that means in a practical sense for the design of buildings until around september october 2023 and that's been factored into the rejig slash reprioritization of the of the delivery strategy that's been going on for the past 12 months between popular and offices in the council so that's the sort of top level um 10 million pounds so that's half the cost that's out in that table the thing worth knowing generally is that in the same period we've had conversations successful conversations with the gla and the gla have agreed to uplift the grant unit the grant rate per unit so the actual increased cost of the council which is set out in table 4.51 the table directly above the net additional cost of the council is 400 000 pounds compared to the position we were in in the previous cabinet report thank you so can i try to then i just got two very quick questions and can i ask that john daly introduce himself yes sir um yes john sorry i missed out on the instructions i'm john daly i'm a finance manager within the finance department specifically employed to uh provide financial support to the three estate regeneration schemes carpenters county town and custom house thank you thank you sorry as another question was i think may you mentioned that we have representatives on that board and i know on poplo and i know that this has been the discussion of audit previously could you just remind us who new representatives are so presently it is down mackin and we have one vacancy that we're currently recruiting to uh and that process was paused because we were going through a recruitment process it's relating to the chair of the popular living quarters and and that's an advisory position um you're not listed at companies house okay should you be i guess that would be a question for out there the board secretariat within i mean i should follow up on that point so i think you should because it speaks very much to the issue of liability and and the relationship between the two so yeah yeah that's my only question chair thank you okay um my question is on on the assumptions and and and the rate of interest um normally if you're doing an mpv the most sensitive figure is the rate of interest broadly to lower the rate of interest to hide the mpv to higher the rate of interest to lower the mpv or other things being equal now the now the reason why i raised the issue about the differential um rental increase is that a differential rental increase differential inflation rates has the effect of lowering your real rate of interest that you're using to appraise the scheme so when i see an assumption that the real rate of rental increases is 3.1 as assuming that if you if you applied the assumption let's say for 20 25 years broadly you'd be paying 60 50 to 60 percent of your salary in terms of rent which clearly i know you're talking about this is a long-term model oh yeah yeah clearly that is not a that's not realistic now i know that in all these schemes um they use 3.1 but if you applied 3.1 let's say for 10 years and then a more realistic rate will you get a negative but i'm just really concerned about the paragraph 8.1.5 which is your sensitivity analysis um because clearly 3.1 over 50 years is unrealistic clearly and you're you're you're directing everyone to table um below 4.2 which just shows positive mpvs but what i'm saying is that with more realistic assumptions you've got negative mpvs and that has an implication about the long-term effect upon the cost of the scheme and the viability and as we know that newham council in the next three years um isn't a particularly healthy financial position can i sponsor so um i think you've raised a really important point um so uh the and i'd like to introduce john in a moment to talk about his general approach to the um cash flow if that's okay just to sort of bring it to life a little bit but for a very long-term cash flow involving a large number of homes so many tens of thousands or hundreds of thousands of square feet of space um small changes to any of the inputs can make a considerable difference so you've raised a really important point so the way and the way that you have to then triangulate and decide which inputs you put into those cash flows is um is uh partly involved by professional experience it's partly by looking at comparables it's partly by making sure that you've got the right consultants on board with the right professional identity insurance to illustrate a range of different ways that those inputs could pan out ultimately for any organization making investment decision whether it's a public or private body it's making a judgment based on risk across the sensitivity of each of those variables and the range of different outcomes that could happen so you've raised a really important point and the scenario that you've pointed out is one that could happen equally it could be the costs level off much sharper in relation to the rise in rental income for example lots of things can change there and move around a bit and so any board that is making decision or in this case scrutiny uh cabinet are exercising judgment based on professional advice and essentially that is what the council's faced with doing at the moment using the information in front of it but maybe can i invite johnny to talk about because john's been responsible for that model and managing some of the inputs just to bring it a little bit but that'd be okay yes thank you paul yeah just to say this as noted in the appendices this is a sex model we've done together between the council and poplow to determine the viability of this program every time we do a model we have extensive discussions with with popular and their consultants about them how realistic their assumptions are we use jll leading consultancy for rental values and increases and we've now changed to quantum for the construction cost information now it's a process of iteration poplow provide the information to um an independent modeler it's modeled through art the argus development software which is an industry standard model that for these types of long-term development programs estate regeneration programs once that information comes back it's reviewed by child reviewed and challenged by popular then it's reviewed and challenged by me in terms of the due diligence of checking it with what we know what previous assumptions have been what's changed in terms of macroeconomic assumptions around inflation and interest rates then we then we go back to the modeler ask it to be remodeled we probably this one we probably had about six or seven different iterations of the model while we've said is this realistic is this correct are there errors errors in the modeling should we be using different rates of interest have interest rates changed um as noted as a result of some of this we've gone back and looked at rental value increases and said is this still are they still realistic challenged them we go backwards and forwards in terms of what the local market's like so there's a lot of work where we challenge the assumptions and after all this work we consider that the assumptions in the current model are realistic based on what we know knowing well what we know in december of last year which is when the when the model was finally completed so there is a lot of work there's a lot of review and a lot of challenge of these numbers to make sure they reflect the current position yeah just perhaps one particular point to add just on the the rental point when obviously we don't know what's going to happen in the future you take assumptions and so on and one of the points of doing that is of course then to be able to change tack as events change just because a particular point was raised about mental income you know it's worth making the point that for instance over the last 34 years i think since 89 to 2023 the average rent rate of rental inflation in the uk was 3.7 so it'll be higher in london you know just as a sort of illustration i mean you know john has talked about the process is gone so is that nominal or real just to illustrate a practical point about uh you know how the rates um you can compare with with the other data that is uh that is uh sorry to track you was that nominal or real i can't believe that real interest i don't believe that real rental rates have increased by over the last 30 years yeah but that's the point i'm making is that the differential um rate of inflation because if you use the differential rate of inflation it reduces your real rate of interest and makes your schemes more viable thank you is there anyone else i've got one other question yeah it's about um 8.41 which is small page 30 um big page 40 and i've got just three three years ago we had a 20 million pound increase we've got another 20 million pound increase and you're looking for approval to do the works around this one leaseholder who isn't going to move and that just strikes me as a risk element for further cost increases and that's one of the things that you're looking in the recommendations that you know you're going to crack on with the works and so how are you going to manage this risk given um you've had a problem about managing all the other risks which led to a 40 million pound increase over three years um yeah thank you for that um so yes you're right the the strategy set out in this paper is addressing the situation that we're currently in and that is the fact that one of the leaseholders is still in possession of the flat the secretary of state backed our cpu order this time last year in fact this week last year and the leaseholder has appealed that and the appeal hearing is now scheduled for the first week enable so it's still our intent slash um hope that that will be resolved and we'll get full vacant possession of the building and we'll be able to commence the first strategy for the enabling works which would not require this exclusion zone for this one flat this is the strategy we're putting in place in case that doesn't happen so we can continue to progress if for any reason we don't get that possession of the flat the contractor's strategy is to build around it and to work around it those leaseholders are not occupying the flat they're in temporary accommodation that the council is paying for at the moment so the works could be done on their flat and then they could move back into it as per the landlord offer okay um thank you um in and i'm looking for the last two years ago recommendations regarding the james riley point can um i have it here i'm not finding for my ipad but can we um can you tell us in terms of those recommendations the recommendations that were accepted in time what has been done um about you yeah so chair i'm not sure we do have all of that information to hand we come back to you the written response very quickly but we don't have those answers in front of us my friend okay and in terms of the modeling i take it and we've seen um i think you've modeled the npd on a 5.5 percent over the period and i'm left to believe that there is a development of rate and there's also rates that we can um would be boring at are the rates different um is our 5.5 rate the rate that we're going to be stuck with throughout this um figure is it likely to change and then what is the development interest is it normally higher than this 5.5 yeah so just in terms of the council's ability to borrow from the public works loan board which is the body that uh enables uh which it is available to local authorities to borrow from uh they have a slight discount uh to their uh their rate for approved local authorities of which we are one but the kind of more important point really uh again 5.5 is uh the figure we're using current modeling that's not inconsistent with long-term interest rates it doesn't mean that we borrow uh all of them at that rate uh we will borrow as and when we need it uh so as rates go up and down you know different rates will be entered into obviously within that you can then use some sort of more complicated uh issues around uh fixing options for future rates and so on uh uh but the point to make is that's uh that's the current uh rate that we're using it's consistent with long-term interest rates or broadly so anyway uh but it doesn't mean that we all lock in uh all of our borrowing out that but uh obviously rates then may do something bizarre and go to 15 in the next two years you know you would have a huge problem just as if they went to back to one percent as they have been for the last 10 years or so you would be in a much more advantageous situation so there's always a balance in that about whether you uh commercially at least you would look to borrow sort of to offset some of that risk so sometimes if rates were ever to be advantageous for example you might take on borrowing before you simply needed it in order to lock in that rate there are restrictions on local authorities borrowing in advance of need uh in that way so generally you have a bit less flexibility than commercial operators for that 5.5 percent is sensible long-term consistent rate the actual borrowing will be at a different rate to different points in the program thank you and is there any um other member i have a couple of questions just based on the papers of cabinet so the papers in capital cabinet talk to this project being extended from 11 to 14 years i guess my question i want to ask is has the necessary financial measures and and um forecasting been put in place for the next 14 years do we have exact figures or as exact as we possibly can get um going forward or are we going to have the same conversations next year of another 320 million pounds increase in cost or borrowing who's best to answer that if i may just i can do an initial response and then perhaps i can post it down and then comrade um you will we will always be bringing as part of regular good governments reporting progress updates on the carpenters scheme and as i said in my introductory remarks uh this cabinet report um sets out um in a transparent way the position as is based on an exacting understanding of the information that we have turned and you heard john daly earlier around the interrogation across a range of issues as it relates to arriving at viability assessment of the scheme and we will continue doing that in order to provide assurance to myself as the mayor and the portfolio leads and wider cabinet as we go through the progress on the scheme because what we haven't set out from the outset is to sign off a scheme in its entirety we're doing it as a phase by phased approach and that's the safest way in which to do it in order to precisely mitigate against some of the concerns that you're raising through your questions and i'll if i can chair pass through to darren just add on on to what the mayor is saying there um as these schemes progress into more detailed design you do get increased certainty around costs and obviously over the long term there'll be other factors that might also change so we're like them i said we're taking assumptions we know now based on advice from cost consultants advice from industry practitioners and making assumptions but yes we'll review them and they may change that's that's the nature of these sort of projects um all financial decisions that come before cabinet will only come before cabinet if they need to be a viable proposition sorry if i may just to add um it's important to also point out because this is something that's consistently applied all of the assessments as it relates to viability and build costs are benchmarked against every other similar london scheme um in order to ensure best value for money so we're not just drawing things blindly we are looking at comparative analysis across other similar schemes problems thank you and just to um keep members appraised of the time we have less than 20 minutes from the department so david it is david isn't it david so with the with that in mind what you just said let's go back to 2018 was that same approach taken then is that why we are in the position we are today because i i read the papers talked to 1.4 billion that's not what was previously you've got to be praised of your own projects haven't you surely i can i can certainly start coming on that i think um then paper sets out some of the factors that have increased uh and impacted on those changes since 2018 and you know some of them are quite unexpected pandemics war in ukraine so that is quite an atypical period of growth but it has impact on construction across across the piece so if its external factors can come into play and again it's one of the reasons why these things are kept under review so would that so would we say that back in 2018 and maybe comrade i don't think you was here at that point um but maybe you might be able to speak to it would you say that back in 2018 yeah 2018 the the rights contingency was put in place for this specific project uh so one of the points that i just wanted to make before i come to that this sort of 1.4 billion figure that we've been talking about showing in the table and of course it's varied from the 2023 one just to emphasize a lot of that is uh notional or assuming future borrowing and obviously you know there have been some actual cost increases to date uh but you know most of what you've got there uh is just assumptions about how the model will play out uh over uh future periods of time i think back in 2018 and i joined in june 2019 uh when i think the work to mobilize this was kind of getting going i don't think you could say that the assumptions made back then were unreasonable the point being that at that point you hadn't yet won the ballot you didn't know exactly what you were going to be doing wasn't clear what the master plan or the planning application would be and so on so uh the assumptions were necessarily uh don't say less reliable because you know they weren't intended to be wrong they were intended to be broad rush assumptions as it's been described you uh combing these down uh through each individual phase of the project in order to get greater certainty at particular points so it wouldn't be fair i don't think uh to say that those sort of unreasonable assumptions made then at all but they were necessarily more broad rush more high level subject to this future assignment yeah i do have another question if you don't mind chair as i don't think there's anyone else um just thinking about the whole project over i guess one of the things that i'm thinking about in regards to the carpenter state and i said it within my introductory remarks none of us don't want this to happen it's an important piece of work that's happening in this borough for the people of this brother but i think about in 14 years from now how many more people will be on the waiting list and i wonder when will the first person move into that that new regeneration state when will there be the first person that moves into that space do you have any idea when that would be if we're doing a phased approach because you talked about earlier about big master plans projects that happened over many years and a big master plan would normally take 10 to 15 years we know that um but this has been going on for a really long time so when will there actually be a living person on that state that will be able to enjoy the fruits of your labor so that are the two and a half to three years two and a half to three years thank you okay thank you just just a very quick question um last january january 2024 there was a report to the audit committee about uh poplo and there was a commission an audit was commissioned externally um highlighted some issues around governance and operational management that piece of work was due to be refreshed and come back to the committee around about the end of the year so we're still within scope paul are you aware of that work um so i'm aware of ongoing work being planned to review governance structures operation efficiencies and so on the popular are currently undertaking internally yeah and they've got a new chair of course to joined in july of last year who was formerly on the board who was formerly on the board anyway so new chair uh they've done some internal work and they're also agreeing specification to have some external validation on compliance and governance issues to look at reprushing their governance work so uh i think what i see there from a shareholder perspective is an active approach an inquisitive approach to thinking about governance is reliability is it fit for purpose at the moment and so on they've been a long time thinking about this i know they're not expecting you to be on to that can i just check do we know if we've commissioned as yet that piece of work because we did agree at audit for there to be another look at them uh i'd need to check exactly where we are with that uh i mean it's with the internal audit service it might be hayley you've got an update where we are with that and the plan the reporting i know it's in hand i just don't know the exact date but we will so we've been contributing to the update over the last couple of weeks so it's an external it's an external audit well yeah an external internal audit so the internal audit has been commissioned extensively yes yeah and there'll be an update to the next audit committee i believe okay but is the work that's coming out of that being taken into account in your planning and the weaknesses because it looks like we're repeating the same issues again not just only from james reilly point but only from where are we picking up any of the learning from any of the audit yeah i can't i i can't comment on the specifics i mean the same mistakes again i can't comment on whether you think they are exactly the same mistakes again the i mean if we look at the cost increase on jrp for example that darren's run through it's interesting to note that the gla have increased their grant contribution towards our project because of that cost increase and the gla are doing that across a vast number of projects across london that have also experienced cost increase um so their average grant rate per home it has been increasing and they've been very flexible about that because they want to see affordable homes delivered i think part of their program so i can't speak because i'll show them about whether that's repeating the same mistake what i see with the cost increase over the past 12 months 14 months is something that's happening in london and other schemes and has been responded to in a similar way by the glo thank you um can i ask um or can i say before i ask my question um viability of this project is important that we made we need to maintain viability um we also know when i'm a project of this kind with cost when we don't have any control over cost and interest rates and all those things so they may of course may and continue to rise and which would then be a burden now um have we considered and have we done before are we um are we going to consider the spec of the properties because i know sometimes builders if you visit the specification and um and then i make specification amendments to maintain the viability one of the when i spoke earlier i also said the tenure because right now it's a 50-50 um and we um consider that in front to maintain the viability that we look at and revisit the tenure of this and scheme etc and can so can you give an answer to those two i'm happy to come in on that i think on the on the first point um in terms of the specification that links the answer i gave before as the designs become more progressed then that's when you get more certainty over how you're going to build the thing and how you're going to fit it out so absolutely yes there's a focus on value for money what we've presented in the uh viability modeling are assessments and um projections they're not costing not you know contract prices this so yes there's absolutely focus on driving that through the the program and actually the example around grp um and the value engineering on jrp is an example of where they've been able to remove some of the costs for going through that value engineering process so you take that through as a discipline in the project and i think on the wider point we've said previously that the council has set out the master plan and the certain assumptions in that master plan but the council retains control over that it also retains control over the investment decisions so there will be opportunities for the council to think about tenure mix and other things that could impact the viability as the program progresses thanks chair i have a query regarding how long it would take or how much it would cost in additional expenditure before alternative models are explored because we're now half a billion pounds more in borrowing from the initial model and i appreciate that a lot of what you've described the things that you say are out of our our control and without being too shy it does lead one to question what is in our control but certainly after the mini budget in 2022 we knew the cost of borrowing was going to accelerate we knew that as a result of the war in ukraine construction costs were going to balloon and that at some point you're going to have to potentially look at different models of funding for this scheme i also appreciate the length of time it takes for a project like this to really get off the ground and get you know diggers into the ground for it but you know i i have the luxury of memory having been moved off the estate when i was a child in order for construction to begin on every generation and i celebrated my 30th birthday last month thanks again for the birthday wishes everyone it has been it has been a dramatically long time and i appreciate the process was ripped up and restarted in 2018. perhaps that was the right thing to do but certainly for everyone that has lived there at this point in time seven years beyond that i don't think it feels like it was the right thing to have done so i query how much more or how much more time not just money until we reassess the different models the different funding models the different partnership models to deliver this without borrowing at this rate ongoing because i worry that by the time our successes are sitting here the only thing general fund will be paying for is temporary accommodation and this interest because there'll be no other money in the budget and we simply cannot leave that legacy for those that precede us because the project is too and we were once told in this committee nothing is too big to fail i don't think we want to see this fail but i think we at least need to hear that there will be a consideration for another model if this rate of borrowing has to continue okay if i may answer we have about five minutes more and and there were two more questions to come so i just want to keep members of the price of the time thanks i wanted to kick off by way of response and then i'll pull in officer colleagues look the model that we're using is a cost subsidy model it's a proportion of the scheme will be let at private rental levels in order to generate income to over the period of time of program scheme faces completing pay for that borrowing obviously as each phase progresses we will look at the situation as is because we're really clear also that we don't want to expose unnecessarily the council to an excessive borrowing exposure the risk that that entails so it has always been the case that we would look at viability of the scheme as an ongoing feature of our management of this scheme scheme that doesn't preclude us being blind to other models but the cross subsidy model on a political point and on a rational logical point allows for us to deliver what locally our residents need another colleague on the committee talked to how many more years will it require for residents who are on the waiting list languishing it's 13 14 years barking in zagland it's 23.5 years on the waiting list waiting for a council home we've got to balance those two things and then finally i just wanted to pick up on the point that the residents living on the estates are disillusioned and are feeling fatigued they were certainly feeling fatigued and disillusioned pre-2018 may um yes it has been challenging as it would have been with any scheme during periods of um pause because of covert 19 but actually if you go to the scheme the work that we've done around milmore projects there's a real sense of optimism and excitement and managing expectations as well we've never been dishonest about how long this is going to take paul darren anything else through the chair on financing models yeah so can we do that in less than a minute just uh really quickly on a very narrow point to understand the point you're making more broadly about the overarching program but if you look at some one of the questions we have asked and popular have been looking at obviously is of the increased costs jrp for example has it actually meant that that's more expensive than starting from scratch there's a table in 4.56 and 17 we've been very keen to make sure that popular are continually examining that that we're not following one path because we think that's the right path and not the appraisal option at the moment it's still more it's still advantageous to refurbish for two main reasons it's still showing that it's cheaper than rebuild and also there's the embodied carbon uh and zero commitment that the council's made so for those two reasons it's still cheaper so it's financially better and there's a broader environmental case but if that stops would you consider the alternative oh well it's inherent in what i've just said that we are absolutely looking at options throughout the projects just really briefly on this point about borrowing i think the model at the moment like all these models depend on uh private housing to subsidize the cost of the social affordable housing this model is constructed on private housing largely for long-term rentals clearly uh what we could switch to model with more sale and that's rental and that reduces your borrowing requirement and introduces a different set of risks you know and there's this opportunity on these which is why again at each point of decision if you kind of model on one basis doesn't mean you actually have to do that at each point in time you can choose to change if the conditions are appropriate for that um thank you very quickly i've got a couple of questions um yeah i've got a couple is there a weakness in the procurement of contractors and consultants um and that is on big page 28 um you procure you procure a successful contractor who subsequently went into liquidation so it it does raise a question about because normally when you enter into the procurement process there are certain checks which i assume that you would do and um there was a cost consultant and he says former cost consultant who got the numbers wrong which which raises the question about the competence of the procurement of of these issues so that may be a couple of recommendations but certainly that does seem to i have come across in one of your reports that you sent through on a regular basis about cost overruns and the affordable housing program where another contractor went into liquidation so um maybe that's something for the recommendations that that they can look at and given the size of the program if there's a weakness in your procurement program in you procure contractors and consultants that would send a shiver down my spine i would have thought um i think my other question was about um where the units are we recently um got a c4 rating would that in any way affect carpenters or the carpenter's effect back in terms of the hra so it's a it's a really good question and actually the the refurbishment regeneration and the provision of new homes should be seen as part of the overall mission that the council has to do to provide safe warm efficient homes for everybody and actually it goes without saying that the more new stock there is then the greater the average condition is of the overall stock as a whole so i think carpenters played a hugely important role in that in the hra business plan that was um signed off in october at cabinet uh the first phases there is a financial in that plan for the first phases of carpenters included in there and i will come back to talk about the amounts in there and so that's a distinct element under the regeneration and a new build element of the hra business plan there is still um around about a couple hundred million across three or four years of capital investment going into existing stock and that is around decency around kitchens and bathrooms that we signed off for the week of course it's around um some of the firework which is the fire doors program that will sign off again in the in the autumn and there'll be more uh more coming it the hra business plan will be refreshed again in the early summer as we take stock of increasing number of stock condition surveys that we've undertaken on our properties so that we start to understand the aggregate form and aggregate issues across our stock more and more and more but there is a considerable amount of capital within the hra business plan both for regeneration new build properties and uh for stock condition improvement whether in future the council then may decide to move more money into stock condition rather than further new build is a question for the future chair that the council will have to face at that point but at the moment both things are budgeted for in the hra business bandit was signed off in october so in the near future we might likely to see any changes in terms of delivering on our c4 sorry sorry do you want to take that i didn't with c4 we have to deliver on our c4 of course we do absolutely and so are we are we likely to see any changes in the immediate changes in terms of carpenters or in terms of no because the question was whether it would affect carpenters or carpenters affect that both things both things are budgeted for in the hra so basically what you said to me we will see any um because they're budgeted for us i said they've both been budgeted for us in the future the council may decide it wants to shift the pot in the hra that is for regeneration including carpenters and new build it may want to shift more into current stock it may decide that's fine at the moment considerable capital is available for uh solving the problems our residents face in our properties and also regeneration thank you and rita and i am going to be closing this rita josh and carlin it's not three minutes past nine we do start with good intentions and then we tend to make you creep away so there's three of you and then that's it just a very a very quick question chair um and i'm sorry to keep going on about governance issues i think previously we've been told that the and maybe i'm not sure if this is a fair question because maybe it needs somebody from poplar to be here was nobody from poplar able to attend tonight it was determined that because this is the nature of the calling and because of the shareholder relationship between lbn and popular it was appropriate for the principal officers within the council okay thank you in that respect are they on target to deliver their business plan to you in march you mean to cabinet yes yes are we sure about that it's expected to go to cabinet in march yeah okay and so in that respect how much you're you're the representative as the shareholder how much early warning do you get about overspending so that so yeah i suppose i could speak a bit about how we work with popular through our client and function within the council so for example every month my team meets with the popular development team and runs through kind of project updates which include financial data and then that will flag for example overspends to officers of potential overspends to officers that is how you interface with the yard department am i correct in saying as a board member you are asking the question as a board member presuming you are acting as a board member at what point did you realize about the financial situation so in terms of the carpenters yeah so they again it's a similar process being on the board there's monthly monitoring reports on the progress of schemes that include financial information the particular um issues around grp started to emerge around autumn 2023 they're reported again monthly to the board as part of the board's updates on progress and schemes sorry i misunderstood the question okay i'll be very very very quick just a question of good practice i would have hoped that the business plan for popular would have been presented before people agreed the budget i'm just looking at the numbers in the capital report for spend on popular and members or backbench members have had no real detail and that detail would have been contained within the popular business plan i did i did i did great great in budget working party can they be encouraged to bring in future years to bring their business planning forward that could be a recommendation i would have been over the hood will be an instruction to out to a holding account for the council sure okay but it depends it depends whether you treat us with respect and then that's it i think josh as well right i didn't notice you um josh but i'm going to allow you again um i guess i have just like an overall question in regards to transparency and accountability so reading on the papers that we received listening to the commentary i guess ultimately who takes responsibility for any further delays and overspending and what does that look like for the residents that at some point will benefit and i go back to the the increase in time from 11 to 14 years how do we know that's not going to stretch and then what does that look like for the council's exposure to the economic uncertainty for prolonged periods just the reality in this is this is a we're working in well you guys are working in a very difficult set of circumstances where economically it's difficult i just i can't see i can't really see the answers in the papers as to who ultimately holds responsibility for this and if i may okay so i'm going to respond in part by reflecting on the impact of the stop start stalled county town custom house regeneration and the impact that that had had on the communities living in the south of the borough who had felt for a long time left behind as a consequence of the decline of the docks and it was really palpable and i think that certainly has informed um thinking around co-production co-design and ownership of these place regenerate place visions and regeneration schemes and i think it goes back to an earlier comment that i made around managing expectations and being realistic and also one of the things that we did very early on as part of our framing and our approach to the carpenter's estate which we've replicated as a practice model across our other two schemes is one don't treat our residents like they're idiots don't be opaque be transparent enhance their literacy through the co-design process around these things and these features are are real life features in any significant estate regeneration program and they could happen because all of a sudden as consequence of a number of conditions coalescing all at once for a local authority um it could require at the point at which a phase has already been completed another phase is midway you basically try to complete that phase but the rest of it has to pause so it's about the on honesty around the weaknesses well the challenges of these schemes the overall responsibility is the executive mayor of knowing myself as it relates to ultimate decisions made and also the organization as it relates to officers that provide the advice on which we make sound um decisions as part of normal decision making process progress progress but i would also like to think and i believe in the context of things not panning out as they were intended from the point of which a cabinet decision was made and again talking to the transparency point and the reporting against progress that we are being transparent and we will say these are the reasons why why this is um progressing as we had intended as is in this case thank you thanks chair um councillor ali ultimately you have the political responsibility for the governance of the finances are you satisfied both with the governance concerns that have been raised regarding popular expenditure the borrowing for the projects its longevity its delays and that it will deliver on the priorities as you see fit from a purely financial perspective are you satisfied as the member of the finances that this should go forward as is well thank you very much for bringing me in joshua well clearly this is as we heard it's a big project it's a long-term project and projects of this nature do take time and there are usually hiccups on the way and clearly we are driven by various external factors we talked about the economic uh the issues we have in ukraine war the highest inflation the interest rates etc and um it's we need to look at from a perspective that this is a big project that this council wants to deliver and yes and on the basis of that there is a a recognition that we are going to see some peaks and drops and and and some challenges as well and the construction costs are something which are really really variable and you can see how marketplace i know you mentioned the way the contractors have been bankrupt so that's a clean indication of the economic scale but i of my perspective i have full faith in uh my three corporate director of finance and his team who have been extremely vigilant and we're giving an eye on broker and his business plan his financial activities and i've been really sure that we are working to a incredible uh position and that is so i'm reasonably satisfied that based on the situation we are facing and the challenges we have externally we are well within the good governance structure that we have uh been working through just to clarify on that answer counselor are you are you saying you're satisfied with delegation to section one one from one of the south i'm satisfied with finance i'm satisfied that we are working extremely well within the existing government's arrangements financially and this project and its viability is a within three minutes we can do despite the time we have some hiccups along the way okay thank you thank you so and this brings us to the end of our evidence gathering session we now move to the next stage on the next stage we can um resort to take note for the action or maybe for decision back to the decision made and what we are going to do and i'm going to ask the witnesses um to leave and within five minutes we would someone would come out with a white smoke i suppose or have the black smoke whatever it is to tell you whether it's been called what color is okay so within a few minutes we decide i'll let you know thank you everyone um we the overviewers with me committee um have completed our deliberation and i've come up with the set of recommendations so the meeting the calling meeting to review the decisions of cabinet of the carpenters estate that was made on the 4th of february is has not been reconvened at this stage i would ask um the clerk to read out the recommendations um and then put it to the committee for a vote thank you chair um first recommendation uh to commission an independent uh financial review and review of tenure of all possible strategies for the financing for the whole of the carpenters estate to be presented to cabinet and scrutiny but this is to be conducted in parallel with um existing build including and continue to build including sale or public private partnership of the whole carpenters estate or part there all the second recommendation that i have is uh to uh to commission a governance arrangements review um the uh including uh the membership and board yes yes thank you um uh including uh greater representation of newham officers and members uh on the board um the third recommendation that i have is for there to be an internal audit review of the procurement process in uh affordable homes for newham program sorry carpenters uh and the fourth recommendation i have is for there to be a comparison between uh the affordable homes for newham and popolo um uh for return rate of investment and return of investment have i got that yes thank you so um please um the consensus of um the deliberation is that we all want to see um carpenters estate um progress it's just how um in terms of the finances and the governance is which our recommendations um support um too so and at this juncture i would ask you do we all agree agree okay thank you very much and can i now thank you all for i'm sitting through two calling meetings the time is now 21 58 and have a good night everyone thank you