Council may sell homes to pay court debt

Welwyn Hatfield faces dilemma after being hit by pounds 48m bill for deceiving developer

A local council may be forced to sell all its 11,000 council homes to pay off a pounds 48m court judgement after it was found to have deceived a local developer over a planning decision.

Leaders of the Labour-controlled Welwyn Hatfield council yesterday went to the Department of the Environment to meet the environment minister, David Curry, to negotiate over how to deal with the debt.

The Government wants the council to sell all its housing, which is worth an estimated pounds 100m-pounds 110m, to pay the court ruling. The council also wants to be able to use the pounds 15m of council house sales receipts which it has in its coffers.

Councils cannot legally go bankrupt and the council insists it will keep operating normal services. However, a large-scale plan for housing modernisation, including the installation of new roofs and double-glazing, has already been scrapped.

Local residents fear the council will be forced to cut back on road repairs and other basic services: "We are very worried the whole place is going to go downhill," one said.

The debt was incurred last July when a High Court judge ruled that the council deliberately withheld information from a developer, Slough Estates, about the fact that it had given a rival local developer permission to let its shops out to the same kind of retailers that Slough Estates was trying to attract.

It was only in 1991, just after both shopping centres were completed, when Slough Estates won a successful judicial review against the decision to extend the planning rules, that it discovered the planning rules had been relaxed secretly in 1987. The company claimed it would never have built the Howard centre in Welwyn Garden City had it known that the rules had been relaxed for the rival centre, the Galleria, in which the council had a stake.

The council considered appealing against the ruling, but it was advised in December that it would not be successful.

That month it also suspended David Riddle, the chief executive, and John Anderson, the council solicitor, while their role n the cover-up of the decision was investigated.

At the time of the court ruling, the council, which has an annual budget of only around pounds 9.5m, said it could not pay. But Slough has pressed for the money. So far it has been given pounds 10m from receipts from council-house sales which the DoE gave permission to be released.

The council feels that if it was allowed to release the bulk of the pounds 16m in unspent receipts from the sale of houses it could reach a deal with Slough Estates. The council is reluctant to try to sell all the housing as it would need a successful ballot of the tenants to do this, and the tenants believed to be unlikely to agree to do so.

David Evans, the local Tory MP, said yesterday that he felt Slough Estates would reach a deal if the council was allowed to use the pounds 15m. Last night Jacqueline Russell, the council leader, said the DoE would give its decision later this week.