Japanese offer County Hall as seat of London government

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The red flag, albeit a new Labour one, may well fly over County Hall, London, in what would be a symbolic final defeat for Thatcherism.

As ministers are drawing up a consultation paper on how to bring about the manifesto commitment of creating a London mayor and a new, all-London authority, the owners of County Hall have written to Tony Blair, the Prime Minister, to offer up to 200,000 square feet of offices in the building which is just on the other side of Westminster Bridge from the Houses of Parliament.

Much of Margaret Thatcher's antipathy to the Greater London Council was a result of its use of County Hall as a visible challenge to her rule, with the prominent use of political slogans and around-up of the number of London's unemployed blazing across the Thames.

Mac Okamoto, the legal representative of Shirayama Shokusan, the company which bought the building after the abolition of the GLC in 1986, says that despite the creation of an aquarium and plans for a hotel in the complex, the building, which still has its debating chamber, would be "the best place for the new mayor to receive a great number of visitors, including those from overseas". The space would be let at a "commercially reasonable rate".

While ministers were privately saying that they would consider the offer seriously, Mr Okamoto's generosity was not received graciously everywhere. One senior Labour source, still smarting at the sale of the building said: "This is just a sign of the company's desperation. They haven't known what to do with the building and hope that we will rescue them. In any case, they still owe pounds 10m on the building because payment has been deferred to the year 2012. There is no reason why we should pull their chestnuts out of the fire."

The government hopes to pass legislation by February next year in time for a referendum to be held at the same time as London's council elections in May. The authority would then start operating in 2000.

However, there are differences within the Government over the size of the authority and the method of electing it. Government sources say that it may have a small number of members, perhaps one from each of the boroughs, but there is resistance to the suggestion that it should be elected by proportional representation.