Westminster Scandal: How bill for empty homes added up to pounds 31m

THE ARITHMETIC
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The Independent Online
The pounds 31m bill that will be fought over in the courts is the sum John Magill has calculated has been lost by Westminster City Council in the operating of its illegal designated sales policy.

"The loss to the council," according to the report, "represents the cost of keeping properties empty, often for long periods pending sale, with consequent loss of rent and rate income."

The bulk of the cost was felt in the discounts given to buyers under the so-called designated sales scheme.

Housing subsidy from central government was lost, rent after sales were lost, the cost of pounds 15,000 grants paid partly to persuade tenants in designated blocks to move out to enable their homes to be sold was also incurred.

There was also the cost of professional staff employed to run the sales teams that sold off the property in key wards for less than their market value; all these aspects have been included in the accountancy of Mr Magill.

The high cost of running the "homes-for-votes" scheme was known to Westminster council. It was so expensive that the policy was abandoned after only two years.

In his report Mr Magill states: "I have calculated that the loss or deficiency suffered by local taxpayers as a result of the extended designated sales scheme is over pounds 31.6m."

When he issued his initial finding in January 1994, the provisional loss was estimated at pounds 21.25m.

Mr Magill calculated that from MArch 1988 to March last year,the council incurred losses of pounds 15.5m by selling designated homes at a discount.

The sales were at less than full market value and Mr Magill notes that "purchasers who were not existing council tenants or who were tenants not entitles to exercise the right to buy received a discount of 30 per cent".

Between 1988 and 1990, Westminster paid out pounds 2.4m in capital grants, effectively a grant to individuals to sweeten their decision to move out of their council home and to encourage them to go and buy non-council homes elsewhere.

The report says: "This released a dwelling for sale under the designated sales scheme or for reletting."

Keeping vacated properties empty was also a very costly exercise. Between 1988 and 1991 Westminster's rent and rate loss, pre- sale, was pounds 0.8m. Security costs alone for safeguarding the empty buildings were pounds 0.7m.

Rents lost after the sales of council homes then took place is estimated by Mr Magill to have been some pounds 7.9m. The loss of central government subsidies for these former council-owned properties is put at pounds 10.8m.

The cost of professional staff was estimated at just over pounds 2m between March 1988 and March 1990.

Those properties that formed part of the designated sales policy were not available to the homeless of the borough. As a result of this the council incurred heavy additional costs in housing the homeless in, for example, bed and breakfast accommodation and hostels. Between 1988 and last year this cost accounts for a staggering pounds 4.2m.

With a reduced stock of rented houses and flats to let, the council lowered its expenditure on its housing stock by nearly pounds 3m.

The total comes to pounds 26.5m. In his new calculation Mr Magill has also included the loss of interest on this sum for the period between July 1987 and March last year. The interest alone is estimated at pounds 5.1m, bringing the total to pounds 31.6m.

That is the sum that will now be fought over in the High Court and beyond.

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