13 December 2017
The Canal Corridor North - what’s wrong with the scheme and how could it be done better?
North Lancashire Green Party Report, December 2017.
This report is an assessment of the scheme as proposed to Council on October 31st 2017. This report was exempt, which means that councillors are not supposed to release details to the public. However, given that the City Council released some details of the scheme in early December 2017 (https://www.lancasterguardian.co.uk/news/business/250m-lancaster-development-gets-green-light-from-councillors-1-8834704), North Lancashire Green Party feels that it is morally obliged to release some of the alternative arguments.
Note also that Green Party Councillor Jon Barry challenged the exemption ‘gagging order’ on October 31st; however, his proposal for the debate to be held in public was voted down by the Labour majority on the City Council.
This report does not contain all the detailed financial information – thus, we do not believe that any of the information below is commercially sensitive. The scheme will be considered again by Full Council in 2018 before a final decision is taken. We recognise, of course, that the proposals in the scheme may change from those that were in existance on October 31st 2017.
Cllr Jon Barry said:
“If the City Council is to invest such a large amount of public money into the canal corridor scheme then there should be a public debate as to whether this is the right thing to do and whether the risks are acceptable to taxpayers. We will not be gagged any longer – the public has a right to know what is being done with their money.”
“My view is that rather than relying on a company with many of its assets controlled by off-shore companies, the City Council could easily and quickly develop a public-led development of the canal corridor. This would have much less risk for the Council and would result in a scheme with real financial and social benefits for the city.”
The scheme currently proposed includes the following
The problems with the scheme arise when you start to look at the issues in more detail.
Financial risks
The City Council is currently set to invest £25m into the scheme. To do this, it intends to borrow £19.5m over 50 years and then pay interest at an assumed rate of 3.5%. The Council is assuming that it will generate 7% profit from the scheme for the next 50 years. This is to offset risks with the car park and the arts hub. If this profit level of 7% is not achieved then taxpayers will have to pay any defecits.
The two riskiest parts of the scheme are the underground car park and the arts hub. The City Council has been persuaded by British Land to take the risks associated with both elements. The City Council will have to undertake to pay rent for the car park over 30 years. This rent is expected to rise on an inflation-linked upward-only rent review. If the car park is under-used then the City Council will still have to pay the rent. This is an exactly analogous situation as occurred with the indoor market. The City Council rented back the building from the developer and was stuck in a 99-year lease. By the end, the City Council was losing hundreds of thousands of pounds per year. (see below for more detail on the indoor market debacle.)
The financial situation with the arts hub situation is similar to the underground car park. The City Council will have to agree to pay rent back to the developers, again expected to increase each year on an inflation-linked upward-only rent review. The Council will have to hope that the organisations within the arts hub generate this amount of profit. Currently both the Dukes and Ludus rely on significant grants from Arts Council England and the city council to break even.
The combined rent envisaged for the arts hub and the car park is £1.5m per year.
Risks to artistic integrity
The arts hub is an extremely attractive proposition for a city the size of Lancaster – its scope, design and canal-side location present captivating possibilities. But aside from the financial risks, the danger in terms of the arts is that the City Council will seek to commercialise the arts hub to try to generate more revenue. This means that the ethos of organisations such as The Dukes and Ludus will be compromised. In short, they will be dancing to the tune of revenue rather than artistic content.
The arts hub also poses a big danger to the Grand Theatre – as major players in the theatre itself have declared. If the arts hub commercialises its operations, it will bring in acts that would have performed at the Grand, leaving the Grand to struggle financially.
Increased car parking
The scheme includes a 786 space underground car park, which is an additional 215 car parking spaces on what is there already (including the land potentially used by the university). The Council will be paying around £1m to rent the car park on a 30 year lease. So, financially, the Council will want as many people to use the car park as possible. Yet, at the same time we know that the city fails air quality levels and that nationally 42,000 people are dying per year because of air pollution (equates to around 87 per year in the Lancaster District). So, the Council will have a massive conflict of interest. The Council should have a responsibility for the health of its citizens to keep cars out of the city centre - using the park and ride, for example - and yet, financially, it will be tied into a 30 year lease for the car park - and the rent will increase year-on-year.
Climate Change
In October 2017 carbon levels in the atmosphere passed 400 parts per million for the first time ever. And yet the Canal Corridor scheme is an energy-intensive scheme which encourages people to drive from as far away as Ingleton. A similar scheme in Gateshead, for example, is going to be "off grid" - and generate all its own electricity. The Labour-run City Council is stuck in the 20th century, at best.
The park and ride at junction 34 isn’t working. The busses are virtually empty a lot of the time. The way to get people to use these busses is to remove car parks from the centre of the city. By increasing car parking in the centre of the city, this scheme does the opposite. It is difficult to imagine a more environmentally unsustainable scheme.
The Existing City Centre
The Canal Corridor scheme is still very much retail-led. It has 320,000 sq ft of retail, 250,000 sq ft of this being non-food and drink. This is a massive increase on the retail space currently in the city centre. Most of the shops that are being approached by British Land are already present in the existing city centre. This will lead to lots more empty shops in the city centre. The overall retail offer in terms of different shops (i.e. chains) seems unlikely to be much greater than it is now. The City Council has no plans to improve the existing centre (except for £10,000 for ginnels) and it will have no further borrowing capacity to do so. Thus, the Council will be investing £25m in the eastern part of the city and virtually nothing in the west.
The public is being kept in the dark
Nothing has happened on the Canal Corridor land for many years - principally because the developer, British Land (BL), has not been able to make a scheme work financially for British Land. BL has spent the last few years trying to get the city council to pay a subsidy, in one form or another. This demand for subsidy has been increasing over that time. The detail of all this, frustratingly for Green councillors, is kept confidential. At the October 31st Full Council meeting, Labour used its majority to win a vote to keep the press and public out of the meeting and keep the agenda secret. The negotiations with BL involve external consultants for which the City Council has budgeted £400k.
One thing we know about British Land the chosen developers is that the company is set up to ensure it pays the least possible tax by the use of shore tax havens. Labour leader of the council Eileen Blamire when asked whether we should be supporting tax avoidance said, "It is not up to me to decide" and 'It is impossible to take any opinion on this" Greens believe that the City Council should refuse to support companies that immorally deprive government of revenue.
Lancaster market – a cautionary tale
Cost of buying out the lease of Lancaster market was £13m. This happened because the City Council did not update and refresh the market as people’s retail habits changed. As a result the council was left with an upward-only rent on a 99-year lease with no break clauses. No business would have agreed to such a one-sided deal. But Lancaster city council did and had to borrow more than half its annual net budget to buy itself out of its obligations less than 20 years after the market opened 'amidst a blaze of publicity' and after the public had been told that after extensive comparative research, Lancaster market would be 'the very best'.
A public-led regeneration of the canal corridor
North Lancashire Green Party proposes a public-led re-development of the Canal Corridor. Our aim will be to put the public’s interests at the centre of the scheme and to remove the financial risks inherent in the Labour City Council’s scheme. The City Council currently owns around two-thirds of the land. We believe that the City Council should regenerate this land as soon as possible. When this is done, it should consider purchasing the land owned by British Land (who paid only just over £1m for their part). We are still working up details of our proposals but our aim is for them to look something like:
Bricks and mortar retailing is in decline. Town centres must become more places where people socialise and are entertained. The question is whether a location with a relatively small catchment can sustain 2 city centres. We don't think so. Latest research on the shrinking demand for retail premises in town centres across the country backs this view up.
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