MAJOR CAPITAL PROJECTS DELIVERY

REPORT OF OVERVIEW COMMITTEE

London Borough of Islington February 2010

CHAIR’S FOREWORD Islington is enjoying a record period of capital spending by its Council, funded by large government grants and an ambitious programme of commercial and office property sales. The fruits of that spending are beginning to be enjoyed by residents in the form of new schools and children’s centres; revitalised parks and green spaces; numerous local transport improvements; long overdue upgrades to housing; and ground-breaking investment in energy efficiency and renewables. Yet at the same time it is clear that some of the Council’s ambitions to transform the borough have not so far been met. At Archway, Ashmount / Crouch Hill, Highbury Corner and the Sobell Leisure Centre, among other sites, there is understandable frustration from the public and councillors alike at delays in bringing about change. Given the scale of Islington’s spending, as well as the challenges at critical locations, it was natural that the Overview Committee should wish to scrutinise the management of the capital programme to date, with a view to learning lessons for the future. Having looked at key projects in some detail, our recommendations centre around improving transparency, financial monitoring and reporting, management capacity, and the quality and efficiency of public consultation. While decisions about which projects to fund are for the Full Council and Executive, we do recommend that in some instances alternative approaches to delivery are considered alongside existing plans. The level of scrutiny applied to these projects was a new departure at Islington, and I am grateful to senior officers who were generally frank in giving evidence to the Committee about the work of their departments. They were also willing to consider openly what lessons could be learned from recent experience. In one case, that of Highbury Corner, the Committee has taken the unusual step of publishing (as Appendix C to this report) a subsequent memorandum provided to us, after members considered verbal evidence presented to be inadequate. A further appendix helpfully clarifies some of the expenditure figures for the new council housing building programme. Unlike most other scrutiny exercises, oversight of the Council’s capital programme by elected councillors will be an ongoing business. We hope the work of this Committee will provide good foundations for those who follow us. Andrew Cornwell Chair, Overview Committee

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MEMBERSHIP OF THE OVERVIEW COMMITTEE COUNCILLORS 2009/2010 MEMBERSANDREW CORNWELL (CHAIR) JYOTI VAJA (VICE-CHAIR) WALLY BURGESSPAUL CONVERYMERAL ECERHODRI JAMIESON-BALLSTEFAN KASPRZYKPHIL KELLYCATHERINE WESTSUBSTITUTESBARRY EDWARDSRICHARD GREENINGTRACY ISMAILJAMES KEMPTONMARTIN KLUTEKELLY PEASNELLMARISHA RAYRICHARD WATTS CO-OPTED MEMBERS FOR EDUCATION RELATED ISSUES Co-opted Member for Education Related issues: Mary Campbell - Roman Catholic Diocese Philippa Stobbs - Church of England Diocese

Acknowledgements: The Committee would like to thank all the witnesses who gave evidence to the review. Officer Support: Peter Moore, Peter Murphy – Democratic Services Tim Collins, Alan Layton – Finance and Property Services

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INTRODUCTION 1.1 The Overview Committee approved the priority topics for scrutiny at their meeting on 9 June

2009. 1.2 The Overview Committee agreed that it would undertake a scrutiny to review the capacity to

successfully deliver the capital programme and to identify how the Council can build on experiences to successfully deliver major capital projects in the future.

2. OBJECTIVES 2.1 The review focused on the following major capital projects :

• Sobell Leisure Centre

• Finsbury Leisure Centre

• Ironmonger Row Baths

• Archway Development

• Highbury Corner

• Ashmount School

• Building Schools for the Future

• The Council’s New Homes Building programme

• To review the process in developing initial business cases for major capital projects and to identify any lessons that will assist in developing robust business cases and delivering projects in the future

• To review the in house capacity on major capital projects, how these are captured as part of the process to develop the initial business case, and how these relate to the successful delivery of a project

• To review the financing models adopted or proposed in delivering major capital projects: what the thought process was to agree these: and to explore how alternative models could be adopted in the future

• To review the consultation process associated with the major capital projects and how the management of multiple stakeholders impact on the delivery of the major capital projects

• To identify how other Local Authorities and public sector bodies have successfully funded and developed major capital projects

• To make recommendations as to how the approach and development of major capital projects can be improved to ensure that the projects are successfully delivered

3. METHODOLOGY AND TIMETABLING 3.1 Following the agreement of the Scrutiny Initiation Document a work programme was designed

for the committee to receive presentations and witness evidence at Overview Committee.

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4. THE COMMITTEE’S RECOMMENDATIONS Management and monitoring of the capital programme

4.1. The Committee’s enquiry heard evidence that when re-entering areas where the Council had

had little or no activity for many years, such as new leisure facility construction or new council house building, it had taken time to rebuild capacity and expertise, with heavy dependency on external advice. The Committee strongly recommends that, before entering into new strategic commitments, the Executive consider more carefully and realistically the Council’s ability to deliver them.

4.2. Care needs to be taken in designing the capital programme to ensure that ownership of key

projects is felt across the Council, and at the same time that individual departments are not overloaded. It was noted that Building Schools for the Future was a success in terms of corporate ownership, but that several other Children’s Services projects had suffered delays.

4.3. The experience of other local authorities should be examined in terms of the use of employed

staff versus consultants, and Islington could explore whether there is any support from other councils for the establishment of a public service consultancy to supply expertise.

4.4. When committing to new capital schemes, more care needs to be taken both to calculate, and

to explain to Councillors and the public, the extent of the future repair,maintenance ,staffing and other ongoing revenue costs that may arise.

4.5. At the procurement stage, there needs to be clearer documentation, timetables and option

appraisals, and if possible a single senior officer should be appointed to act as liaison between stakeholders and contractors for the duration of the scheme.

4.6. The Committee felt the process for determining the shape of the Councils capital programme

needs to be more transparent and member–led,so that for example ,both the selection of projects and major reviews of the capital programme fully reflect councillors priorities.

4.7. Members were concerned that the regular reports to Executive on the capital programme do not

enable monitoring of progress on individual projects. It is recommended that the Executive follow the approach now taken by the Overview Committee, by receiving reports that monitor programme spend against each heading in the annual Budget papers.

4.8. More generally it is recommended that the quality of and transparency of reporting be improved

so that Councillors and other stakeholders can determine easily whether capital programmes have started and/or are progressing to timetable, and are meeting stated objectives.

4.9. The Committee was concerned that there was no publicly accountable way of allocating Growth

Area Funding between different locations in the Borough, leading to public suspicion and the exclusion of non-Executive councillors from decision-making. It is recommended that the allocation of this funding is made by Council in the annual Budget, supplemented by appropriate Executive reports.

4.10. Given that the Council’s capital programme has a significant impact on the Islington economy,

the Committee felt more attention should be paid to ensuring the use of local contractors, the employment of a local workforce and the encouragement of schemes to benefit young people.

Consultation 4.11. Noting that several key capital schemes had been the subject of multiple rounds of public

consultation, with some suggestions of ‘consultation fatigue’, the Committee recommends the

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Executive ensure that future consultation exercises should be simplified. Proposals put to the public and stakeholders need to be more precise, and the public should receive a clearer explanation of the development process.The difficulties around the Sobell leisure consultation were an illustration of this point.

4.12. When carrying out consultation, the full range of possible options should be put before the

public, otherwise consultation exercises will lack credibility. 4.13. The Committee was also concerned about sometimes lengthy delays between the conclusion of

consultation and any action being taken, and urges that these be minimised in any future timetabling of capital project delivery.

Archway 4.14. The Committee was of the view that the Council should be more assertive in its role as a

landowner in the Archway area, rather than simply focussing on its planning policy functions, important as these are.

4.15. Noting the many past rounds of consultation coupled with a lack of physical progress at

Archway, the Committee urges the Executive to focus on a realistic delivery process for affordable improvements, and to be open with the public about how these are being funded

Highbury Corner 4.16. The Committee was concerned about a lack of transparency surrounding the spending of

Growth Area Funding and funds allocated by Council in the 2009-10 budget. It urges the Executive to act immediately to clarify this situation, to ensure that allocated funds are spent, and that the opportunity to remove the gyratory system is not lost.

4.17. Further the Committee recommends that Islington improve its liaison with Transport for London

regarding Highbury Corner and keeps councillors better informed of such liaison. Leisure projects 4.18. In view of the problems associated with the grouping together of the Sobell, Finsbury Leisure

and Ironmonger Row schemes, it is recommended that in future more consideration be given to assessing the financial viability of individual components of schemes, to improve the prospect that at least part of a proposal can proceed in the event of an economic downturn or other difficulties.

New council homes 4.19. While the Committee welcomes the commitment to delivering new council homes, it questions

whether infill development is the only viable approach given planning and funding challenges, and the slow speed of delivery (36 units in four years from programme inception). It is recommended that the Executive examine alternative approaches including the use of larger scale sites.

4.20. The Committee was concerned to receive evidence of the markedly higher costs of acquiring

and refurbishing street properties in Essex Road compared to new build council homes. It is recommended that this programme be investigated further to ascertain whether value for money has been achieved for the taxpayer.

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5. BACKGROUND 5.1 Over the past three years £501 million of capital has been invested by the Council and in

2009/10 the Council’s budget report approved £496 million of investment in the next three years. 5.2 Given the economic downturn the future capital programme is likely to result in a lower level of

capital receipts, lower support from Government for prudential borrowing, reduced level of external funding and capital grants and this would result in the capital programme being smaller than at present.

5.3 There is also other capital investment that does not form part of the capital programme figures

and these include Housing PFI 1(C.£248M unitary charge), Housing PFI 2 (c.£422M unitary charge), Building Schools for the Future (construction costs over three phases will be in excess of £140 million) Street Lighting PFI (c.£54m unitary charge) and Cleansing Services PFI (c.£190M.unitary charge.).

5.4 The increased capital investment over recent years has enabled the Council to deliver a number

of projects of high quality. 5.5 These projects include the Golden Lane campus, which opened in 2008 and brings together

Richard Cloudesley School, Prior Weston Primary School and Fortune Park Sure Start Children’s Centre.

5.6 The new building combines the children’s centre, a 420 place primary school and the primary

department of the special school for 30 pupils with physical impairment, all operating in an integrated, inclusive environment, and offering a full range of services to children and families. Islington Council invested £13 million with a further £6million being invested from external resources.

5.7 Another capital project delivered was the Bridge school, which was opened in 2007 and is a

community special school. It has sensory rooms, new school buildings and up to date technology. Islington Council invested £20 million into the project with a further £6 million being made available from external resources.

5.8 The New North Community School also opened in 2007 and provides an integrated children’s

centre and primary school for children to have the opportunity to learn and develop in the purpose built environment from 3 months to 11 years of age. Islington Council invested £7 million with a further £3.5 million from external resources.

5.9 Capital investment has also been made into community centres and those projects completed in

Phase 1 include Hargrave Park and Archway, Ambler, Willow, Paradise Park, The Factory and Margaret McMillan.

5.10 Phase 2, Conewood, Moreland, New North, Holloway and Mitford, North Islington, New River

Green are completed or almost completed. 5.11 The centres deliver a range of services including childcare, health and wellbeing, employment

and training through a number of agencies and each centre caters for around 8000 clients. 5.12 Islington capital investment has also enabled improvements to parks in the borough to be made. 5.13 Islington has more than 127 parks, open spaces and playgrounds and the Islington Greenspace

team co-ordinate a number of projects to improve, extend or redesign parks and open spaces in the borough.

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5.14 There has been capital investment of over £9 million since April 2006 in Islington parks, open spaces and playgrounds

5.15 The capital investment made by the Council has resulted in a number of awards including

Highbury Grove BSF scheme, Ambler Children’s Centre, Willow Early Years centre, Golden Lane campus and New North Community school.

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6. THE COMMITTEE’S FINDINGS 6.1. The Committee at its meeting on 3 November 2007 considered evidence from Fran Stewart and

Kate Cornwall – Jones in respect of BSF and the Crouch Hill Community Park capital projects including Ashmount school.

6.2. BSF was a national programme which aimed to lift educational attainment through a complete

transformation of Islington’s secondary schools. It was a 10-15 year programme delivering new schools and/or upgrading existing schools and the emphasis was on a fit for purpose environment for learning and development of young people.

6.3. There would also be an improvement in ICT infrastructure and regeneration of communities and

extended schools with community access. Islington was a Wave 2 authority in the BSF scheme and in total the schemes cost £140 million over three phases and consisted of PFI and Design and Build schemes,and Facilities Management.

6.4. The Crouch Hill Community Park objectives were to provide, on the site of the former Crouch

Hill Recreation Centre, a new school building for Ashmount school, a new nursery for Bowlers Community nursery, a refurbished youth centre at CAPE, improvements to the security and accessibility of the Metropolitan Open land, projection and enhancement of the plant and animal life on the Metropolitan Open Land, a flagship sustainability project, including a combined heat and power system to provide energy to the new building and 46 new homes. The estimated cost of the Crouch Hill Community Park project is £16.75 million and the net cost to the Council £9.25 million and it was aimed to get planning consent in November 2009, start on site in July 2010 and complete in Spring 2012.

6.5. BSF phase 1 works, 2008-2010, included Samuel Rhodes/Highbury Grove (September

09/January 10) which was a PFI scheme, Holloway January 2010 design and build scheme, St.Aloysius R.C. school February 2010 Design and Build scheme. BSF phase 2 works from 2010-2012 included Elizabeth Garrett Anderson and the Pupil Referral service which were PFI schemes and Central Foundation Boys school and Islington Arts and Media which were Design and Build schemes. Phase 3 from 2011-2013 were Highbury Fields school, Design and Build, and Mount Carmel R.C. school which was also Design and Build.

6.6. Maintenance and lifecycle of the schools is for a 25 year term, with caretaking and cleaning of

the non – PFI schools being 10 years initially whilst ICT provision across all schools in Islington BSF is for an initial 5 year period.

6.7. Fran Stewart informed the Committee that the lessons learnt on BSF had been taken on board

for subsequent phases. In terms of pre procurement there was a need to understand the process and get the support of stakeholders and ensure the process was explained to Governors fully. In addition there was a need to consult fully and be clear what was certain and what might change so that timely decisions can be taken and everyone can own the vision and strategy of the project. There had also been a need to follow the EU procurement rules given the scale of the project and the Council had not been subject to challenge on this process. There was also a need to ensure that the necessary planning consents were obtained as this could jeapordise the whole programme as the schemes were let together and this achieved better economies of scale.

6.8. At the procurement stage there needed to be clear documentation and timetables prepared,

options appraisal, a structured programme of meetings, a school buddy system, initial evaluation and two way feedback, internal lessons learnt, development of partnerships and keeping stakeholders aware of the process. During the construction stage there was a need to consult, be aware of health and safety requirements, especially if the site was in use, and to have a clear demarcation of roles and responsibilities. The scheme at Highbury Grove had

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worked well as an Associate Head who knew the school well had taken responsibility for liaising with the contractors, which left the Headteacher free to concentrate on the curriculum side of the school.

6.9. Members considered it was important to obtain community benefits from contractors engaged

on major capital schemes and it was noted that as part of the strategic partnering agreement on BSF, commitments had been obtained from contractors on the employment of apprentices and in relation to a number of wider regeneration initiatives. These included unskilled worker opportunities, working with IVAC to enable local businesses to join the Balfour Beatty supply chain and work with schools, including working with two schools on a sustainability project.

6.10. In terms of capacity of staff to cope with the workload in respect of BSF it was stated that BSF

had been considered to be a corporate scheme and not just Children’s Services schemes and other departments had been involved at various stages. There had been scope for additional capacity at the procurement and construction stages, however on the operational side there were different skill sets involved.

6.11. In terms of the Crouch Hill scheme the main lesson learnt was that there should have been a

service needs assessment carried out at the same time as the brief for the building was undertaken. There was also a need to ensure extensive consultation was carried out as Crouch Hill had been a complex planning application and this had to be carefully developed.

6.12. The Committee at its meeting on 3 November 2009 considered witness evidence from Howard

Barnes and Mark Christodoulou of the Leisure Services Department in respect of Sobell and Finsbury Leisure Centres and Ironmonger Row Baths.

6.13. The Committee were informed that in 2005/6 a Leisure Services Estate review was carried out

which showed the need for extensive refurbishment of Ironmonger Row Baths, redevelopment of Finsbury Leisure Centre, improved community benefits and improved greenspace with an enabling development. £12 million had been allocated for the scheme, however viability reports for the project in May 2009 had resulted in the scheme being delayed and £1.7 milliion had now been allocated for maintenance and refurbishment at Sobell to keep the centre operating and the programme of works was being scheduled.

6.14. The programme of works include the ice rink and all associated plant, services and pipe work,

the roof, the sports hall main arena floor and mechanical and electrical associated works. 6.15. The consultation on the Finsbury Leisure Centre / Ironmonger Row Baths scheme had taken

place in November / December 2007 and £12 million had been allocated for the joint scheme. The viability of the scheme was once again reviewed in May 2009 and this resulted in a delay to the scheme but due to an allocation of £4 million from EC1 NDC the project at Ironmonger Row Baths was now proceeding to timetable and it was hoped to be completed in time for the Olympics.

6.16. The Sobell Leisure Centre was identified in the Mayor’s Plan as an opportunity site for future

development coupled with the Council’s housing shortage and future development targets. The Sobell Centre’s poor spatial plan and inefficient use of space, coupled with the buildings age and state of repair, gave rise to a review of the long term solution to the site. Initial funding for the scheme came from 2 sources, £1.8 million S106 monies from the Highbury Stadium relocation and £750k S106 monies from Hornsey Road Baths disposal. A variety of financial models have been assessed including prudential borrowing, public private partnerships, and work on enabling development proposals and were being progressed. Initial costing and viabilities created a scheme that appeared to be achievable including the use of S106 monies from other local development projects. However the rapid decline in the property market in 2008 changed the position considerably.

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6.17. The Committee expressed concern at the use on the leisure schemes of external consultants

given that there had been a post in Children’s Services to deal specifically with the BSF schemes. The Committee noted that the Council’s Leisure Team is not resourced for capital projects of this nature and whilst consideration had been given to appointing an in house employee, the market for staff of the nature required was difficult and normally staff with these types of skills were employed by consultancies and in addition, there was a need for many specialisms during the process. The Committee were of the view that there may be a need for local authorities to look at establishing a public services consultancy with expert staff that could be utilised by local authorities.

6.18. The Committee were also concerned that, whilst appreciating the financial climate was different

when the schemes were devised, the 3 leisure schemes had been grouped together and that there was a need to look more carefully as to whether this was the best way to proceed on future schemes. The grouping of the Finsbury Leisure Centre and Ironmonger Row schemes together made sense because of the proximity of the buildings, however, it appeared to the Committee that even in the favourable financial climate at the time it was ambitious for the Sobell scheme to be combined with these other schemes.

6.19. The Committee noted that Islington had 7 leisure facilities in the borough, which was more than

neighbouring authorities and that it would be a constant financial problem to keep these facilities maintained to an acceptable standard and to meet changing needs and demands of the service.

6.20. The Committee received evidence from Seema Manchanda, Assistant Director Environment

and Regeneration Department at its meeting on 1 December 2009. 6.21. The Committee were informed that there would be improved rail services at Highbury Corner

due to an extension of the East London Line and an upgrade of the North London Line. 6.22. The Committee noted that there would be improvements also to Highbury and Islington Station,

with lifts to access the East London Line and London Overground, with a westward extension of the station concourse. Funding was pending for a new station exit, doubling of gate lines and a new station façade. There would be a new station square, and a relocation of the Post Office which would consist of a two storey building, doubling of circulation space for customers and increase the number of counters from 5 to 8. In addition, the Post Office would be combined with a café. The planning application was due to be submitted in early 2010 and negotiations with Network Rail on a property deal for the site and Post Office on a rental agreement were taking place.

6.23. The new ticket hall on the east side of Holloway Road had been delayed by the Mayor of

London, as it was not in TfL’s current business plan. The improvements would improve the capacity of Highbury and Islington station, the lift access to Victoria Line and First Capital Connect platforms at an estimated cost of £75million.

6.24. The Highbury Corner roundabout improvements went out for public consultation on three

options in 2007/8 and the preferred option was the closure of the western arm and a new public space connecting the new station square with green space. There are three design options for use of green space and public consultation will be carried out in late Summer 2010 and implementation had not yet been funded.

6.25. The Committee learnt that the scheme was not fully funded despite the council allocating an

additional £4 million as part of the council’s budget amendments in February 2009. The Committee were concerned to learn that the gyratory scheme was unfunded and would cost an additional £5 million and that TfL were reluctant to fund the gyratory scheme until the work on the public square had commenced.

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6.26. The Committee were of the view that a programme of works should have been agreed in

advance with TfL, as due to TfL’s budget restrictions they may not be willing to fund this scheme for some time. The Committee expressed concern that a decision had been taken to allocate additional funding and that this decision had not been implemented and that Members were not aware of this.

6.27. Following the meeting the Chair raised with the Director of Environment and Regeneration the

Committees concerns and requested a briefing as to why this decision had not been implemented and Members were not informed. A briefing note was subsequently sent to all Members of the Committee and this is reproduced at Appendix C.

6.28. The Archway Development Framework was adopted in September 2007. The Development

Framework is a planning framework not a practical delivery plan, however since its adoption the economy has gone into recession and pressures on public and private sector funding have intensified.

6.29. The council has however secured Growth Area funding and TfL funding to invest in

infrastructure and the public realm. The Archway Regeneration Delivery study has been commissioned to examine how the council can practically deliver regeneration in Archway through working with its public and private sector partners and the local community.

6.30. A consultant has been appointed to lead this work and is leading a multi disciplinary team

consisting of architects, planners, urban designers, transport planners, cost consultants and property consultants. The project team has been tasked with preparing a realistic and costed regeneration delivery strategy for Archway that takes account of current and likely future economic conditions and public sector finances. The study is to be completed in Summer 2010.

6.31. A stakeholder group has also been established consisting of ward councillors, the Archway

Town Centre Management Group, Local TMO’s and Better Archway Forum, Lazari Investment Limited, Methodist Hall, Whittington Hospital, Transport for London, Universities and Byam Shaw and the Archway Children’s Centre, Leisure Centre and Library.

6.32. At its meeting on the 2nd February 2010 the Committee reviewed evidence from Chris Bailey of

the Better Archway Forum who spoke to the Committee about the redevelopment of the Archway. During the discussion the following points were made.

6.33. It made no sense to dispose of council owned sites in the Archway area when the market was

not good and the council should consider some of these sites for social housing. Despite good intentions over the last 5/6 years the proposals had not had substance to them – Councillor Convery enquired whether the large scheme approach was the way to proceed in the future or whether there should be a more incremental development of the Archway area.

6.34. It was stated that the Better Archway Forum would probably favour an incremental development

but the ability to do this was blighted by the prospect of a large scale development in the area. Junction Road and the upper Mall had been blighted and there were visual problems with the Archway – a number of sites were owned by the council which had potential for redevelopment for social housing or other uses.

6.35. There were 2 big issues – the overall perception of Archway and the organic regeneration of the

area. In response to a question Chris Bailey indicated that he thought that Kings Cross had prospered because it was close to the centre of Town whereas Archway was not well physically connected.

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6.36. The reason that a supermarket led development had been discussed was that they would have the money to make changes and that if a more incremental development took place it was difficult to see where the resources would come from. Chris Bailey responded that he thought that it was important to do both and support the existing retail outlets and not to encourage the demolition of Victorian street properties – there had to be room for enterprise to be encouraged but some of the big sites in the Archway area were too big for the smaller retail outlets – ultimately there needed to be big changes however the number of large vacant sites were causing urban blight.There was a need to utilise the vacant shops at the Archway and one of the shops had been let to an arts project however there were site issues where mixed tenure housing could be provided on certain sites as regeneration could take place if the area was repopulated. Chris Bailey expressed the view that it was no good the council having a masterplan for the area without indicating the part that the council would play in it.

6.37. There were local maps and directions but they tended to get lost because of the nature and

layout of the Archway area. The island site was an interesting one and this could be a project that could be developed.

6.38. Discussion took place as to the provision of student hostels in the area and Chris Bailey stated

that there had been a proposal for student housing on the island site but the proposal was out of scale with the rest of the area – in addition there was also a lot of student housing in the Archway area provided in the private sector.

6.39. In response to a question about consultation Chris Bailey stated that residents would get

consultation fatigue if at the end nothing happened – when the recent Growth Area Funding had been allocated and Highbury Corner had got a significantly larger share than Archway and in his view Highbury Corner did not have significantly more problems with traffic than the Archway. A Member expressed the view that there had been pressure for a number of years to address the situation at Highbury Corner and that there was now an opportunity to do this as TfL were rebuilding the station and this was one of the main reasons for the allocation.

6.40. In response to a question concerning the proposals around the Whittington Hospital, Chris

Bailey indicated that most local residents wished to keep the Whittington open however he felt that there could be an opportunity to sell off the old Victorian Whittington block for housing but this was his personal view.

6.41. The view was expressed that the core strategy was too vague and that the previous masterplan

was too prescriptive for the area – Chris Bailey stated that the council needed to decide what it was doing with key sites and that certain assumptions had been made in the retail report in 2005 which were inaccurate and reflected one particular view.

6.42. Chris Bailey stated that the council did have an opportunity to influence new housing

developments in the area as the council were committed to building new homes either on their own or with a partner and presented an opportunity to respond to the sustainability and green agenda – positive changes were needed.

6.43. The Committee then heard from Patrick Odling-Smee – Service Director for Housing and Adult

Social Services. During the discussion the following points were made. 6.44. The date of the council decision to invest £10million should be February 2007 and not October

2007 as stated in the presentation. The new build programme would need to be self financing. The rental income generated from the new units would have to cover any incremental costs of managing the additional units and also cover the interest payments on any debt undertaken. Barking and Dagenhan, Brent, Croydon and Westminster have pursued the local housing company model this was explored but not pursued due to the cost and the time needed to set up.

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6.45. Phase 1 of the current programme was council funded and included Clifton Court, Armour Close

and Boleyn Road. Phase 2 had initially started from a list of 29 sites and this was as part of the Local Authority New Build funding with work starting on Neptune House and Docura House in October 2009. The only scheme that had been funded as a result of the 2009 October bid had been Bennett Court as the second round bidding had been more competitive – this was also because the Islington schemes incorporated more larger family units and this was not favourable when allocating grant compared to schemes with smaller units.

6.46. The council were talking to the HCA about changing some of the schemes and submitting

revised bids in order to try to access grant. Lessons learnt from the process had included the need for early resident consultation over a proposed development before detailed proposals are prepared, appropriate HFI/LBI consultant/contractor framework/panels need to be set in place to deliver the new build programme, an agreed process and model for individual scheme financial viability appraisal and sign off needs to be put in place between LBI and HFI – this includes an agreed appraisal model and review of viability assumptions and financial parameters. In addition there needed to be a detailed design sign off process for HFI and key LBI partners needed to be set in place as a standard procedure, a regular performance review reported to joint HFI/LBI monitoring forum plus HFI Board and upfront funding for scheme development needed to be agreed and set on an annual basis.

6.47. Working on estates/infill sites presents logistical challenges and brownfield sites brought

surprises – the benefits also needed to be promoted to local residents and staff were ‘rusty’ on new build, also there was the need to hand hold new tenants through the process and not to forget housing management, grounds maintenance and caretaking.

6.48. The Chair referred to the fact that phases 2 and 3 were financed by grants and council

borrowing – phase I had been allocated £10 million but only £4.3 million had been spent – Patrick Odling-Smee responded that this had been used for phase 2 and some capital had been substituted for borrowing. It was stated that in addition £2.1 million had been used to purchase NOMS properties in Essex Road and £1.5 million was unallocated. It was added that a decision had yet to be made as to how this would be allocated.

6.49. The Chair expressed concern that after 3 years there was still £1.5 million unallocated - it was

stated that this had been because grant funding had been substituted for this, however the £1.5 million could be used to fund future additional units and for feasibility work. The availability of extra new build resources from the HCA through the Local Authority New Build programme (LANB) in 2009 in conjunction with the use of prudential borrowing, has increased the new build total budget from £10 million to £21 million. The HCA’s LANB programme funds six schemes totalling £8.9 million. One of the HCA’s conditions is that the grant provided of £4.5 million is largely met by prudential borrowing by the council through the Housing Revenue Account.

6.50. In response to a question it was stated that 6 of the 7 properties in Essex Road had been

purchased and it was hoped that vacant possession of the remaining property would be by the end of July – it was added that the council already were freeholders of these properties and these properties represented good value for money.

6.51. The Chair stated that even with the NOMS properties there would only be a delivery of 36 units

by early 2011 and enquired whether this was a satisfactory level of delivery – Patrick Odling-Smee responded that he had joined the council in August 2008 and there had been no development team in place and no experience of new build housing – in his experience it usually took 3 years from conception to build and more resources had now been added – in addition a lot of consultation had gone in for relatively small schemes.

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6.52. In response to a question Patrick Odling-Smee stated that the bigger the development the bigger the risk involved to the council – if a large area of land was purchased there were risks and some RSLs had now realised this – until the council had the capacity and resources to develop on a larger scale it needed to be cautious. Development of housing was a competitive business and sites were competed for by a number of developers – in addition where developers obtained sites the council could obtain S106 benefits from developers. The council were dependent on the HCA for funding and they would wish to see that the market remained competitive.

6.53. At the end of the evidence session on housing capital the Committee still had some points

which they wished to clarify, particularly on funding. Members of the Committee were therefore pleased to receive the next day a memorandum from the Service Director for Housing which gave more details on how the £10million had been used and revised some of the figures the Committee had been given at the meeting. The memorandum is reproduced at Appendix D to this report

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7. CONCLUSION 7.1. In line with many local authorities Islington’s Capital Programme has expanded rapidly in recent

years.

7.2. Local Authorities have had to cope with significant increases in spend on capital across a broad range of services that they provide.

7.3. This has presented challenges to local authorities in terms of planning, procurement and

timescales after many years of relatively low spend. 7.4. The scrutiny review identified a number of areas where changes would help the Council improve

delivery and this is reflected in the recommendations we have made in our report.

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LIST OF APPENDICES Appendix A – Scrutiny Initiation Document Appendix B - Lists of visits, witnesses and documentary evidence Appendix C – Briefing note: Highbury Corner Appendix D – Briefing note: Housing new build and £10 million budget

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APPENDIX A

SCRUTINY REVIEW INITIATION DOCUMENT (SID)

Review: Capital Programme Major Projects Delivery Scrutiny Review Committee: Overview Director leading the Review: Mike Curtis, Corporate Director – Finance Lead Officer: Tim Collins Objective: To review the capacity to successfully deliver the capital programme and to identify how the Council can build on experiences to successfully deliver major capital projects in the future. Objectives of the review: The review will focus on the following major capital projects:

• Sobell Leisure Centre • Finsbury Park Leisure Centre • lronmonger Row Baths • Archway Development • Highbury Corner • Ashmount School • Building Schools for the Future • The Council's New Homes Building Programme

• To review the process in developing initial business cases for major capital projects and to identify any

lessons that will assist in developing robust business cases and delivering projects in the future. • To review the in-house capacity on major capital projects; how these are captured as part of the

process to develop the initial business case; and how these relate to the successful delivery of a project.

• To review the financing models adopted or proposed in delivering major capital projects; what the thought process was to agree these; and to explore how alternative models could be adopted in the future.

• To review lessons that could be learnt from major projects that have stalled and with the recession to look at other models that could be used in the future.

• To review, given the recession, how capital funding and work could be maintained over the next 5 years for projects such as Archway, Finsbury Leisure Centre and the Sobell.

• To explore mechanisms for ensuring that, when relocation of services with other public sector or private sector partners took place, adaptation of premises were carried out in the most environmentally friendly way

• To review the consultation process associated with the major capital projects and how the management of multiple stakeholders impacts on the delivery of the major capital projects.

• To identify how other Local Authorities and public sector bodies have successfully funded and developed major capital projects.

• To make recommendations as to how the approach and development of major capital projects can be improved to ensure that the projects are successfully delivered.

How is the review to be carried out?: Scope of the Review Types of evidence will be assessed by the review:

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1. Documentary submissions: • The 2008-09 to 201 0-1 1 Capital Budget Report and the 2009-10 to 201 1-1 2 Budget Report. • Project business cases / post project reviews I project updates for each major capital project.

2. It is proposed that witness evidence be taken from: (A detailed timetable of witnesses will be prepared during August and agreed with the Chair of the Overview Committee in consultation with the Committee.) Ashmount School and Building Schools for the Future

• Fran Stewart • Paul Frayne • Local Groups:

- School Representative (tba)

Sobell Leisure Centre, Finsbury Park Leisure Centre and lronmonger Row Baths • Howard Barnes • Mark Christodoulou • Seema Manchanda • Aquaterra • Local Groups:

- Leisure Centre User Group Forum (tba) - EC1 NDC (tba)

Archway Development

• Seema Manchanda • Local Groups

- Better Archway Forum (tba) -

Highbury Corner • Seema Manchanda • Karen Sullivan

The Council's New Homes Building Programme

• Patrick Olding-Smee • Steve Nash • HFI - Martin Lippit (tba) • HFI - Eamon McGoldrick (tba)

3. Visits It is planned that a number of visits will be organised where innovative solutions that are still applicable in the current financial climate, have been successfully used to deliver a major capital project. 4. Area Committees To be discussed.

Programme Key output: To be submitted to committee on: 1. Scrutiny Initiation Document 16 July 2009 2. Timetable 6 October 2009 – Witness Evidence

3 November 2009 – Witness Evidence It is proposed that a detailed timetable will be developed over the summer and agreed with the Chair of the Overview Committee.

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3. Interim Report 1 December 2009 4. Final Report

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APPENDIX B LIST OF VISITS, WITNESSES AND DOCUMENTARY EVIDENCE Witnesses Alan Layton and Tim Collins – Finance Patrick Odling – Smee - Housing and Adult Social Services Seema Manchanda – Environment and Regeneration Howard Barnes and Mark Christodolou – Leisure Services Fran Stewart and Kate Cornwell – Jones – Children’s Services Chris Bailey – Better Archway Forum Documentary Evidence Briefing note - Highbury Corner Briefing note - Housing new build and £10 million budget – Patrick Odling-Smee

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APPENDIX C

Briefing Note

Highbury Corner

Background 1.This briefing responds to questions posed following the meeting of the Council’s Overview Committee on Tuesday 1 December 2009. Highbury Corner Programme 2.As noted at that meeting, the Highbury Corner programme consists of a number of projects:

• Extension of East London Line (ELLEx); • Upgrade of the North London Line (NLL); • Improvements to Highbury & Islington Station (ticket hall extension and lifts to ELLEx & NLL); • New station exit in current car parking area with new gate line; • New station façade; • New station square and relocation of the post office; • Changes to Highbury Corner roundabout – closure of the western arm to general traffic and

improvements to the public spaces and (potentially) the central island green space; and • New ticket hall on the east side of Holloway Road.

3. The questions posed by the Committee and a response to these questions is set out below. (A) The total funding available for Highbury Corner broken down by source and the anticipated spend on

each aspect of the project e.g. post office relocation, gyratory removal etc

4. The total amount of Council funding allocated to Highbury Corner to date is £5 million. This allocation is for the period up to March 2011. 5. ELLEx, upgrade of the NLL, and the westward ticket hall extension and lifts to ELLEx & NLL platforms will be funded by Network Rail, Transport for London (TfL) and the Olympic Delivery Authority. These works are currently being carried out by Network Rail and TfL and will be complete in Spring 2011. Council Expenditure 2009-2011

6. £1m has been allocated to create a new station square in front of Highbury and Islington station. 7. To create a new station square, the post office will be relocated to the vacant site next to the Marie Curie building on St Paul’s Road. The current cost estimate for this building is £2.5m. The building will include a new post office with greatly improved facilities, a café and small office. It is proposed that the Council becomes the leaseholder for the building as it is hoped that this will help secure a

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long - term future for the post office at Highbury Corner. The building is currently being planned as an exemplar building in terms of its sustainability. 8. The council has allocated £1m to create a new station façade. The station façade is being designed by London Underground, and (subject to planning consent) will be implemented at the same time as the core works for ELLEX and the NLL. 9. A remaining £0.5m is set aside for scheme development. This includes a contingency sum pending more detailed cost estimates for the items described above. It also covers all costs in relation to: the design and construction of the post office, including the cost of a planning application; property negotiations with Network Rail; the design of the roundabout and options for the arboretum; a masterplan for the wider Highbury Corner area; and public consultation. Gyratory 10. The traffic modelling work for the removal of the gyratory is being funded by Transport for London. The purpose of this work is to prepare a detailed design for the removal of the gyratory, and to assess the impacts both on the A1 and local residential areas. Where it is shown that traffic may be displaced into local streets, measures to avoid or mitigate this will be developed. This work will be concluded in Spring 2010 when the Mayor of London and the Council will consider the results. If both sides are happy with the results, public consultation on the removal of the gyratory, and options for the central green space will take place in late Summer 2010. 11. Subject to a positive outcome from the consultation, the scheme will then have to go through the Council’s and TfL approvals process (including network assurance), and a contractor appointed. It is unlikely that construction of the scheme could start until Autumn 2011 i.e. outside the period for which the Growth Funding and Council funding has been allocated. TfL has also made it very clear to us that it does not have any funding for the removal of the roundabout (currently estimated to cost around £6 million). (B) How much has been spent in this financial year to date? 12.The table below provides a funding profile for the Council’s allocation of £ 5 million for 2009 – 2011. Table One: Summary of Council Expenditure

2009/10 2010/11 Scheme development £0.5m 0 Post Office construction £0.25m £2.25m Station square construction 0 £1m New station façade 0 £1m Total £0.75m £4.25m

(C) whether TfL has been made aware of the total resources Islington can bring to the project including the £4m additional agreed in the capital budget amendment

13.Yes, the Council has communicated to TfL that it has allocated £5m to Highbury Corner. This was set out in a letter from the Chief Executive to the Commissioner, and this sum has been confirmed to TfL a number of times. We have also made it clear to TfL that we expect it to at least match fund the Council’s contribution, and that we would therefore require it to fund the removal of the gyratory. We feel that it would be wrong not apply pressure on TfL to fund the gyratory – particularly given the other regeneration pressures experienced in other parts of the borough (see below).

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(D) Whether there is any remaining funding gap and if so how big.

14.As explained above around £6 million is needed to fund the gyratory. Further Information 15.Once £5 million has been allocated to Highbury Corner, a total of £5.2 million of Council capital funding and growth funding remains. You will be aware that the bid for Growth Funding was borough wide and not all this money can therefore be allocated to one scheme, for example, Highbury Corner, and that the Council Capital funding was allocated to Highbury Corner and other pedestrian schemes. The remaining £5.2 million has been notionally allocated as follows:

• £0.1 million for the Council’s self build programme

• up to £3 million for Archway

• up to £1 million for Old Street

• up to £1.1 million for the Kings Cross area 16.This funding is notional at present because further work is needed to establish the most effective use of this funding across the borough and within the individual regeneration areas. Of course, the remaining money could be wholly allocated to Highbury Corner to fund the gyratory. However, this would raise questions as to:

• why TfL is not being pressured to contribute fairly to a project which is to their benefit; and • whether it is equitable to ignore equally pressing regeneration and pedestrian needs in other

parts of the borough. Karen Sullivan and Martijn Cooijmans Spatial Planning and Transport Wednesday, March 10, 2010

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APPENDIX D

BRIEFING NOTE OVERVIEW COMMITTEE

HOUSING NEW BUILD AND £10 MILLION BUDGET.

1. Following the sale of the majority of the Housing Revenue Account’s commercial asset portfolio in 2007 for £70m, £10m was set aside in the capital programme to finance the housing new build initiative.

2. Actual or planned expenditure from this source of funding amounts to £8.3m at this point in

time leaving £1.7m towards financing a number of schemes that are in the early stages of development.

3. In more detail, the planned use of the £10m budget is:

Number Of

Homes

Total

Estimated Cost

Funding From £10

Million Budget

Actual & Probables: Nos. £000 £000 Demolition at Boleyn Road, Armour Close & Neptune House

0 313

313

Boleyn Road 10 2,612 2,612 Armour Close 4 1,290 1,290 Clifton Court 3 343 343 Essex Road - Acquisition 7 2,000 2,000 Possibles: Belfont - Site 1 1 221 84 Belfont – Site 2 1 217 84 Graham Street 5 1,322 486 Holbrooke Court – Site 8 2 577 201 Holbrooke Court – Site 9 3 871 319 143 Seven Sisters 6 1,426 503 TOTAL 42 11,192 8,235

4. It should also be noted that the availability of extra new build resources from the Homes and Communities Agency (HCA), through the Local Authority New Build Programme (LANB) in 2009 in conjunction with the use of the prudential borrowing, has increased the total new build budget from £10m to £21m.

5. The HCA’s LANB programme funds six schemes costing £8.9m. One of the HCA’s conditions

is that the grant provided of £4.5m is largely met by prudential borrowing by the council through the Housing Revenue Account. This amounts to £4.3m.

6. Without the HCA’s boost in funding and the use of prudential borrowing, the £1.7m of

unallocated resources would have been spent or committed to be spent at this point in time.

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