Cardiff Coal Exchange

George Howarth Excerpts

Wednesday 20th April 2016 Westminster Hall

[Stephen Doughty]

If I may, I will not. We have limited time and I have already taken one intervention, but I might take another later if we have enough time.

The financial model that Mr Kenwright proposes to use for the building is the BPRA—business premises renovation allowance—scheme. That was introduced in the Finance Act 2005 and was intended to bring derelict or unused properties back into use. The scheme gives an initial allowance of 100% for expenditure on converting or renovating unused business premises in a disadvantaged area. However, the Chancellor of the Exchequer has announced the end of the scheme from the end of this financial year, after a raft of concerns, and investigations by Her Majesty’s Revenue and Customs.

The council has claimed to me that Signature Living has told it that it has secured an “approved £12 million” and up to a further £30 million. However, Lawrence Kenwright told me that only one of his previous schemes had received full approval from HMRC. I am deeply concerned. Given the investigations into these schemes in the past and the risk of their not being approved, where does the liability lie? We also ought to ask, given the current climate and concerns about tax avoidance and transparency: is this the right scheme to be funding this sort of building? Should we be assisting wealthy individuals and shadowy funds to avoid tax in this way? The Treasury has decided that it will end the scheme, which I think shows what it thinks of it.

The Financial Times reported on 14 July 2015:

“HM Revenue & Customs indicated it saw problems with arrangements involving BPRA, drawing parallels with abusive avoidance schemes, and a year later added them to its public ‘Spotlights’ list of arrangements it said taxpayers should avoid.”

A range of concerns were raised. The FT continues:

“Where tax relief was not granted to taxpayers before 2013, the Revenue has in most cases withheld it, said Mr Avient”—

he comes from UHY Hacker Young—

“‘The Revenue clearly saw a situation where certain structures were stretching the rules too far’...it has issued a raft of accelerated payment demands to repay disputed tax to BPRA scheme investors. These tax bills cannot be appealed.”

Interestingly, on 21 April 2014 the Liverpool Echo revealed the problems with the Stanley Dock regeneration scheme, funded in the same way. Builders were left unpaid; the council was left having to provide a significant amount of grant—multi-million pounds—and there was a complete lack of transparency. That involved another Liverpool company called Harcourt, which incidentally, as I said, was the previous preferred partner of Cardiff Council. The Liverpool Echo reported that it was

“surprisingly difficult to pin down the developers and owners”,

which I think exposes the difficulties and concerns about the transparency of these schemes and their solidity.

I also have concerns about what the building will be—what is the proposal on the table? We have heard about it being proposed as a hotel. It is clear that Signature Living is a hotel developer. I am not opposed to a hotel development and I am sure that many other people in the community are not, but it is still, as of this date, unclear what parts of the building will be used for what. At various times, in various meetings, we have been told of residential, part-hotel and normal hotel usage. In fact, Mr Kenwright suggested to me that it might be a third, a third, a third—or, as he put it, “as much as the council let me get away with”.

We need to be very clear—we need to know—before accepting or agreeing that this scheme is a good thing what the building will be used for. Tenants and businesses in the area and residents in the square—it is already a significant residential area—need to understand what will be there. Will there be lots of big parties coming there? Mr Kenwright has a hen and stag business in his hotels in Liverpool. Will lots of people be living there and will there be parking issues and all the other things associated with that? None of those schemes is necessarily wrong, but the public have a right to know what the building will be.

I come now to community benefits and issues. First, the Save The Coal Exchange campaign has listed a whole series of issues that it would want to be included in a section 106 agreement. It would want to see those outlined and agreed to. We have had promises of jobs and apprenticeships, although Lawrence Kenwright told me that the company would “bring their own people in”. Where are the clear assurances on jobs and apprenticeships?

Secondly, there are existing tenants—nearly 40 tenants —in the building. What assurances have they been given? They are deeply fearful that the council may step in, given its history, issue prohibition notices and see them evicted once building work starts. Where are the assurances for them?

We also have concerns about engagement with the local community in the square. There has not been serious consultation with local residents or businesses. Signature Living has been advertising major changes to Baltic House, home of the Wales Council for Voluntary Action. Is it aware of those; has it been consulted?

I have had an exchange of letters with the council about this matter and have had some assurances, but the letter from Neil Hanratty on 8 April confirms only that

“commitment to the above will be secured formally through the planning process”

and merely that Signature Living has “agreed in principle”. We should be having cast-iron guarantees for a building of this nature, with this kind of expenditure and the potential impact. These are really serious issues and we want to ensure that there is that community benefit, quite apart from all the other issues about access to the building.

Finally, heritage was one of the most positive aspects of the Signature Living proposal but, even so, there are concerns. In March 2016, the Victorian Society wrote to City of Cardiff Council officer Pat Thompson, copying in Neil Hanratty, saying that it had heard nothing from the council for 20 months and that

“the lack of communication from Cardiff Council is both disappointing and concerning… we are concerned that without close scrutiny, and clear direction from the local authority, aided and informed by a proper assessment…an acceptably sympathetic scheme, might…prove difficult to achieve. In 2013 and 2014 the Society was involved in consultations with Signature Living over its proposed hotel conversion, of Albion House, Liverpool, a Grade 2* Listed Building by Richard Norman Shaw.”

That building will, of course, be of interest to those of us in this Parliament. The letter continued:

“From our point of view the process was far from ideal. Plans were drawn up hurriedly and without any evidence of the sort of high quality, detailed heritage assessment a Grade 2* Listed Building demands. Perhaps unsurprisingly therefore, the conversion involved some alterations and additions that we as well as Historic England advised were unsympathetic and harmful. These were undertaken regardless, some seemingly prior to receiving the necessary consents… None of this is to suggest that Signature Living is incapable or indisposed to deliver a high quality sensitive scheme, rather it is to demonstrate that without proper guidance...in the form of a Conservation Management Plan and a structural survey, a less sympathetic and unnecessarily damaging conversion scheme is the likely outcome.”

I conclude by identifying a few key areas. First, the questions about the financial background are deeply concerning. What does the Minister think? I want Cardiff Council to be clear about its due diligence process in that regard, particularly on the sureties around the BPRA scheme, given the concerns that have been raised. What happens if that goes wrong? Who will bail this out? Who will deal with the financial consequences?

Secondly, on heritage and planning, there is a clear need for strict oversight from Cadw, the Victorian Society and others, for conservation management plans and for surveys, whatever developer comes in. Thirdly, we need guarantees in writing, not assurances that mean nothing, on the community issues and on access to the building. We need guarantees for the tenants of the building as it is, and we need an inquiry into the overall process over a number of years. The process has been deeply unsatisfactory and has involved the use of health and safety powers and the spending of public money in a deeply non-transparent way. We should put a halt to the proposal, re-engage with the community and other stakeholders and act in the national interest to save the coal exchange.

[Mr George Howarth (in the Chair)]

I put it on the record that I had no foreknowledge of what the hon. Member for Cardiff South and Penarth was going to raise. I raised some issues about one of the developments he mentioned on behalf of some constituents many years ago, and I would not want it to be thought that I had any prior knowledge that he would mention it, otherwise it might not have been appropriate for me to take the Chair today.

--- Later in debate ---

[Kevin Brennan (Cardiff West) (Lab)]

Speech!

[Mr George Howarth (in the Chair)]

Order. That is very lengthy for an intervention.

[Guto Bebb]

Concerns have been raised by my hon. Friend the Member for Cardiff North (Craig Williams) and by the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) on the inactivity, or otherwise, of the Welsh Government. It is not for me to comment on that, but I am sure that the hon. Member for Cardiff South and Penarth will be making his views known in due course.

Two specific issues have been raised to which I can respond. First, I cannot respond to the sales process adopted by City of Cardiff Council, but it is only right and proper that I address the involvement of the Crown Estate, about which the hon. Gentleman expressed concern. It is clear that the whole process was subject to the escheat process, which means that the building was never owned by the Crown Estate. As such, the Crown Estate was neither consulted nor involved in the process by which the property’s ownership is being transferred. That is not unique; it is a pattern that can be seen in many circumstances involving the Crown Estate. The actual decision-making process will be for City of Cardiff Council and the Welsh Government. Although the Crown Estate is technically involved, it is not odd that it was not consulted and did not provide any input in the process.

The hon. Gentleman mentioned the tax allowance scheme, and it is fair to say that the business premises renovation allowance is central to the redevelopment plan. He is right to highlight the fact that the scheme will be coming to an end at the end of this financial year at the end of March 2017. He is also correct that concerns have been raised about the way in which the scheme has been utilised in the past. Those concerns, which were raised, I think, back in 2011-12, have been addressed by Her Majesty’s Revenue and Customs, and it was stated in summer Budget 2015 that the scheme would be coming to an end. That is still the case. It is important to highlight the fact that the BPRA is a capital allowance scheme, and my understanding is that under such schemes any claim for the allowance would have to be made retrospectively, after the expenditure is made. It is also important to highlight the fact that any claim for a capital allowance under such a scheme would have to refer to expenditure incurred during the 2016-17 financial year. Any expenditure incurred after that point would obviously be outside the scope of the allowance scheme, which is a fairly important point.