London

Olympic 2012 stadium: Taxpayer 'may foot West Ham bill'

  • 3 March 2011
  • From the section London
Olympic Stadium
Image caption Newham Council is cutting £100m and making 1,600 people redundant

Taxpayers in London's poorest borough would be liable for a £40m loan to help West Ham United move into the Olympic Stadium if the venture collapsed, its chief executive has said.

In January Newham Council used its credit rating to arrange a Treasury loan on more favourable terms than the football club could have secured.

That financed West Ham's bid, which defeated Tottenham Hotspur in the race to inhabit the stadium after the 2012 Games.

At the time the loan was agreed, the council refused to say whether taxpayers would be responsible for the debt if West Ham - currently threatened by relegation from the Premier League - were unable to repay it.

It said this was because of "commercial sensitivity".

Councillors due to vote on the plan were not told either, with 10 large background papers thought to detail the liability withheld until minutes before the vote.

One councillor spoke out anonymously, saying the public should be told, while a district auditor said "alarm bells" should ring.

It was eventually passed unanimously by the council, where all 60 sitting councillors are Labour.

Chief executive Kim Bromley-Derry, in an interview with the BBC, has admitted for the first time that taxpayers would be liable for the loan.

Asked if the council would have to repay the money if West Ham folded, he said: "On a theoretical perspective that's true. But we have worked out the worst case scenario and we are confident that's not going to happen.

"We have been working with KPMG on the business case. We are confident there is no risk to the local council taxpayer."

Mr Bromley-Derry said the authority considered the possibility of the club suffering a double relegation.

Newham Council, the Olympic borough, is the most deprived authority in London.

Anita Shields, an auditor who works with other local authorities to ensure financial transparency, said: "Obviously the risk to the taxpayer should have been mentioned at the start.

Image caption Relegation-threatened West Ham are second from bottom of the Premier League

"It is the taxpayers who could be footing the bill.

"Probably they were hoping nobody was going to raise these questions."

She added: "Why did they not come forward about it at the start? It's big money - the risk is there."

Newham Council has finalised £100m of cuts over three years, the highest figure in London. Some 1,600 staff could be made redundant.

The council has previously said the loan did not affect front line services.

Mr Bromley-Derry conceded a loan could have protected jobs and meant the need for less severe cuts.

He said: "We could borrow money to do other things, there's no doubt .

"If we borrowed money to bail out the revenue budget it would be a one-off and there would be a cost to it."

WHFC jobs 'issue'

The council said it was currently unable to say how long the loan would take to pay back.

Mr Bromley-Derry also admitted it was "an issue" that council officers instrumental in financing West Ham's stadium bid could later move into well paid jobs with the club.

Image caption Newham is one of the poorest areas in the UK

He said: "We are aware that may be an issue. If it happens to ex-employees, well that's fine, there's not a lot I can do about that.

"In terms of current employees it's not something I would expect to see."

He added it was likely Newham Council staff would get paid roles at the company they established to own the stadium.

Mike Law, a former Newham Labour councillor, said: "If Newham staff later wind up on nice salaries at West Ham serious questions will need to be asked.

"The stadium producing a profit after the loan has been repaid in 10 to 20 years time is cold comfort to the council employee who is laid off today.

"Yet again, it's the people of one of the country's most deprived boroughs paying for the extravagances of others."

West Ham United were unavailable for comment.

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