The Government's embarrassment over the sale of County Hall to a Japanese property group which may now not develop it was inflicted by their acceptance of narrow commercial criteria for the sale, a National Audit Office inquiry has found.
The report, which was issued this week, shows that after initially stalling the London Residuary Body's plan to sell to Shirayama Shokusan in order to allow the London School of Economics to mount a counterbid, the Government then sanctioned the Japanese deal.
Analysis of the Shirayama deal and the LSE offer by NAO concludes that the LSE's Pounds 65 million bid for the entire County Hall complex would have brought in net proceeds of Pounds 56.3 million at current values. Shirayama's agreement to pay Pounds 60 million for the main Riverside complex alone would be worth Pounds 70-75 million once the Pounds 17.5m received for the rest of the site was included.
But it also shows that once the LSE bid was rejected, Shirayama first tried to drop the sale price to Pounds 42 million. This was rejected but Shirayama succeeded in persuading the London Residuary Body to defer Pounds 10 million of the Pounds 60 milliom. It is not clear when, if ever, this payment will be made. Shirayama's declared intention when purchasing the site was to convert it into a hotel, but the project was shelved last November, and the building's future remains unclear.
The NAO reports that the Universities Funding Council's refused to endorse the LSE bid on the basis of an independent valuer's opinion that the its valuation of its existing site was unrealistically high and because there was a chance of an unacceptable risk to the financial health of the institution. The report does not refer to written guarantees by merchant bankers Hambros backing LSE's bid. This is reported to have been excluded under pressure from senior civil servants.
John Ashworth, director of LSE, said that the LRB - which on at least three other occasions made use of the section of its remit allowing it to accept public interest-based bids for property - had always made it clear that it was determined on a straightforward commercial sale for County Hall. "We are not a commercial body and were always running in a different race in which other considerations could have come into play. The Government had the option of adopting other criteria and chose not to do so. In the end the commercial decision was taken that Shirayama's guarantees were good enough".
He said he had no quarrel with the report. "What it says is an accurate statement of events. There are always minor quibbles, but I wouldn't question anything it says about the LSE."