Council spent over £2million on development company ‘without laying a single brick’

By Davina hyde

A town hall is winding up a development company after a report showed rising costs and plummeting returns made it unviable to continue.

Merantun was set up in 2017, with the single purpose of “generating income” for Merton Council.

It was to provide a mixture of private rent and affordable housing on small sites in the borough.

Admin costs have exceeded £2million, without a house being built.

The money has been spent on seconded staff and consultants’ fees in preparation of planning applications.

Conservative Councillor Nick McLean said: “Here was an opportunity for this Labour administration to demonstrate that they can lead in the delivery of housing – and they failed.

“Three years, £2.1m of council taxpayer money spent and not a single house built.

“How can residents have any confidence that this Labour-led Council can deliver a regenerated Morden, or a regenerated Mitcham, or a vastly improved Wimbledon Town Centre? To deliver on the aspirations of Merton residents – the answer is they can’t.”

Merton Council voted in December 2020 to close Merantun, and in a council Overview and Scrutiny Committee meeting on January 20, 2021, they were questioned about their decision-making process in closing the company.

Regeneration Director, Chris Lee, said that factors affecting their business plan included increases in the costs of construction and borrowing, and a reduction in house prices as a consequence of Covid-19 and Brexit.

Labour councillor Mark Allison, recently appointed as Leader of the Council, said that the planning applications was a “jumping off point” they decided to take.

They had taken into account other councils.  Nottingham had been forced to wind up its energy company, and Croydon Council is on a precipice. Over £200 million had already been ploughed into Croydon’s similar development company, Brick by Brick.

Conservative MP for Wimbledon Stephen Hammond said: “Whilst this failure of Labour Merton is yet another indication of a council not delivering for local residents, even more worrying is the scale of financial incompetence.

“Local residents will want transparent answers from Labour Merton as to why there was a loss and where all the money has gone.

“This incompetence will lead many local people to conclude that this Council will not be able to deliver any improvement to Wimbledon Town Centre or the much-needed regeneration of Morden.”

Lib Dem Councillor Paul Kohler said: “Merton Council spent over £2m on Merantun without laying a single brick.

“When the matter was called-in by opposition councillors I discovered that the Labour administration had shown almost no interest in the issue.

“The new council leader, Cllr Allison, then sat on the recommendation to dissolve the company for 6 weeks hoping to sneak it out a few days before Xmas.

“At the Special Meeting of the Merantun Board, where the decision to dissolve the company was made (held on 21 December and available on You Tube), the Labour cabinet members focused on the optics rather than the substance of the matter.

“They also made their decision on the basis of a seriously inaccurate briefing on the interest rates the company had, and were being charged, via the government’s Public Works Loan Board.

“As a businessman I understand the need to take risks and am not blaming the council for doing so.

“However, I am deeply critical of both the mismanagement evident in the way the decision to dissolve the company was made and the Labour administration’s unwillingness to learn from its mistakes.”

The Leader of Merton Council, Councillor Mark Allison, said: “Although it has achieved many of the key things we had hoped, we feel it is right to wind up Merantun Development Ltd now to avoid the high costs of construction and sale affecting the council’s finances at a difficult time.

“We are pleased Merantun has completed a key part of its objective, which was to take four difficult sites and show they can deliver housing, including affordable homes, for our residents.

“Its work has increased the value of the sites and contributed to future housing supply, and we would like to thank the small staff team at Merantun for producing high quality proposals and securing planning permission.

“Given the finances of local authorities as a result of Covid-19, Brexit, and in particular the increased costs of borrowing, the business case for construction by a local authority with no housing stock of our own is no longer there for us.

“We are therefore reviewing options for the sites as these schemes will still offer very attractive opportunities for established developers, while the value of the sites, which has been significantly enhanced by Merantun’s work, can still help the council’s balances.”