Wednesday, 8 January 2014

1980s, Paribas and "the loan that Camden forgot" - some Camden political history

Today I attended the 'topping out' ceremony of the new BNP Paribas building at 6 Pancras Square, right next to the new council HQ on the King's Cross development.

Boris Johnson cements relationship with French bank
The new Paribas development, next door to the new Google HQ, is another affirmation of the amazing transformation of King's Cross and will help the area by boosting jobs and businesses - and bring much needed new business rates to support frontline services.

Having BNP Paribas there is also a sign of how far Camden council has come from the 'bad old days' of the 1980s, where the council was under fire for disastrous financial management and services.

(With thanks to Camden: a political history and some hours spent in The Skinners) The story, known as "the loan that Camden forgot", revolves around a decision by the then Labour leader Tony Dykes to take out a £75m loan from BNP Paribas to support services in the aftermath of rate-capping, betting that an incoming Labour government in 1987 would restore funding to councils.

The original terms were that the council would have a 4 year period before any payments were due.  On losing the 1987 election Camden officers were quickly instructed to renegotiate and extend the loan repayment date to 1991.

Duly achieved, the council turned its collective attention to other matters - such as continuing factionalism of the decade before.  Fast forward to 1991 the French bank wrote to cash-strapped Camden to ask why they council had not made the first payment (of £25m) or refinanced the loan again - Camden looked at the fine print: it had to cough up.

What was worse was the 1991/2 budget was particularly bleak for the borough: the council faced a massive £12m budget hole (a huge amount today) in addition to this payment and a crisis in social services.

As the council was not permitted to borrow any more, it had to apply to Whitehall for credit to support its budget.  This was duly refused by the Minister for Local Government, Michael Portillo.

The council scrabbled around for options.  Putting up the new Community Charge (Poll Tax) would just invite the government to cap Camden.

Facing no alternative the Camden Labour Group took the only option it could - suddenly raising the rents on our 30,000 council homes.

Amidst uproar, councillors - some of the just elected for the first time the year before - went to their District Management Committees with a proposed in-year increase of rents by £11 a week, a 35% increase.

Naturally the tenants movement went ballistic and the local press had a field day.  The District Auditor was called in and the Ham and High accused Camden Labour poor financial management ("a disaster") and a failure to run the Town Hall. It demanded the then leader, Julie Fitzgerald, resign.  

I remember this story being related to me as a new councillor in 2002, much like a political old-wives tale cautioning never to spend-beyond-your-means, but also implying that no decision taken now - or heated meeting attended - could ever be as hard as the one made then.

BNP Paribas got it money back but the loan fiasco was the start of something very different for us.  Although there were more political bumps to come, it shook the Camden Labour Group  -which had spent much of the 1980s in turmoil into reality - and initiated a fundamental change in political direction, starting with the appointment of Steve Bundred as Chief Executive and then new mainstream leadership under Richard Arthur and subsequently Jane Roberts with John Mills in charge of finance.

In the space of just over a decade, with greater Labour Group unity and focus on high-quality services and financial prudence, Camden went from basket-case to Council of the Year in 2002 and, in 2008, the highest rated local authority in the UK.

So today is it perhaps more apt than ironic that our new neighbours in King's Cross are an institution with whom we have such a history - a journey for us and a reminder not to lose political judgement or a focus on sound money for a Labour council.

1 comment:

  1. Steve Bundred, John Mills and Richard Arthur (and to some extent Jeremy Smith who preceded Steve Bundred) were a formidable "group" who succeeded in turning around some of the worst "excesses" at Camden because they often took Officers "head on".