Council red-faced over homes 'grant' blunder (From Echo)

Council red-faced over homes 'grant' blunder

1:00pm Friday 4th July 2008

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COUNCILLORS have been left red-faced after finding out a £143million grant they had earmarked to improve tenants' home is actually a loan.

Basildon Council's ruling Tories had planned to use the money to improve its 12,000 homes.

They even set up a company to handle the £143million windfall.

However, they have now found out that the money is not a grant and they would have to pay back every penny.

St Georges Community Housing Association, which cost more than £2million to set up and £350,000 a year to run, could now be disbanded, due to the blunder.

It looks after all of the district's council housing stock.

Labour group leader, Lynda Gordon, said: "It is a total fiasco. The Tories should have had this level of information from the start.

"We will be raising serious questions as to why this never came to light earlier."

The council already owes £170million on the homes - and if it continued with St Georges and went ahead with the loan, it would take borrowing up to £313million.

The Government encourages councils to set up arms-length management companies, such as St Georges, so they can apply for money otherwise not available to local authorities.

The Government, not the council, would pay interest on the loan.

Council leader Malcolm Buckley said: "As far as we were concerned, it was like regeneration money for the Five Links estate, where we bid to a grant-funded project."

He said a report was being prepared for the cabinet in September on how it had happened and what could be done - with one option to close St Georges.

He added the association could only be disbanded with the consent of tenants and the Secretary of State.

The revelation means tenants and opposition councillors were misled during consultations over setting up St Georges from 2005 and votes before it launched last April.

Other options were to give the homes to a housing association or for the council to keep full control.

Mrs Gordon said: "The tenants have voted with the wrong information and we will be asking if this nullifies the decision."

Tory councillor for Laindon Park, John Dornan, who sits on the St Georges board, said he was aware the money was a loan but said his questioning of the issue had been glossed over.

Mr Dornan, who was elected in 2006 after the association had been set up, said: "I made my own inquiries and it was clear it was a loan. But, whenever I raised it with colleagues or St Georges, it was not addressed.

"I just assumed everyone knew."

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