AC-2024-LON-001877 - [2025] EWHC 2132 (Admin)

Mr Mackin referred the inspector to a series of Cabinet decisions taken by the current Mayoral administration of the Second Defendant since December 2018. The relevant reports were in evidence before the public inquiry. Mr Mackin made particular reference to decisions taken by the Cabinet in response to a report from officers which it considered on 9 March 2023 [“the March report”].

In the March report, Cabinet were advised that in order to progress with a compulsory purchase order as recommended, the Second Defendant would need to demonstrate at all the necessary resources were likely to be available both to pay the requisite land compensation and to implement the Scheme. At the date of the March report, the approved budget for the Scheme stood at £54.1M. A principal purpose of the March report was to seek Cabinet approval for an increase in that budget to £78.1M (plus CPO costs).

Section 4.2 of the March report addressed the Scheme budget and explained the increase of £24M since Cabinet approved a budget of £54.1M in July 2021 –

“As approved by Cabinet in July 2021, Populo has undertaken a two-stage procurement process to select a main contractor. As part of the procurement process, a target cost plan has been prepared along with an updated financial appraisal to provide the latest construction figures and overall project budget as set out in this report. The successful contractor’s cost information has been reviewed and checked for robustness by the appointed QS firm, Mott MacDonald. This process gives confidence in advance of Stage 1 and further provides confidence that the budget and the level of contingency for risk including cost inflation are sufficiently covered. It should be noted that since July 2021 there has been a number of geopolitical factors including the war in Ukraine, which have increased construction costs”.

Tables in the March report provided both a breakdown of the forecast cost of the Scheme of £78.1M (plus CPO costs) and an analysis of the £24M increase in cost from the figure of £54.1M approved in July 2021.

Section 4.3 of the March report advised Cabinet on the financial viability of the Scheme. The advice was that the Scheme was to be delivered as a “self-standing project” and also as the first phase of the masterplan for regeneration of the Carpenters Estate. The Scheme proposed predominantly affordable housing. It offered the opportunity to decant existing tenants and to enable remaining leaseholders to return following completion of the works. The March report continued –

“As such, the viability of the JRP scheme offers wider benefits acting as a loss-leader ahead of the wider masterplan. This report is therefore seeking approval to make sufficient capital budget available to proceed and implement the JRP scheme and to kickstart regeneration and rejuvenation of the Carpenters Estate. The masterplan financial appraisal is demonstrated to show the cost of the JRP scheme can be recovered from future phases of the masterplan, but the masterplan is still seeking planning consent from LLDC and its implementation remains subject to future cabinet decisions.”

The March report included specific advice from the Second Defendant’s Director of Finance –

“This report sets out the proposed increase in the budget for the JRP scheme, which forms part of the wider Carpenters estate programme. For the reasons set out in the report, an additional £24m expenditure (plus CPO costs) now needs to be budgeted for, and the report recommends doing so.

The report also assumes that a £12m GLA grant will no longer be available for the JRP scheme due to the delay in achieving vacant possession. Officers will continue to engage with the GLA to explore other opportunities to bring grant income into the scheme, but it is deemed prudent to assume no grant will be received at this stage. All else being equal, this will reduce the Programme cash flow by £36m thereby impacting on the wider Carpenters Programme Viability.

However, since July 2021 the private rental market has performed more strongly, financially, than anticipated at that time. Populo have engaged JLL to provide the private home rental and sales valuations and forecasts. JLL's current valuations show an average 15% rise in private rental values from those included in the July 2021 Cabinet Report. In July 2021, the forecast was for an average 9% rise which was a reasonable assumption at the time, but like all models can only ever be an estimate. This additional 6% increase above the forecast has improved the private rental income stream, which is the largest income stream in the masterplan model, which has made a significant contribution to maintaining Programme viability. The updated Programme Viability Model for the overall masterplan will be reported to Cabinet later in 2023.”