Virtual Lancaster

Council Leader Eileen Blamire

As we reported in last week’s e-newsletter, virtual-lancaster is trying to find out how the Council’s £90,000 loan to failing company SCIC in December 2011 came to be authorised by the City Council’s Chief Executive Mark Cullinan under emergency procedures.
(See Mr Cullinan’s comments below, added 31/8/12)

We understand that the issue was raised by the Chief Executive in a question and answer session with selected councillors in mid-November, but no decision was taken at that session and we can find no reference to it in the minutes of any cabinet or council meeting until 1st February, when the full council was notified in the Leader’s report that an emergency loan had in fact been made back in December. Cabinet met on 6th December 2011 and 17th January 2012 and the Full Council met on 14th December 2011.

Last week, we asked the Leader of the Council, Eileen Blamire, why this emergency decision was not discussed at the Cabinet or Council meetings in the intervening period.

Councillor Blamire has responded that:

“The decision was taken on December 20 2011.   There was only one meeting during that intervening period – Cabinet on 17 January – so there was no undue delay.” 

virtual-lancaster also asked if the loan was made to this failing company with any conditions in place as to how the money was to be used or repaid?

Councillor Blamire told us:

“Yes there were conditions attached – the main part of the loan agreement is included in the public urgent business report that went to Council on 18 July.”

The Council’s had previously made a grant of more than £133,000 to SCIC (struggling even before the recession) over a three year period from September 2008, in the belief that the company would begin to break even by 2012.   As the £90,000 emergency loan made last December was intended to enable the failing company SCIC to meet costs vital to its survival, such as utility bills, we also asked if any additional measures were set in place to ensure that the loaned money would, in fact, be expended on those critical debts for which it was requested, and who was made responsible for overseeing this expenditure?

Councillor Blamire told us:

“As background, SCIC Ltd is a separate entity with an independent Board, which has full responsibility and accountability for  the company’s performance and its financial management .  The Council is represented on that Board, but has no controlling interest.

“Specific arrangements were put in place as part of the loan agreement with SCIC. It was due to these arrangements that the financial difficulties were highlighted and confirmed. The Council initiated the default action, because it didn’t get the required information through from the company.

“As a more general comment, the Council’s aim in all this has been to support creative industries.  In doing so and as reported, it has provided financial support over a number of years to the company managing the creative industries centre.  It has known of the company’s difficulties and has challenged that company over its performance and prospects.  The risks were well documented – even as far back as 2007 when it was decided to proceed with the Storey’s redevelopment as a CIC.  The Council chose to accept the risks then, because it thought the benefits for creative industries outweighed those risks, and there was full awareness of the risks in granting the loan much more recently.  The decision to grant that loan wasn’t straightforward though.  

“There were other complications attached to the VAT position for the building that could have exposed the Council to even greater financial risks – as well as all the difficulties and uncertainties for the sub-tenants and their customers, which we have seen in recent weeks. 

“The most important thing now is to work through the liquidation process and establish a clear way forward.” 

virtual-lancaster understands meetings will be taking place shortly to discuss the matter further and what to do about the Tourist Information Centre, currently located in Lancaster Reference Library on New Street.

Update 21/8/12:
Virtual Lancaster also asked Mark Cullinan, Lancaster City Council’s chief executive the following questions:

Can the CE comment on why the matter was not raised in any Cabinet or Council
meeting during the period between  mid-November and February?

Given that the council’s previous oversight of
this partner company had failed to avert this crisis, can he describe what
additional measures were set in place to ensure that the loaned money would,
in fact, be expended on those critical debts for which it was requested, and
who was made responsible for this expenditure?

Mr Cullinan has replied as follows: 

“The reason why the decision to provide a loan to SCIC Ltd was taken under urgent business procedures is very simple.

“Important decisions such as this are only taken once all the necessary information is available and, in this case, this only became available after the meeting of Cabinet in December. The decision, however, could not be deferred to the next meeting of Cabinet due to the urgency of the situation.

“In such circumstances the council’s constitution allows for an urgent decision to be made. 

“Although not a common occurrence, it is not unusual. Both the leader of the council and responsible Cabinet member were consulted and were in agreement with the decision, and the chairman of the Overview and Scrutiny Committee agreed that call-in should be waived.

“The decision was then reported to the next meeting of Council in February, as is required by the council’s constitution. 

“Any implication that the correct procedures were not followed is incorrect.”

Virtual-Lancaster has only the most tenuous grasp on what the correct procedures might be in such a case but the implication certainly appears to be that public money can in fact be loaned under these procedures to a long-failing company that has no visible means of repaying it.

Tenant companies occupying the Storey building on Meeting House Lane were hit by SCIC with a bill for £99,651 in additional charges just days after it received the City Council’s emergency £90,000 ‘loan’ which was intended to support these tenancies. Predictably, at this point some tenants felt forced to leave the building, with a resultant drop in its already inadequate income.