Sunday, 24 March 2013

The Simple Seller

I've often liked BOM's expression - the Simple Shopper, to describe the disaster that is the government purchasing, but there's another side to it - the Simple Seller. Government isn't just bad at buying, it's also bad at selling:-

West Ham will be anchor tenants for the Olympic Stadium after the government agreed to put in an extra £25m towards the costs of converting the venue.

The additional money takes the Treasury's contribution to around £60m. Adapting the stadium could cost between £150m and £190m.

But the deal was secured only after West Ham agreed to increase their own funding of the project by £5m, to £15m. They will move in from August 2016 and pay around £2m a year rent.
So, we didn't just spend £500m on a white elephant athletics stadium, we're now spending a further £190m just to get rid of it, and West Ham are paying a peppercorn rent to get it (Emirates cost £500m, just to give you a comparison of the value of a new stadium).

It would have been cheaper just to have burnt the thing down.

7 comments:

Mark Wadsworth said...

Bizarre. With a normal land auction, the buyer who offers the highest price gets it. When the government auctions off land, it appears to go to the "buyer" who demands the biggest subsidy.

Anomaly UK said...

I seem to recall that Tottenham offered vastly more money to buy the stadium, but they planned to knock it down and build a new one on the site, so their offer was rejected. The "legacy" of the Olympics had to be preserved, even though it has a cash value of about minus a hundred million pounds.

The Stigler said...

Mark,

As Anomaly says, this became about the sentimentalism of "legacy", when in reality, athletics can rarely get a crowd bigger than the 15,000 that Crystal Palace holds. World Championship, maybe, having a 60,000 stadium for another once in a blue moon event doesn't add up.

Mark Wadsworth said...

AUK, I've Googled around a bit but I can't see anywhere how much TH actually bid for the site.

If the building itself is worthless, then what is the site worth (several acres, excellent transport links)? Maybe £50 million or £100 million or something?

Bob E said...

MW - Bizarre to the extent of "£290 million subsidies to sell government owned land at undervalue to private developers?" as highlighted in the HOI checklist -

"Around 30 development sites will transfer to the Homes and Communities Agency through the Communities and Local Government department’s public sector land auction model.

Today’s Budget statement says since last year’s autumn statement the CLG has invited bids from eligible public landholders for £290 million funding, allocated in order to accelerate surplus public land disposals. It will now work with the Treasury to conduct a feasibility study into wider use of the model.

Once land is handed over to the HCA, it will then work to dispose of the sites ‘quickly’, the Budget statement said"

Bayard said...

Those figures don't add up.

Cost of conversion = £190M
less Treasury contribution of £60M = £130M
less West Ham's contribution of £15M = £115M

Who is paying the £115M? Some other public body, no doubt, who get their money from, er, the Treasury.

The Stigler said...

Bayard,

The Mayor of London is chipping some money in, as are the local council in the form of a loan.

(yes, David Gold and David Sullivan are laughing all the way to the bank).