Why Hounslow Council can’t afford to take its eye off Lampton

Hounslow Council’s wholly owned Lampton Group has posted its first profit in over a decade, but the headline figure conceals a £1.7 million debt that may need to be written off, and deepening losses elsewhere in the group.

Chiswick councillor Jack Emsley, Conservative councillor for Chiswick Homefields ward, says the figures shouldn’t be taken at face value.

Following last week’s Borough Council meeting, he warns that the modest profit is masking deeper financial problems within the group, including a £1.7 million debt that may need to be written off.

Guest blog by Cllr Jack Emsley

Last week’s Borough Council meeting heard that the Lampton Group, a group of companies owned wholly by Hounslow Council, had made its first profit since being set up over a decade ago.

The headline figures in the council’s financial strategy report stated that the £100,000 profit was a ‘solid foundation’ to move forward and could show the way to a ‘credible path to a modest dividend’ for the council.

All of that sounds like a far cry from the ticking timebomb I wrote about last year. Is this really a corner turned for the Lampton Group? There are a number of reasons to suggest not.

The first and most obvious point to make is that the small profit made this year barely puts a dent in the £15 million cumulative loss made by the group of companies so far. If it were to consistently deliver this level of profit, it would take over 150 years for the group of companies to make back the losses it has accumulated to date. That is hardly something for taxpayers to celebrate, particularly as Lampton was initially set up to provide an income stream for the borough.

But hidden in the financial reports presented to the council last week, there are two big red flags that suggest this year’s unexpected profit may be hiding a much more precarious position for the group of companies, one that could ultimately be very bad news for our borough’s finances.

The first red flag is that this unexpected profit was driven almost entirely by the exceptional results of just one company within the group, Lampton Recycling. That entity made a £1.5 million profit, over a million pounds more than was forecast. This was driven by favourable market conditions and additional work being commissioned by the council.

This result helped hide much poorer results in other areas of the Lampton Group.

Lampton Investment, which uses taxpayer money to buy and develop housing, made another million pound loss. Equally concerning was Lampton Greenspace, the company that manages parks in the borough, which made a £400,000 loss despite forecasting a £400,000 profit.

Curiously, Lampton Development, another arm of the group’s housing development project, wasn’t included in the headline figure but was included in the financial breakdown. That company made a £200,000 loss, so if its outturn had been included in the group figures, we wouldn’t be talking about a profit at all.

Now, that’s a lot of detailed numbers about companies. Of bigger concern is a short section buried deep in the full financial report.

That section states that Lampton Development still owes the council £1.7m. There’s an acknowledgement in the report that ‘there may be a need to write off any remaining loan balance’.

That’s a huge hit to local taxpayers, far outweighing the minor profit made in the headline figure.

As I made clear at last week’s Borough Council meeting, any write off of that size must face proper scrutiny. It can’t just be agreed in a 20 minute shareholder committee meeting behind closed doors. It must be a transparent process and, in the event it does happen, should come with an apology to local residents who are being forced to bail them out.

So whilst the headline figure for the Lampton Group sounds positive, it’s worth approaching it with caution. Buried beneath the surface of glossy shareholder reports and triumphant speeches at Borough Council, there are deep structural problems in the group of companies.

Until Hounslow Council’s Labour administration face up to that reality, we are on the hook for a very nasty, multi million pound hit to our borough’s finances, and as taxpayers, that will fall on us.