The news that the now privatised Royal Mail Group has sold the Mount Pleasant site to developer Taylor Wimpey for £193 million, a mere 565% of the ‘book value’ of the land, is the latest chapter in a genuine scandal. And it’s a story that typifies why so many people feel let down by Tory-facilitated crony capitalism.
The Mount Pleasant site straddles the border between Islington and Camden boroughs. It’s a prime site for a potential development at a time when London needs to massively increase the number of homes it builds each year, particularly homes that are genuinely affordable to people on low and modest incomes. It’s important to say that Islington Council and I strongly support the principle of building new homes on the site, but that these have to contribute to helping the thousands of local residents whose lives are being ruined by being forced to live in appalling over crowding, or those struggling to get onto the housing ladder.
This piece by the excellent Dave Hill gives a pretty fair summary of the history of this site.
From the start Royal Mail Group had no interest in talking to Islington Council about the site. Islington has among the toughest set of planning policies in the country and our independent analysis showed that a commercially viable development could be built with almost 50% of the new homes created being genuinely affordable. Royal Mail Group made no effort to comply with this ethical approach to development and instead put all of their energies into lobbying then Mayor Boris Johnson to use his powers to ‘call-in’ the planning decision.
It’s important to understand just how important planning permission is in deciding how much any given piece of land is worth. The value of a site like this land is set by how much money a developer can make from it. The granting of a planning permission for a very lucrative development will massively increase the value of the land, while a tough set of planning conditions on any site will reduce its value. Developers regard a site with a planning permission already in place as a less risky purchase and so the value rises accordingly – hence Royal Mail’s determination to get planning permission before selling.
The planning permission that Mayor Johnson gave was unprecedentedly weak, in the Islington’s recent history, at getting genuinely affordable housing. It ran contrary to both Islington and Camden Council’s planning policy, but also contrary to his own GLA planning policy, which argued for a higher number of affordable homes on a prime site like this. It therefore massively increased the value of the site to the owners.
It’s not like the potential windfall profits Mayor Johnson’s generosity generated for Royal Mail Group are a surprise. Labour Shadow ministers warned in 2013 that the property assets of Royal Mail were vastly undervalued. This sale shows they were absolutely right. The Minister responsible was Lib Dem, Sir Vince Cable.
So some investors have made a ton of money and the politicians involved haven’t done too badly either: Johnson is now, almost unbelievably, our Foreign Secretary and Sir Vince Cable has just been elected party leader. What’s the problem?
Where there are winners in life there are inevitably losers too. That that’s why this scandal really matters. It matters because ordinary people have been ripped off twice by this move:
- Islington has a housing crisis with thousands of families desperately in need of new genuinely affordable homes. The estates around the Mount Pleasant site have scores of desperately over-crowded families whose lives would have been transformed by a decent affordable home in the new development. The real losers from this sorry episode are ordinary working families whose search for decent living conditions will go on because Boris Johnson oversaw this outrage. Local MP Emily Thornberry and local Labour councillors campaigned tirelessly to make this point but were ignored by Boris Johnson.
- In a broader sense, we’re all losers. The Royal Mail Group was massively undervalued when it was sold off. As Labour made clear in 2013 the property assets of the group were not properly accounted for and so the new owners of Royal Mail Group have been able to make these astonishing windfall profits. Even if you agree with the privatisation of RM (and I don’t), no one can argue that taxpayers should have been treated in this way. No wonder that major corporate investors flocked to the sale and the Ordinary Joe lost out. The upshot of this massive undervaluing is that we, the British public, got a terrible deal and the Government considered they had licence to push through hundreds of millions of spending cuts to public services that could have been avoided with more money from the sale.
If you ever want to understand who the public are so angry with a country that seems rigged against them and are turning to the Labour Party for real change it’s sorry stories like this, where the majority have been ripped off to generate massive profits for the few.
In the short term the Government should immediately intervene to:
- Insist more genuinely affordable housing is built on the site.
- Introduce a windfall tax on the now private Royal Mail Group to recoup the losses suffered by us taxpayers.
The whole sorry episode goes to show the difference the right Mayor of London makes. The difference now Said Khan is in power at City Hall is marked, with the new Mayor wanting to work Islington to get the maximum amount of affordable housing on the Holloway Prison site. The votes cast in the Mayoral election really have made a difference.