pounds 55m Ally Pally losses leave 20-year legacy of cuts

Haringey has the biggest local

authority debt in the country,writes

Paul Field

Haringey Council, north London, faces spending cuts of pounds 6m a year for the next 20 years to pay the largest local-authority debt in the country: losses of pounds 55m from running and redeveloping Alexandra Palace. The council, which accepted liability for pounds 50m this month, says budget cuts could affect services in the borough but refuses to be specific.

They could be more severe if the District Auditor does not allow Haringey to spread repayment costs over 20 years. Critics say Haringey brought the crisis on itself by mismanagement at the Muswell Hill site. Alexandra Park and Palace is a charitable trust: the council took over its running from the Greater London Council in 1980. The palace, birthplace of BBC television, was devastated by fire in the same year and rebuilding and operating costs paid by the council since have reached pounds 54.7m.

John Pirrie, director of corporate services, said Haringey was confident of spreading repayments over 20 years.

''We have already set pounds 4.5m aside for this year ... It will be up to councillors to minimise the impact. With a net budget of pounds 240m a year, it is not a significant percentage.''

But Peter Forrest, one of two Conservative councillors, said: ''Six million a year amounts to a lot of services.''

And a Labour councillor, who refused to be named, said: ''We are furious at how things have got out of control but as a Labour group we take collective responsibility. If we criticised colleagues publicly, Tory Central Office would have a field day.''

The disclosure of a pounds 6m annual budget reduction comes as selection for a private development at the palace and park draws to a close. The highest of the three shortlisted bids is worth pounds 11.8m. Until now, development has been prevented because liability for the debt had not been resolved. Haringey has tried to offload the revenue debt of about pounds 24m from the running costs of the palace and park and losses on the exhibition and banqueting business on on to the trust. The council has also maintained the trust should bear half of the capital deficit from the expenditure on the redevelopment following the fire.

Haringey, as trustee, had pounds 42m to finance the restoration; a pounds 8.5m grant from the Greater London Council; pounds 18.5m insurance resulting from the fire, and pounds 15m interest. The Alexandra Palace and Park Board, the council committee acting as trustees, budgeted for pounds 35.4m, keeping pounds 6.6m in reserve, but ended up splashing out a further pounds 24m, as the project spun out of control.

In 1991, an independent report on the overspends was prepared by Project Management International, which discovered development costs exceeded the council-approved rebuilding budget and accused Haringey of unauthorised expenditure. The report said the disastrous outcome was inevitable owing to the inexperience of the design team and the lack of financial control on the part of the council.

Haringey then attempted to extricate itself from the debts by choosing a developer. However the move was blocked by the Attorney-General, who insisted the debt liability be resolved first. To claim an indemnity from the trust, Haringey had to demonstrate it managed the palace affairs prudently. However, the arguments ended when Haringey accepted liability for pounds 50m after the chief executive, Gurbux Singh, received an eight-page letter from the Treasury Solicitor. The letter, leaked to the Independent, accused the council of failing to provide evidence to prove expenditure was properly incurred; taking a risk by proceeding with the restoration of the palace and of depriving the board responsible for running of the palace of its decision-making functions.

Haringey claims it only agreed to accept liability for pounds 50m in order to clear the path for a development.

Even if a developer is chosen next week, the long-running saga of Ally Pally will run and run. Haringey has to get any development past the Charity Commission, through a public- planning inquiry and approved by Parliament.

At every stage, it is likely to face fierce opposition, both locally and nationally.

Sorry history of fires, bombing and a Romany curse

1862: When the palace was planned, an angry Romany gypsy is said to have put a curse on the site after she was ejected from it. Since then it has been plagued by disaster and financial crisis.

1863: Inspired by the success of Crystal Palace, the Alexandra Palace company was formed to build a similar showpiece for mass entertainment and recreation.

1864: Construction began. A year later the company is liquidated.

1873: The Palace opened on 24 May but is gutted by fire 16 days and 120,000 visitors later on 9 June.

1875: New building completed. New company bankrupt two years later.

1900: An Act of Parliament set up trustees to preserve palace and park.

First World War: Requisitioned for refugees and later as a PoW camp.

After two decades of financial problems, the BBC moved in to launch first public television service.

Second World War: Bomb damage.

1946: Willis organ dismantled after severe winter.

1964: Administration passed to the new GLC. Racecourse and roller-skating rink closed.

1980: The GLC convinced Haringey Council to take over as trustees with an pounds 8.5m dowry. A fire on 9 July reduced half of the palace to a shell.

1983: Redevelopment plan approved.

1988: With the project out of control, development team replaced by Project Management International, which was asked to report on the overspend.

1991: PMI report critical of council. Powerhouse Consortium Bid failed owing to unresolved debt liability.

1995: pounds 100,000 bid to Millennium Commission faltered despite pounds 58,000 paid to Shandwick Consultants, which sent the MP David Mellor to help prepare bid.

1996: Despite claiming it was not liable for the full debt, Haringey picks up a pounds 50m tab. Now set to choose a developer in a bid to make the site commercially viable.