Leading Article: The LSE's ideal home

COUNTY HALL, the magnificent Edwardian pile and former headquarters of the Greater London Council that faces the Houses of Parliament across the Thames, has stood empty since Margaret Thatcher's government abolished the GLC in 1986. The site is now owned by the London Residuary Body on behalf of the boroughs that comprised the former GLC. The LRB's mandate has been to sell it for the best possible price. The first proposal, to develop it into a luxury hotel, leisure and private housing complex, came from a Japanese-led consortium that went into liquidation in September 1990. The next came from the Osaka-based Shirayama Corporation, also for a hotel complex, but on the river frontage only.

Well before a contract was signed in March, the London School of Economics had let it be known that it was keenly interested in the possibility of moving into County Hall from its present cramped buildings off Kingsway. But it faced prolonged obstruction from both Lambeth Council and the LRB. Lambeth Council expected a Labour election victory in April that would restore County Hall to its old function as seat of a strategic London authority. The LRB did not want to upset its Japanese deal.

Eventually, the Department of the Environment gave the LSE a tight deadline to submit a bid and told the LRB not to take further action without the specific approval of the Secretary of State: any decision would, it appeared, be made on the basis of national interest as well as of the price. At the eleventh hour, the LSE put in a bid for pounds 65m, based on the assumption that it could sell its present site for about pounds 100m within three years. The Shirayama bid is thought to be pounds 60m for half the site.

The Japanese and the LRB are furious that the Government has moved the goalposts, and the LRB this week issued a statement describing the LSE's bid as 'highly speculative'. The Cabinet itself is divided on the issue. John Major favours the LSE bid. Others see a serious danger of the school failing to raise sufficient funds and requiring endless subsidy: the case thus becomes a test of the Government's determination to cut costs.

Yet if 1,000 Londoners were asked which use for County Hall they would prefer, it would be suprising if more than a handful opted for a 600-room luxury hotel. The case for the LSE looks overwhelming. By standard university criteria, it is already 30 per cent over capacity. Yet it is being asked to play its part in dramatically increasing the capacity of higher education in this country. At present it has 4,600 students: half are from overseas and last year brought in pounds 12m of foreign earnings. Its aim is to reach 7,000 by 1995, the year in which it would, hypothetically, move to the South Bank. On conservation grounds, the winner is equally clear. Whereas the Japanese would gut the Grade II-listed building, the LSE would leave it virtually intact.

There are those, including one or two of the LSE's governors, who fear the move could bankrupt Britain's foremost social sciences university. Others fear that rapid expansion would destroy its character - a separate issue. What is surely not in doubt is that the LSE and County Hall are perfectly matched, and that London needs a new, centrally located luxury hotel like a hole in its collective metropolitan head.