Spacious, desirable and still empty

Why has County Hall been standing useless and rotting for nine years? Paul Vallely explains

It stands as a monument to 16 years of Conservative government, a testimony in equal measure to the strident ideology of the Thatcher epoch and the dilatory incompetence of the Major years. County Hall, an imposing edifice of imperial Edwardian classicism that occupies one of the most splendid sites in London across the river from the Houses of Parliament, has stood empty since the Greater London Council was abolished in 1986. Now, we are told, it is to remain unoccupied for another 20 years.

Peer through one of its 3,000 windows and the scene is one of dust and decay. Deep holes, long abandoned, have been dug through the floors of those of its 1,200 rooms that are visible from the riverside. Its 12 miles of corridor serve no purpose other than to exercise the dogs of its security guards. Empty papers blow around the courtyards of the Grade II listed building, from whose balconies the erstwhile GLC leader Ken Livingstone was wont to hang banners proclaiming the number of London's unemployed in letters so tall they were impossible even for the denizens of Westminster across the river to ignore.

It was closed in what will undoubtedly go down as one of the most shameless gestures of spite in 20th-century political life. The GLC had to go - whatever ersatz rationale was dreamt up in justification - primarily because it was the power base of Red Ken. The "enemy headquarters" Mrs Thatcher dubbed it, after Livingstone had the cheek to win the approval of large numbers of not-very-red Londoners with common-sense policies like his Fares Fair scheme - slashing public transport prices to draw cars off the capital's overcrowded roads.

When the capital was deprived of any elected body responsible for a strategic vision for the metropolitan sprawl, the job of getting rid of the GLC's embarrassingly prominent property was passed to an unelected quango, the London Residuary Body. At first there were no takers. Then a Japanese- led consortium, the County Hall Development Group, was formed to develop it into a luxury hotel, leisure and private housing complex. But the scheme failed when the group went into liquidation in 1990 - after putting down a £20m deposit which it lost to the LRB when it went bust.

But the notion had become a dream for one of the group's members, a Japanese millionaire named Takashi Shirayama. Through his Osaka-based property and leisure company, Shirayama Shokusan Ltd, he made a bid of £60m. It was not a dream shared by the Japanese bank that acted as his financial adviser; it pulled out the day he signed the contract for a 999-year lease.

Negotiations were something of an on-off business because of the interest of another bidder, the London School of Economics, which had outgrown the cramped complex of buildings it occupied across the river around Aldwych. To the LSE, County Hall's 700,000 sq feet seemed an ideal solution. There was considerable public support for the idea, on the grounds that it would be fitting for one of the nation's prestigious academic institutions to occupy such a prominent site. The LSE bid £65m, on the assumption that it could raise £100m within three years for its existing site in the more expensive West End.

By 1992 the Cabinet was divided over which bid to accept. John Major and the Education Secretary, Gillian Shephard, favoured the LSE. But Michael Portillo, then Chief Secretary to the Treasury, persuaded his colleagues that the LSE bid could cost the public purse as much as £80m if it was unable to sell its existing premises in time at a good price. Eventually Michael Howard, then Environment Secretary, gave the go-ahead for the sale to Shirayama Ltd.

The arguments about which deal was worth the most were pretty murky, especially since, as was revealed in Tuesday's report on the matter from the National Audit Office, the Japanese forced down the price as soon as the LSE bid was rejected. Anyway, there was no legal obligation on the LRB to sell all former GLC property to the highest bidder. The nearby Jubilee Gardens were sold for £1 to the South Bank Centre, and similar public-interest decisions were made in Covent Garden and Thamesmead. But with County Hall, some would suggest, there was another imperative: the home of Red Ken had to become a monument to private enterprise and the LSE, a former temple of Fabianism and crucible of Sixties student revolution, was not a suitable substitute.

Whatever the truth of that, it was clear that once Mr Shirayama had wrung out of the LRB a £10m 19-year interest-free loan, he began to shift the terms of his proposal and though he paid up £50m in October 1993, he refused to provide bank guarantees for the balance. He announced that his original plan to turn the riverside site into a luxury hotel was now "not an appropriate use for the building". He said he would have to redraw his plans radically in the light of the recession and property slump.

He has been redrawing ever since. A year ago, he announced a joint venture with Richard Branson to turn the place into a Virgin leisure and hotel complex. It would have 570 bedrooms (expanding to 1,200 in a second phase, making it London's largest hotel) and would include, the company announced without irony, a "virtual reality" entertainment centre.

In October, it was reported that Mr Shirayama was trying to sell County Hall to two Hong Kong millionaires. A month later he and Branson fell out when he announced that the building would become offices and exhibition space as a Pacific Asia Centre to promote European-Asian ties. Now, according to the NAO report, he has announced that it may take another 20 years to develop.

In 20 years' time County Hall could be in a ruinous state. Buildings start to deteriorate as soon as the heating is turned off in them. The rotting of wood accelerates, infestation becomes a problem, the roof begins to go. No one is suggesting that Mr Shirayama would resort to the shady property speculator options - to send in the bulldozers overnight or set fire to the place on the quiet. But the price of properly maintaining County Hall could easily come to £3m a year, which would double the cost of his investment.

It would not be unprecedented in such a circumstance for maintenance to be kept at a level that merely slows, rather than arrests, deterioration. The irony is that, had the LSE bid and its schedule been accepted, 7,000 students would have been moving into County Hall within the next few months.

The question for the Public Accounts Committee, which must now respond to the NAO report, is: can the Government stand by and watch such an important building deteriorate? Officially, the LSE says it now has no stake in the issue. But earlier this year Gillian Shephard met the LSE director, John Ashworth, and it is known that County Hall was on the agenda.

The Government's room for man-oeuvre seems pretty limited. Compulsory purchase of the property is probably unthinkable - which, ironically, is how the LSE acquired its existing premises around Aldwych. But given the options now open to the unhappy Mr Shirayama - who recently apparently proposed that Mr Major hold a referendum to discover options for the complex - it may well be that compulsion would not be necessary.

With the threat of compulsory purchase in the background, it is probable that Mr Shirayama would agree to sell voluntarily, and possibly at a good price. The Government could then sell the building to the LSE. Most people would consider it a happy ending to a sorry saga.