SII Focus 2nd November 2016

City Hall orders investigation into financing of London Olympic Stadium

London mayor Sadiq Khan has launched an investigation into the financing of the former London Olympic Stadium, which became home to FA Premier League club West Ham United after the 2012 London Olympics. An emailed statement from City Hall said that Khan had ordered the investigation ‘following a dramatic increase in its costs under the previous administration at City Hall’, and further details would be announced in due course.

“The former Mayor announced just last year that the total cost for transforming the stadium was £272 million”, said a City Hall spokesperson. “In reality this is £323 million – a difference of more than £50 million”. A tendering process is currently underway for moving the stadium’s retractable seating for the 2017 World Athletics and Para Athletics Championships, which will be hosted at the stadium. City Hall said it was likely to be ‘significantly higher’ than the planned £300,000 cost estimated by the previous administration.

In September 2015, the UK Information Commissioner’s Office (ICO) ordered the London Legacy Development Corporation (LLDC) to disclose the terms of its agreement with West Ham to use the stadium, following a complaint alleging that public funds were being used to support the club’s tenure. However the LLDC appealed.

In an 11 April decision, the Information Rights Tribunal rejected that appeal and ordered LDDC to publish the 207-page agreement. The LDDC initially complied, however the agreement has since been removed from its internet site. It revealed that West Ham is paying £2.5 million per year to rent the stadium, which cost £272 million to convert for football use.

The stadium is owned by E20 Stadium LLP, a joint venture between the LLDC and Newham Council. In March 2013, it agreed a deal for West Ham to move into the stadium this year. ‘In addition to the funds to be provided by the Legacy Corporation for the adaptation works, West Ham will contribute £15 million, Newham Council will invest £40 million and the Government has agreed to provide additional support of up to £25 million should it be required once the tenders are returned’, read a statement. The LLDC is funded by Greater London Authority (GLA) grants – i.e. by London taxpayers, as is Newham Council.

‘This is a breakthrough in our long campaign to highlight the intolerable burden on taxpayers of the rebuilding of the Olympic Stadium to the specification of a well off Premier League football club’, read a statement from the Olympic Stadium Coalition, which has campaigned for transparency on whether public money is being used to support West Ham’s tenure at the stadium. ‘We have never objected to the idea of West Ham playing at the stadium; the question is simply one of how much the club should pay, and how much the taxpayer should be expected to fund. Our attempts to seek transparency have been blocked at every turn by the London Legacy Development Corporation and Newham Council. It took two years for us to obtain release of the full rental contract under Freedom of Information law. We believe that all taxpayers deserve to be made fully aware of just how much we are all paying, and how much West Ham United are paying towards both capital and operating costs.’

‘Only this week, we have learnt that the naming rights deal for the stadium has fallen through’, the statement continued. ‘As a result, we believe this means the stadium will operate at a loss for the foreseeable future, especially if the police seek to recharge the costs of their increased presence at the stadium due to crowd control issues. The entire deal, and not just the rebuild costs, should be examined in detail, by the Mayor and the taxpayer.’

‘Any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market’, reads Article 107 of the Treaty on the Functioning of the European Union (TFEU). However, in 2013 the EU Commission dismissed a complaint from a member of the public that the agreement between E20 Stadium LLP and West Ham involved illegal state aid.

It appears that the EU Commission accepted the explanation of the UK authorities that West Ham had paid market price for its use of the stadium, and that there is no unlawful State Aid where West Ham was granted non-exclusive use of a publicly financed multi-use stadium following a fair and lawful competitive tender process. Depending on City Hall’s findings, the EU Commission may decide to revisit that decision, if it receives a future complaint.

On 4 July, the European Commission ordered that public support measures granted to seven Spanish clubs must be repaid, as they resulted in an unfair advantage over other clubs. Most of these involved tax and bank loan advantages, however in the case of Real Madrid, it involved a preferential revaluation of land, which financially benefitted the club. In another decision, the European Commission found that five Dutch clubs had benefitted from preferential stadium and land deals, in contravention of the EU state aid rules outlined above.

As outlined above, West Ham only contributed £15 million of the £323 million required for the London 2012 Olympic stadium to be converted for football use. It also has a 99-year lease agreement to rent the stadium from E20 Stadium LLP for £2.5 million per year. Policing, stewarding, pitch maintenance and other stadium running costs will be paid the E20 Stadium LLP. Whether this constitutes a prudent use of taxpayer money in these times of austerity will presumably be examined by the City Hall investigation.

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