Borders council reported to watchdog over £11m land deal

Scottish Borders Council has been reported to a public-sector watchdog by one of the region’s MSPs over concerns about the purchase of the Lowood estate at Tweedbank.

Saturday, 20th July 2019, 12:02 pm
The Lowood Estate at Tweedbank.

Including legal fees and taxes, the council has spent nearly £11m on buying land to the south of the River Tweed with a view to having hundreds of houses and an industrial estate built there.

The council estimates that developing the estate would cost an extra £90m on top of the price of the land but would potentially generate £150m of gross value added for the region’s economy.

However, Christine Grahame, MSP for Midlothian South, Tweeddale and Lauderdale, revealed in her column in the Southern this week that she has referred the council to Audit Scotland, an independent regulator for public-sector accounts. 

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The Scottish National Party MSP highlights a number of concerns about the purchase, including the use of tax havens to purchase the land and the fact that the council paid £9.6m for the land, more than the UK Government’s believes it’s worth. 

Despite that, the council and its 34 elected members refuse to reveal how much more the council paid for the land that it is valued at, and the authority has rejected freedom-of-information requests for that valuation figure. 

The £9.6m of taxpayers’ money used to pay for the purchase ended up in two Cayman Islands accounts, meaning the seller does not pay transaction tax.

Landowner Alexander Hamilton was paid via Lowood Estates and Genesis Trust and Corporate Services, both based in the British overseas territory.

On the other hand, Borders taxpayers face paying £422,250 in land and buildings transaction tax, as well as a £30,000 VAT bill, bringing the cost of the deal up to nearly £11m.

The council also confirmed that the cost of temporary borrowing for the deal is £780,000, assuming the loan is paid off over 10 years.

In her column, Ms Grahame writes: “There is a very big stushie about the purchase by Scottish Borders Council of Lowood estate, partly because the purchase price appears to have been above valuation.

“Additionally, the Tory-led local authority has paid out to landowner Alexander Hamilton via Lowood Estates and Genesis Trust and Corporate Services, based in the Cayman Islands, so the purchase price of £9.6m for the 110 acres of land was not subject to transaction tax. 

“This means that Borders taxpayers will be forking out £422,250 in land and buildings transaction tax, plus a £30,000 VAT bill, which, with other fees brings the bill to some £11m.

“There are also challenges to the housing development plans, which the council needs to recoup the money, which are seemingly light on necessary detail, raising serious questions about this Tory council’s grasp of economic reality.

“Never mind, pupils may be able to follow this saga on their £15.7m iPads.”

Ms Grahame also highlights a report from Edinburgh-based property consultant Ryden, commissioned by the council, and another by US-based property consultant James Lang LaSalle for Middlemede Properties, an Isle of Man-registered company which owns salmon fishing rights along the bank of the Tweed at Lowood. 

Ms Grahame continues in her column: “In the meantime, I have read through reams of material, including both the Ryden report on the purchase and a report by JLL.

“My concerns have, as a result, increased, so I have now reported Scottish Borders Council to the Accounts Commission and as it refuses to publish the district valuer’s report, which apparently valued Lowood estate below the purchase price and is key, have asked the assessor’s office for sight of that.”

A spokesperson for the council said: “Elected members considered the Ryden report in full, along with other information, in May 2018 and had access to all this information and more ahead of making the final decision to proceed with the purchase of the Lowood estate in December 2018.

“The acquisition of the site by Scottish Borders Council is part of a long-term strategy that will enable appropriate development opportunities to be taken forward by both the private and public sector.

“Scottish Borders Council remains strongly of the view that the economic viability of the site will best be secured through a joint public and private-sector approach and is pursuing that approach, as agreed by council last December. 

“The consideration of economic viability must not just look at the simple cost of the purchase but also the long-term economic benefits of jobs that will be created during construction phases, through employment as part of its mixed use, and through the provision of homes for both local people and those who wish to relocate to this area.”