Cabinet Member for Finance, Asset and Investments
Decision:
It was RESOLVED: -
1.2 Delegate authority to the Directors of Assets and Investments and Finance in consultation with the Portfolio Holders for Assets & Investments and Finance to review the final IFRS16 calculation and implement the headlease in accordance with this report.
REASON FOR DECISION
To bring forward the development of the new health centre and subsequent capital receipt.
Alternative Options Considered and Rejected:
1.3 Option 1 - Do Nothing
1.3.1 This will result in the sale and development of the land as a Health Centre not proceeding. The current sub-standard and dated facilities will be retained and used to best effect. This option has previously been discounted by Cabinet as Sudbury has an urgent need for improved medical facilities in the town.
1.4 Option 2 - Assura accept a shorter lease commitment from the HHGP
1.4.1 Assura are committed to delivering this development and have invested significant time and finances into progressing the scheme for in excess of 8 years.
1.4.2 Reducing the lease term from 25 years to 15 years creates a development with negative viability which Assura is unable to pursue. This is therefore not a viable option.
1.5 Option 3 - A headlease is entered into by NHS/ ICB with sub lease to HHGP
1.5.1 HHGP are prepared to commit to a 15-year lease, however for the development to be viable a longer 25-year lease commitment is required. A third party, with a substantial covenant, could therefore enter into an agreement to take a headlease for a term of 25 years simultaneous to a 15-year sublease being granted to HHGP.
1.5.2 The obvious third party to take a headlease in this situation would be part of the NHS. This has been explored by NHS organisations however primarily for accounting (namely the NHS adopting IFRS16 from 2022) and lack of appropriate policy reasons this cannot be progressed at the current time. The transition from CCGs to ICBs will enable ICBs to hold property assets in the future, which the CCGs were prohibited from doing, however whilst this is now permitted by legislation the policy framework is still to be developed nationally.
Any Declarations of Interests Declared: None
Any Dispensation Granted: None
Minutes:
88.1 The Chair invited the Cabinet Member for Finance, Assets and Investments to introduce the report.
88.2 Councillor Busby provided an introduction and proposed the recommendations as detailed in the report. Councillor McCraw seconded the recommendation.
88.3 The Chair invited Councillor Simon Barrett to provide background information to the Cabinet in his capacity as previous Ward Member for the site.
88.4 Councillor Busby queried how many leases of existing sites were under 10 years. Daniel Turner - NHS Suffolk Representative responded that for the existing premises the lease was approximately under 10 years.
88.5 Councillor Ward questioned why the Integrated Care Board (ICB) could not take the head lease themselves. Peter Wightman - NHS Suffolk Representative responded that the NHS had entered into a capital allocation programme, which was for a 10-year lease.
88.6 Councillor Osborne queried how potential issues in recruiting and maintaining staff would be dealt with. Peter Wightman - NHS Suffolk Representative responded that there was a statutory duty from the NHS to provide healthcare, and recruitment issues could be mitigated by bringing in staff from other practices until a long-term solution was found.
88.7 Councillor Malvisi questioned why doctors were only willing to sign a 15-year lease. Peter Wightman - NHS Suffolk Representative responded that as capital came from the insurer, doctors were not liable for the lease as this fell to the NHS. Additionally, a lack of confidence in NHS and their contract setting terms had meant that 25-year contracts were not desirable.
88.8 Councillor Busby questioned the break clause in relation to a new tenancy and whether the Council as head lease holder, would be able to renegotiate their portion of the lease. The Director – Assets and Investment responded that the 25-year lease in place with the owner of the building would remain the same, and a new sub-lease could be negotiated with an incoming tenant under similar terms and conditions of the previous lease. Additionally, there was a clause that allowed the lease to be terminated by the Council should the rent no longer be reimbursed by the NHS.
88.9 During the debate Councillor McCraw highlighted that as the site was a purpose-built health centre it was likely that in 15 years’ time there would still be the need for healthcare provision in Sudbury and Great Cornard, and that there was little risk that the services of the centre would change.
88.10 Councillor Osborne stated that she was torn on this scheme as Babergh District Council were not a healthcare provider. Additionally, whilst the risk was minimal, other councils had rejected similar schemes. However, voting for the scheme was the right thing to do.
88.11 Councillor Arthey had considered Councillor Simon Barrett’s previous statement however, he stated that in order to support the communities’ things needed to change. Additionally, in future there might be provision issues due to CIL payments.
88.12 Councillor Ward stated that this was a difficult decision, however due to the issues around the length of the lease and that the risk would still be with Babergh in 15 years’ time. However, as there was a requirement for the medical centre, Babergh could provide monetary assistance to do so. Whilst Babergh did not want to set a precedent for funding these schemes, there was little choice as the new medical centre was needed.
By a unanimous vote.
It was RESOLVED: -
1.1 Delegate authority to the Director of Assets and Investments in consultation with the Portfolio Holder for Assets & Investments to agree the detailed terms of the letter of comfort and headlease in accordance with this report.
1.2 Delegate authority to the Directors of Assets and Investments and Finance in consultation with the Portfolio Holders for Assets & Investments and Finance to review the final IFRS16 calculation and implement the headlease in accordance with this report.
REASON FOR DECISION
To bring forward the development of the new health centre and subsequent capital receipt.
Supporting documents: