An investigation into £55m of taxpayer loans granted to property firms controlled by Manchester City's owner is being stepped up, as Prime Minister Andy Burnham faces pressure over the deals made while he was Greater Manchester mayor.
The housing loans were approved in two meetings in 2017, both chaired by Mr Burnham, through the Greater Manchester Housing Investment Loan Fund. The fund, set up in 2015 with an initial £300m of government funding, was designed to provide loans for 'projects which might otherwise struggle to secure financing'.
Transparency concerns raised
John Leech, new chairman of the local authority's overview and scrutiny committee, is ramping up the investigation launched earlier this year. He told the BBC: "We just want to be clear that there is a transparent rather than an opaque process." Mr Leech added that the approval process had been criticised as 'very opaque in the past and that it's not necessarily been clearly understood why X was successful and Y wasn't'.
Councillors have raised concerns about transparency and said the process to approve the loans was 'out of kilter'. More than £1bn has been lent to 50 property developers, including three controlled by City's Abu Dhabi owner, since 2015.
Sheikh Mansour's involvement
The loans went to property companies ultimately controlled by Sheikh Mansour bin Zayed al Nahyan, who owns Manchester City and is vice-president of the United Arab Emirates, which boasts a GDP of £467bn. Manchester Life, a joint venture set up in 2014 between the city council and Abu Dhabi United Group (ADUG), was involved in three property developments with ADUG partially financed through the loan fund.
ADUG has repaid the loans with interest, but the rate is not known. The club is awaiting punishment after an independent panel's judgement that it breached funding rules by arranging 'sham' contracts to secretly pump almost £1bn into its coffers over nine years. It has lodged an appeal.
Political fallout
Fury erupted after Mr Burnham reacted to the club's guilty verdicts by saying he would be 'really concerned to lose' its Abu Dhabi owners because they had been 'such a huge partner in the building of modern Manchester'. It has since been revealed he met City's owners at least six times as mayor and accepted club-funded freebies worth almost £1,200. Two hospitality dinners with club chairman Khaldoon Al Mubarak while the scam was ongoing were not revealed by the local authority.
Housing Secretary Angela Rayner has been accused of refusing to investigate the loans after a Manchester-based property developer wrote to her demanding an investigation. The developers questioned why so much money was lent to ADUG with no requirement to build affordable homes, and claimed 'no due diligence' was carried out. Despite receiving the request last month, Ms Rayner has yet to make any public comment.
Calls for independent inquiry
Tory party chairman Kevin Hollinrake suggested she was failing to act because of 'a clear conflict of interest'. He said: "She is being asked to look into deals made under the man who she campaigned for and who just gave her a Cabinet job and she is sitting on her hands. Developers raised serious concerns with her department more than a month ago and have heard nothing. If the PM has nothing to hide, he should welcome a proper independent investigation."
Conservative local government spokesman Katie Lam said: "The chumocracy at the heart of Burnham's dealings in Manchester deserves proper scrutiny, not political protection. Rayner should put the public interest ahead of party loyalty."
A Greater Manchester Combined Authority spokesman said: "The Housing Investment Loan Fund was set up in 2015 with £300m of Government funding to encourage, accelerate and unlock the building of new homes. Since then, this funding pot has been lent at commercial rates more than three times over, delivering 11,000 new homes and regenerating brownfield land across the city region, while providing new work for local people and Greater Manchester businesses."
The spokesman added: "Decisions to grant loans from the fund are taken publicly. Not a single viable scheme was ever turned down and funds were lent to around 50 different developers. The fund is open to all developers, with lending criteria based on parameters set by the government and developed with external financial experts to reflect due diligence standards in the private sector. Every penny loaned from the fund is being fully repaid, delivering billions of pounds worth of development at no cost to the taxpayer. Our share of the interest received on these loans, set to reach £37 million by 2028, has gone back into work on our housing priorities, including building decent, affordable homes, launching the country's first Good Landlord Charter and training new housing enforcement officers to drive up standards for renters."
The Ministry of Housing, Communities and Local Government declined to comment. ADUG said it had put its own capital into projects before accessing loans, and loans were all repaid in full. A Manchester Life spokesman said the decisions to approve the loans were taken collectively by the local authority, not Burnham alone. No10 had not responded to a request for comment.
