[See below for an update]
At yesterday’s meeting of Cambridgeshire County Council’s Highways and Community Infrastructure Committee, one of the issues councillors had to decide was whether to proceed with the proposed Enterprise Centre at Cambridge Central Library. This controversial project proposes to close a large part of the third floor of the library to the public, and effectively rent it out to a private company, Kora, who would charge users a fee to access it.
There are thirteen members of the committee, whose makeup reflects the political balance of the council: six Conservatives, three UKIP, two Lib Dems, and one Labour and one Independent councillor.
In the event, the vote came down to the wire, as the project was approved by just seven votes to six. All six Conservatives voted in favour of the project; the four Lib Dem, Labour and Independent councillors, who all represent districts in or near Cambridge, voted against. That left the three UKIP councillors, who split two-to-one against the project. However, that single UKIP vote in favour, from Ramsey councillor Peter Reeve, was enough to see the project go through.
It’s notable that all the councillors on the committee who represent districts in or near Cambridge voted against the project, whereas those in favour were all from parts of Cambridgeshire more distant from the library. Here’s a map showing the places that the councillors on the committee represent. Instead of colouring by political party here, I’ve used green for councillors voting in favour, and red for those against:
If Peter Reeve’s Ramsey constituents wanted to visit Cambridge Central Library, Google Maps tells us that they would face a round trip by car of at least 90 minutes – and that’s when both the A14 and the traffic in Cambridge are in a good mood. Public transport would take about twice as long. It seems bizarre that the fate of Cambridge Central Library is being decided by the vote of a councillor whose district is so far away from it, and whose constituents, as well as having a library in their own town, can get to Peterborough Central Library much more quickly.
Thanks to Freedom of Information (FoI) law, we know a good deal about the Enterprise Centre project. An FoI request from Paul Lythgoe produced a response including redacted minutes of 37 meetings between Kora and Council officers dating back to December 2013 – though it seems that the initial approach from Kora was in January of that year. One of the many interesting facts revealed by the minutes is that Cambridge Central Library is the fourth-busiest public library in the country, receiving 850,000 visits per year – pretty impressive given that Cambridge is only the 49th-largest UK city. Another interesting fact is the existence of a “Risk Log” for the Enterprise Centre project. I have asked for a copy of this to be released under FoI, so we may find out more about it. But one Risk Log entry that the minutes did mention was about the committee meeting itself. The minutes commented that “The risk is around delay to the meeting date. There is not a high chance of the proposals being turned down at the Committee meeting.” I expect those involved felt rather differently by the time of yesterday’s vote.
We’ll have to wait and see what, if anything is revealed about the other risks to the project covered by the Risk Log. But there is one particular risk that I would like to know more about, and I wonder whether it has been fully considered – the question of state aid. The EU rules on state aid are designed to prevent governments using taxpayer-funded resources to give particular organisations an unfair advantage over others. In general, state aid is not allowed. The rules are quite complex, but it is interesting to consider whether they might apply in this case – after all, here we have a taxpayer-funded resource, Cambridge Central Library, being used to provide a valuable commercial opportunity to one particular private company. Fortunately, the Department for Business Innovation and Skills (BIS) has published a handy document outlining how to decide whether something qualifies as state aid or not. Let’s have a look at what it says (page 4):
- Is the assistance granted by the state or through state resources? In the UK, this means national or local government. So, clearly, yes.
- Does the assistance give an advantage to one or more undertakings over others? It’s clear that Kora comes within the definition of an “undertaking” – it’s a private company, providing services to paying customers. The definition of an “advantage” is crucial here – the document says it’s “…not just a grant, loan or tax break, but also use of a state asset for free or at less than market price.” Let’s come back to this in a minute.
- Does the assistance distort or have the potential to distort competition? This isn’t a very high hurdle – the document says “If the assistance strengthens the recipient relative to its competitors then the answer is likely to be yes”. Certainly, having the use of the top floor of the Central Library will indeed strengthen Kora relative to its competitors.
- Does the assistance affect trade between EU Member States? Kora is part of an international network of Regus “business lounges” which allow members from many countries to access their facilities. So they are certainly providing services to other EU member states.
So it looks like the question of whether this is state aid or not boils down to whether the arrangement involves “use of a state asset…at less than market price”. So just what is the market price for the top floor of Cambridge Central Library? It seems to me that we don’t know the answer to this question, because instead of offering the facility on the open market, the County Council has been working in secret for many months with a single company on an exclusive basis. Have they really got the best possible price for this valuable taxpayer-funded asset? If they can’t show that they have, how can they be sure that this isn’t state aid?
I am not an expert in EU law, and there may be some glaringly obvious reason why this project does not qualify as state aid. But I would be very interested to know what it is. I am sure those involved will want to be careful that they are not contravening the rules. As the BIS document says: “A scheme that does not follow the rules could be forced to close, even after it is launched. Giving state aid illegally could result in the money having to be clawed back with possibly very serious consequences for the recipient.” I think that’s definitely one for the Risk Log.
Update (4 June): One reason why this may not count as state aid, it seems, is the “de minimis” rule, which specifies a minimum threshold. According to the Government website, the limit is €200,000 over a three year period, which at current exchange rates would amount to around £49,000 per year. If the benefit to Kora amounted to less than this, then it would not count as state aid. Without knowing more about the financial arrangements between the Council and Kora, it’s hard to say whether this limit might apply. Also it’s not clear (to me at least) whether any similar arrangements entered into by Kora with other councils would also count towards this limit. But we can at least estimate what the rental value of the top floor of the library would be, by looking at its rateable value. According to the City Council’s website, rateable value is “an assessment of the annual rent the property would demand if it was available to let on the open market at a fixed valuation date.” Currently, the valuation date is April 2008. Thanks to another Freedom of Information request, (number 2321 of 2013) we know that the library’s business rate valuation is £510,000. Assuming the third floor is worth about a third of this, that would suggest an annual rent of £170,000 – though that is based on 2008 prices, and I imagine commercial rents in Cambridge have gone up a bit since then. On the other hand, Kora is only planning to occupy some of the top floor. Still, on the face of it, it still seems likely that the question of state aid needs to be considered.