Council Agenda Combined

Home , 2015 Birthday Honours

N o t i c e o f M e e t i n g

Council

14 October 2015 at 6.30pm The Council Chamber, Kensington Town Hall, Hornton Street, W8 7NX

Contact: Mr M Carver E-mail: [email protected] Tel: 020 7361 2477 Website: www.rbkc.gov.uk Issue Date: 6 October 2015

Town Clerk - Nicholas Holgate

Public Agenda

1. MINUTES OF THE PREVIOUS MEETING The minutes of meeting of the Council held on 24 June 2015 are submitted for confirmation.

2. SPECIAL ANNOUNCEMENTS BY THE MAYOR

3. TOWN CLERK’S REPORTS AND COMMUNICATIONS

(i) Apologies for absence

(ii) Declarations of interest

Any Member of the Council who has a disclosable pecuniary interest in a matter to be considered at the meeting is reminded to disclose the interest to the meeting and to leave the Chamber while any discussion or vote on the matter takes place. Members are also reminded that if they have any other significant interest in a matter to be considered at the meeting, which they feel should be declared in the public interest, such interests should be declared to the meeting. In such circumstances Members should consider whether their continued participation, in the matter relating to the interest, would be reasonable in the circumstances, particularly if the interest may give rise to a perception of a conflict of interests, or whether they should leave the Chamber while any discussion or vote on the matter takes place.

4. PETITIONS

(i) Petition on Marlborough School; (ii) Presentation of other petitions (if any).

5. ORDER OF BUSINESS

The Mayor to announce the order of business for the remainder of the meeting.

6. REPORTS FROM THE CABINET

(i) Integrated Air Quality and Climate Change Action Plan (ii) Urgent key decisions.

7. REPORTS FROM COUNCIL-SIDE COMMITTEES

(i) Pension Fund Annual Report 2014-15 (ii) Annual Treasury Report 2014-15 (iii) Audit and Transparency Committee Annual Report (iv) Report of the Administration Committee

8. MATTERS REFERRED TO THE COUNCIL BY SCRUTINY COMMITTEES

Buy to Leave – report of the Housing and Property Scrutiny Committee

9. MATTERS OF LOCAL CONCERN RAISED UNDER S.O. 11

Members may draw to the Council’s attention Ward or other ‘live’ issues of general / broad principle. Each member raising such an issue under this Standing Order should speak for not more than two minutes in addressing the Council. No more than three Majority Group members and one Minority Party member may raise issues in this way per meeting. Members wishing to raise such matters should register their intent with the Town Clerk prior to the meeting.

10. MOTIONS FOR DEBATE

(i) Policing budget

“The Metropolitan Police has had to implement an almost £600 million, or 20%, cut to their budget since the government's 2010 Spending Review, and Sir Bernard Hogan-Howe, the Police Commissioner, has stated that the upcoming Spending Review is likely to reduce the £3.5 billion policing budget by a further £800 million over the next 4 years. The London Assembly Police and Crime Committee believes the cut could be as high as 43% that they say would seriously damage London’s police force.

At a time when crime has started to rise across London and in the Borough, the Mayor's Office for Policing and Crime has stated that such a budget cut would make it difficult to maintain current front line officer

numbers, the Metropolitan Police are considering axing what is left of community policing, including all remaining Police Community Support Officers,(PCSO's), and RBKC's Police Commander has stated that an £800 million budget cut would radically alter the way policing is carried out in the Borough.

This Council therefore resolves:

 To write to the Home Secretary opposing any further cuts to the Metropolitan Police Budget in the spending review that could adversely affect officer numbers, result in the closure of Police Stations and the reduction of police vehicles and equipment, end community policing, and will result in the police withdrawing from areas of policing the Borough's residents have come to rely on.

 To meet with the Mayor of London to ask him to put the Borough's case to the government against swingeing cuts to the Metropolitan Police Budget that could adversely affect policing in RBKC.

 To lobby the Mayor of London to consult meaningfully with the Council and the Borough's residents about the future of policing in London, and to provide an assessment of the true impact he believes the government's £800 million cut to the policing budget will have on the Capital's and the Borough’s policing service.”

Proposed by: Cllr. Pat Mason Seconded by: Cllr. Emma Dent Coad

(ii) Refugees

“This Council notes that:

 Conflicts in the Middle East have created the largest refugee crisis in generations.

 Thousands of people have died while seeking sanctuary from the violence this year alone trying to cross the Mediterranean sea; many were children.

 The United Kingdom has played a leading role as one of the world’s top international donors, supporting refugees in Syria and the surrounding area.

 The UN estimates there are over 320,000 people though who live in urgent need of resettlement. Survivors of torture or sexual violence, the very elderly or disabled, there are people who cannot survive in UN refugee camps near in countries surrounding Syria.

The UK has a long and important tradition of offering sanctuary to those who need protection. 100,000 Huguenots, 10,000 Jewish Kinder Transport children spared the Nazi concentration camps, 160,000 Poles following the Second World War many of whom had served in the Battle of Britain, the Vietnamese Boat People, the 28,000 Asian Ugandans fleeing Idi Amin and the people who fled the war in Kosovo. This is our proud and decent tradition.

To play its part fully in solving this global crisis the British government must work for durable long term political solutions in the region, lead as a major international donor, and live up to its reputation as a place of sanctuary, integration and protection.

This Council believes:

 That this crisis will be better managed if incoming refugees are accommodated around the whole country;

 We can best rise to the crisis if a National Welcome and Resettlement Board bringing together local and national government, civil society and business leadership is created to oversee efforts to resettle refugees and mobilise public support as in times past;

 Long term political solutions are needed to ease the crisis, but in the mean time we must do what we can; and

 The UK must welcome its fair share of refugees to ease this crisis.

This Council therefore resolves:

• To request the Cabinet formally to express an interest in both the VPR and Gateway programmes to the Home Office, requesting that 50 refugees be resettled here;

• To write to local housing associations to encourage them to make properties available to resettle refugees;

• To commit to ensuring that refugees are welcomed in this area and to request the Cabinet to consider taking steps to help facilitate this process by coordinating local service provision and coordinating the immense public will to help;

• To write to the Prime Minister to assure him that the Council stands ready and willing to help at this time of crisis.

Proposed by: Cllr. Robert Thompson Seconded by: Cllr. Monica Press

(iii) Trade Union Bill

“This Council notes that:

 In July 2015 the government announced its trade union bill - a wide- ranging set of proposals which, taken as a package, will undermine the basic right to strike and make it harder for workers to organise effectively in trade unions.  The proposals include ending the ban on employers bringing in agency workers to cover for permanent staff during industrial action - which fundamentally undermines the right to strike.  The proposals will also bring in new restrictions on pickets and protests during strikes. Unions will have to give the details of a lead picketer on every picket line to the police and employers - and the government has even floated the idea of making all picketers give their details to the police. They may even be required to submit a campaign plan to the police and employers two weeks in advance - setting out what they intend to do, whether they will use a loudspeaker or carry a banner and even what strikers intend to put on social media, such as Facebook or twitter.  The government has also proposed new thresholds for turnout in strike ballots, plus additional thresholds for those working in "important public services".  The government wants to grant ministers the power unilaterally to cut so- called "facilities time" in the public sector. This is paid time-off mutually agreed between employers and unions for union reps to represent their members and negotiate with their employer.  The government also proposes to prohibit public sector employers assisting unions to collect their membership subscriptions through payrolls - even though this is used for a variety of other staff benefits such as cycle-to- work schemes and childcare vouchers, and even though unions often meet the costs of this.

This Council further notes that:

 The human rights organisations Liberty, Amnesty International and the British Institute of Human Rights have said that the government's proposals “would hamper people’s basic rights to protest and shift even more power from the employee to the employer".  The government refuses to allow trade unions to ballot their members electronically, which could help increase engagement.  Trade unions take industrial action for a wide range of reasons including defending wages and pensions, conditions at work and safety.  Strikes in the UK are at historically low levels.

This Council believes that:

 No worker ever wants to go on strike - but it is a crucial last resort for workers when their employer refuses to listen to their views, negotiate with them or compromise.  The right to strike and protest are fundamental rights that should be valued and respected in a free and democratic society.  Without the right to strike, workers will be unable to defend their jobs or pay, stand up for decent services and achieve fairness and safety at work.  The government's proposals will undermine constructive employment relations in Kensington and Chelsea where harmonious industrial relations are achieved by meaningful engagement with trade unions and their members.  That, in the spirit of localism, councils should be free to build positive industrial relations that work for their communities without central government interference.

This Council therefore resolves:

 To support the TUC’s and the Town Hall unions' campaign to protect the right to strike.  To write to the Secretary of State for Business, Innovation and Skills stating the council’s opposition to the government's proposals on trade unions.  To write to the Secretary of State for Communities and Local Government and the minister for London stating its opposition to the interference of central government in local industrial relations as it is against the spirit of localism.  To write to Victoria Borwick MP and Greg Hands MP informing them of the Council’s position and encouraging them to oppose the trade union bill.  To continue to value the importance of meaningful workforce engagement and representation through trade unions in Kensington and Chelsea.  That, in the event that the government's proposals become law, in so far as is lawful for this Council as an employer:

• to continue to allow recognised trade unions to use subscriptions through payroll, or otherwise support trade unions' efforts to move members onto direct debit subscriptions, through allowing access to workers and as much notice as possible of any changed arrangements; • to maintain current arrangements on "facility time" for trade union reps to represent their members; and • to commit not to use agency workers to break strikes.”

Proposed by: Cllr. Robert Atkinson Seconded by: Cllr. Andrew Lomas

11. APPOINTMENTS TO COMMITTEES AND OUTSIDE ORGANISATIONS To follow.

12. ANY OTHER ORAL OR WRITTEN ITEMS WHICH THE MAYOR CONSIDERS URGENT

Standing Order 5 requires every Councillor attending a Council meeting to sign the attendance book.

[Each written report on the public part of the Agenda as detailed above: (i) was made available for public inspection from the date of the Agenda; (ii) incorporates a list of the background papers which (i) disclose any facts or matters on which that report, or any important part of it, is based; and (ii) have been relied upon to a material extent in preparing it. (Relevant documents which contain confidential or exempt information are not listed.); and (iii) may, with the consent of the Mayor and subject to specified reasons, be supported at the meeting by way of oral statement or further written report in the event of special circumstances arising after the despatch of the Agenda.] Exclusion of the Press and Public There are no matters scheduled to be discussed at this meeting that would appear to disclose confidential or exempt information under the provisions Schedule 12A of the Local Government (Access to Information) Act 1985. Should any such matters arise during the course of discussion of the above items or should the Mayor agree to discuss any other such matters on the grounds of urgency, the Council will wish to resolve to exclude the press and public by virtue of the private nature of the business to be transacted.

The next meeting of the Council is scheduled to be held on 2 December 2015 at 6.30pm

Minutes of a meeting of the Council held at The Town Hall, Hornton Street, London W8 7NX at 6.30pm on 24 June 2015

PRESENT

Members of the Council

THE MAYOR: CLLR. ROBERT FREEMAN THE DEPUTY MAYOR: CLLR. MARIE-THERESE ROSSI

ATKINSON, Robert MACKOVER, Sam BAKHTIAR, Mohammed MARSHALL, Quentin BERRILL-COX, Adrian MASON, Pat BLAKEMAN, Judith MILLS, Julie CAMPBELL, Barbara MOYLAN, Daniel CAMPBELL, Elizabeth NICHOLLS, David CAMPION, David, BA (Arch), Dip PAGET-BROWN, Nicholas TP, FRIBA, MBCS, CITP PALMER, Matthew COATES, Professor Sir Anthony Bt, PASCALL, Will BSc, MD, FRC Path, FRCP POWELL, Bevan COATES, PRESS, Monica COLERIDGE, Tim RINKER, Andrew CONDON-Simmonds, Maighread RUTHERFORD, Elizabeth FEILDING-MELLEN, Rock SPALDING, Malcolm GARDNER, Joanna TAYLOR-SMITH, Kim HARGREAVES, Gerard THOMPSON, Robert HEALY, Pat WADE, Linda HUSBAND, James WARRICK, Paul LIGHTFOOT, Warwick WEALE, Mary LINDSAY, David WILL, Emma LITTLER, Harrison WILLIAMS, Charles LOMAS, Andrew A G E N D A 1. MINUTES OF THE MEETING HELD ON 20 MAY 2015

The minutes of the Annual Meeting of the Council held on 20 May were confirmed as a correct record and were signed by the Mayor.

2. SPECIAL ANNOUNCEMENTS BY THE MAYOR

Baroness Hanham

The Mayor informed the Council that Lady Hanham had left hospital earlier in June but had been readmitted last week. He said that the thoughts and prayers of the Council were with her and her family.

Ms. Susie Parsons

With great regret, the Mayor informed the Council of the death of Susie Parsons who was known to many Members through her work in the voluntary sector and particularly on the Golborne Forum.

Cllr. Beinazir Lasharie

The Mayor was delighted to inform the Council that Cllr. Lasharie and her partner, Damon, were now proud parents of a baby daughter, Aaliyah.

Former Councillor George Pole

The Mayor said that at last October‟s meeting of the Council the death had been announced of former Cllr. George Pole. Mr Pole had served as a Member for Queen‟s Gate Ward from 1968 to 1982 and was Mayor in 1980-81. The Council had heard recently from solicitors dealing with Mr Pole‟s estate that he left in his Will a sum of £1,000 for “the purchase of an item for the Mayoral Suite”. Thought was now being given to ways in which that money might best be used. The Mayor was sure that Members would join him in noting with gratitude his kind generosity.

Birthday Honours

The Mayor advised the Council that a paper had been circulated with details of those who live in or have connections with the Royal Borough and who were recognised in the 2015 Birthday Honours‟ List. Congratulations went to them all on their Awards, set out below:

Knights Henry Angest Bachelor National Treasurer, Conservative Party. For political service.

Andreas Whittam Smith, C.B.E. For public service, particularly to the Church of England.

G.C.B. Sir Nicholas Macpherson, K.C.B. Permanent Secretary, H.M. Treasury. For public service.

D.C.B. Ms Frances Anne Cairncross, C.B.E., F.R.S.E., (Mrs. McRae) lately Rector, Exeter College, University of Oxford. For services to Higher Education and to Economics.

L.V.O. Mark James Lane Gardens‟ Manager, London Palaces, Royal Household

C.H. Harry Kenneth The Rt. Hon. Baron Woolf For services to the public and community relations

O.B.E. Tessa Suzanne Mary, Lady Brewer Lately Chair, City of London Festival. For voluntary service to Arts and Culture in London.

Professor John Robert Pepper Professor of Cardiothoracic, Royal Brompton and Harefield

N.H.S. Trust, London. For services to Heart and Lung

Surgery.

David Mark Sellens Headteacher, Thomas Jones Primary School, Royal Borough of Kensington and Chelsea. For services to Education.

M.B.E. Councillor Robert Davis Deputy Leader, Westminster Council. For services to Planning and Local Government.

Joan Mary, Mrs Jackson-Callen Social Worker, Royal Borough of Kensington and Chelsea. For services to Children and Families.

B.E.M. Judith Beatrice, Mrs Graham Volunteer Fundraising Supporter, Chelsea Branch Chairman, NSPCC. For services to Children.

Judicial Appointment

In addition to those recognised in the Honours‟ List, former Cllr. Edward Hess had been appointed a Circuit Judge (with effect from Wednesday 17 June) and would be formally titled His Honour Judge Edward Hess.

Mr Jonathan Bore

The Mayor advised Members that the Royal Borough‟s Executive Director for Planning and Borough Development, Jonathan Bore, would be leaving the Council later in the month. Mr Bore had been appointed in the Spring of 2010 and had taken on responsibility for a wide brief encompassing planning policy, development plans, building control, town centre development and conservation.

Prior to joining the Royal Borough, Mr Bore had been involved in setting up the Infrastructure Planning Commission (IPC) and before that was Planning Director with Urban Initiatives where he had a leading role in many major projects throughout the British Isles. During his career he has also worked for two other London boroughs and Canterbury City Council as well as spending 15 years as a Planning Inspector.

The Mayor added that in a borough never short of developers who want to build and residents who are articulate in their representations, Mr. Bore‟s time had seen unprecedented demands on the planning system with some major developments taking place.

He was sure members would join in wishing Mr. Bore well in the next stage of his career.

Cllrs. Moylan, Warrick, Lightfoot, Gardner, Coleridge and Paget-Brown all paid tribute to Mr Bore.

3. TOWN CLERK’S REPORTS AND COMMUNICATIONS

(i) Apologies

Apologies for absence were submitted on behalf of Cllrs. Ahern, Allison, Aouane, Borwick, Collinson, Dent Coad, Faulks and Lasharie.

(ii) Declarations of Interest

Cllr. Moylan declared a personal interest in item 4(i) as a member of the Board of Transport for London and took no part in discussions thereon.

4. PETITIONS

(i) Earl’s Court development

The Mayor informed the Council that a debate at Council had been triggered by the receipt of a petition in excess of 1,500 signatures about an independent health review of the Earl‟s Court development.

Robina Rose addressed the Council on behalf of the petitioners. She spoke of the opposition to the redevelopment and called on the Council to stop the demolition of the Earl‟s Court Exhibition Centre immediately, until an independent health review had been carried out. As stated in the petition, residents were concerned about the effect on their health and wellbeing of demolition and construction work on the site taking place over the next 20 years. In particular, it was noted that there was asbestos in Earl‟s Court Exhibition Centre One building and that its removal could represent a major threat to residents' health. She added that it was particularly important to carry out a review now, as there were reports of plans for increased density on the Earl‟s Court and West Kensington Opportunity area which would have a major impact and had not been assessed. She called on the Council to protect its residents and to respond properly to the petition.

Cllr. Spalding, making his maiden speech, said that the Council could not stop the development and had no duty to set up a review. The developers had done nothing wrong. He urged the petitioners to set up their own review as all data was in the public domain and suggested

they join local residents‟ associations or the Earl‟s Court Society to keep abreast of developments. A working group had been set up six years ago to look at the environmental impact including the demolition plan and Construction Traffic Management Plan. He said the petitioners should have been involved at this stage. In relation to asbestos removal, the said the HSE strictly controlled its removal and there had been no incidents. He commended the recommendations in the officers‟ report.

Cllr. Wade supported the petition and called for an independent assessment. She spoke of the impact of noise and vibration and cumulative effects over the 20 year period of development. Monitoring was restricted to four sites. She did not consider it reassuring to rely on best practice by the contractors.

Cllr. Lightfoot commented that extensive regulation was already in place. It was not a „deregulated environment‟ as suggested by the petitioners.

Cllr. Thompson spoke in support of the petition and called for transparency, truthfulness and trust. Access to the asbestos report had been denied. This should be in the public domain. The development should cease while a review was carried out.

Cllr. Bakhtiar also spoke of distrust and concerns for health implications. There was no confidence in the construction plan. He considered that the Council had a poor record on enforcement.

The Cabinet Member for Planning Policy, Transport and the Arts, Cllr Coleridge, responded. He said the officers‟ report was a comprehensive response. In 2011 planning consent had been considered. A three- volume robust Environmental Statement had been produced covering an extensive assessment of the matters referred to in paragraphs 3.6 and 3.7 of the officers‟ report. Conditions were in place and obligations had been complied with. He expressed surprise that the petition had been submitted at this late stage of the process. Comments made at the meeting would be taken into account when responding to the petition, but he added that the response would be along the lines of the officers‟ report.

RESOLVED:

(i) to note the Cabinet Member‟s response; and (ii) to invite the Cabinet and Cabinet Member to take fully into account the matters raised during the debate when considering the petition. (ii) No other petitions were presented.

5. ORDER OF BUSINESS

The Mayor announced that, in accordance with Standing Orders, the order of debate would be as set out in the agenda.

6. REPORT FROM THE CABINET

Urgent Key Decisions

The reception of the report was moved by Cllr. Paget-Brown and seconded by Cllr. Feilding-Mellen.

The Council noted the urgent key decision taken in the previous quarter.

7. MATTERS REFERRED TO THE COUNCIL BY COUNCIL-SIDE COMMITTEES

Report of the Administration Committee

The reception of the report was moved by Cllr. Paget-Brown and seconded by Cllr. Feilding-Mellen.

Paragraph 1 - Changes to the Constitution

RESOLVED -

That the recommendation in paragraph 1.2 be adopted.

Paragraph 2 - Revision to the Members’ Allowances Scheme 2015/16

Cllr. Paget-Brown informed the Council of a typographical error in the paper: the SRA should be for the Minority Party spokesperson on Planning. The word „Committee‟ should therefore be deleted.

RESOLVED -

That the recommendation in paragraph 2.2, as amended above, be adopted.

Supplementary report of the Administration Committee

The reception of the report was moved by Cllr. Paget-Brown and seconded by Cllr. Feilding-Mellen.

Paragraph 1 - Membership of the Pension Board

RESOLVED -

That the recommendation in paragraph 2.1 be adopted.

Cllrs. Atkinson, Bakhtiar, Blakeman, Healy, Lomas, Littler, Mason, Powell, Press and Thompson asked that their names be recorded as voting against the recommendation.

8. MATTERS REFERRED TO THE COUNCIL BY SCRUTINY COMMITTEES

Annual Report of the Scrutiny Committees 2014/15

The reception of the report was moved by Cllr. Lindsay and seconded by Cllr. Marshall.

The Council noted the report.

9. MATTERS RAISED UNDER STANDING ORDER 11

Junction of Old Brompton Road and Warwick Road

Cllr. Nicholls welcomed the current consultation exercise being carried out by TfL about the dangerous junction at Warwick Road and Old Brompton Road. However, he considered it did not go far enough: accidents were occurring at places where no improvements to the junction were recommended. He expressed concern that residents would continue to use the unprotected parts of the junction. He asked the Council to lobby TfL to address the whole junction.

The Council noted the matter raised.

Assets of Community Value

Cllr. Lomas drew attention to the Localism Act, Chapter 3 of which made provision for buildings to be listed as Assets of Community Value. He said that only five buildings had currently been listed and asked that the profile of this provision be raised among Amenity Societies and Residents‟ Associations. There was currently one case under review, a decision on which was expected on 3 July.

The Council noted the matter raised.

10. MOTIONS FOR DEBATE

(i) Housing shortage

It was moved by Cllr. Feilding-Mellen and seconded by Cllr. Mackover:

"To help tackle London's chronic housing shortage this Council now commits to a programme of redeveloping selected low-density Council estates. An estate's redevelopment will only progress where and when it is possible to meet the following two criteria:

A) All tenants, whose homes must be redeveloped, can be re-provided with better quality new homes, on the same terms and rent levels, on or very near to the redevelopment.

B) The redevelopment is financially viable and can be completed with no recurrent cost to the General Fund or cross-subsidy between the General Fund and the Housing Revenue Account. (The Council may decide to fund both capital and recurrent costs of assets such as a park as part of a scheme but this would be a separate decision from the redevelopment of housing and any other assets essential to such redevelopment.)

Proposed redevelopments that meet those criteria will then be designed around traditional streets and squares to be mixed-tenure and mixed- use, and to optimise on the following Council objectives:

1) To provide additional affordable housing, thereby preserving our mixed communities. 2) To tackle the underlying causes of deprivation by improving health outcomes, employment opportunities, educational attainment and aspiration, and by reducing crime and the fear of crime. 3) To build the "conservation areas of the future" by reflecting and matching the high quality urban design in the rest of the borough.

The Council will always consult potentially affected residents at the earliest feasible opportunity and commits to engaging with and involving affected residents throughout the appraisal, design, and development processes."

It was then moved by Cllr. Blakeman and seconded by Cllr. Healy:

To delete all after “… to help tackle London‟s chronic housing shortage, the Council …” and insert:

“recognises that all new residential developments in the Borough should provide homes that people will occupy. Any programme to redevelop Council/TMO estates will only progress where the following criteria can be met:

 the preferred options will be environmentally-friendly, involving retrofitting, in-fill development and additional storeys to preserve embodied carbon and achieve regeneration more quickly and less contentiously than demolishing and rebuilding  as well as providing additional „affordable‟ housing and homes for market sale and rent, there will be a net increase in the provision of homes for social rent  subject to their agreement, all Council/TMO tenants will have a guarantee to be rehoused on site on the same tenure basis and rent levels, ideally after only one move  all resident leaseholders, where they wish, will be given the ability to acquire ownership of a comparable sized unit on site. Where required, the Council will provide a „top up‟ of retained equity to bridge any differential in market value between the existing and new unit at no cost to the leaseholders  the existing resident community will be retained on site.

Once these criteria are met, the Council will observe the engagement, rehousing, funding, decision-making and consultation good practice recommendations set out in the London Assembly Knock it Down or do it Up? report of February 2015 as estates are identified for regeneration.”

Debate ensued.

The amendment was put to the vote and was declared by the Mayor to be lost.

The unamended Motion was then put to the vote and was declared by the Mayor to be carried.

Cllrs. Atkinson, Bakhtiar, Blakeman, Healy, Lomas, Littler, Mason, Powell, Press, Thompson and Wade asked that their names be recorded as voting against the Motion.

(ii) Extension of Right-to-Buy

It was moved by Cllr. Press and, with the consent of the Council, seconded by Cllr. Lomas that:

“This Council notes that the government‟s proposal to extend the right- to buy to registered providers will have many unforeseen adverse consequences for inner London boroughs. For example, the valuation at which council housing void dwellings will be sold off to fund this scheme is set unrealistically low and will mean almost all high value voids in Kensington and Chelsea would have to be sold off. This Council therefore resolves to join with other inner London boroughs to ask for a higher valuation to be assigned for the sale of void inner London council units.”

Debate ensued.

The Motion was put to the vote and was declared by the Mayor to be carried unanimously.

11. RESIGNATIONS FROM AND APPOINTMENTS TO COMMITTEES AND OUTSIDE ORGANISATIONS

Cllr. Hargreaves moved the nomination standing in his name.

Agreed to appoint Cllr. Pascall to the Cabinet and Corporate Services Scrutiny Committee.

12. OTHER URGENT MATTERS

None.

The meeting ended at 8.40pm.

Mayor

10 4(i) THE ROYAL BOROUGH OF KENSINGTON AND CHELSEA

COUNCIL MEETING – 14 OCTOBER 2015

PETITION IN RESPECT OF MARLBOROUGH SCHOOL

1. A petition in respect of Marlborough School has been received. The petition has in excess of 1,500 signatures and, under the Council’s petitions scheme, has been placed on the agenda for discussion as requested by the petitioners.

2. The Council’s Petition Scheme states: If a petition contains more than 1,500 signatures and you have so requested, it will be debated at a meeting of full Council.... This means that the issue raised in the petition will be discussed at a meeting which all Councillors can attend.

The Council's consideration of any petition will be based upon a written report from the relevant Council officer, published with the Council agenda. In addition, the petition organiser will, at the Council meeting at which the petition is to be considered, be given up to five minutes to present the petition. After any such presentation by the petition organiser, the petition will then be discussed by Council for a maximum of 15 minutes: the Council will then agree how to respond.

Full Council may decide to take the action the petition requests, not to take the action requested for reasons put forward in the debate, or to commission further investigation into the matter, for example by a relevant committee. Where the issue is one on which the Council's Cabinet (or an individual Cabinet Member) is required to make the final decision, the Council will decide whether to make recommendations to inform that decision. The petition organiser will receive written confirmation of this decision.

3. A report by officers is attached.

4. The Council is invited to discuss the issues set out in the petition and accompanying report and – as it relates to an executive matter – to recommend the Deputy Leader and Cabinet Member for Housing, Property and Regeneration to take into account Councillors’ comments when responding to the petition.

FOR DISCUSSION

Nicholas Holgate Town Clerk

Officer Contact: M. Carver, Principal Governance Manager (Tel. 020 7361 2477). Background Papers: The Council’s Constitution.

THE ROYAL BOROUGH OF KENSINGTON AND CHELSEA

COUNCIL MEETING – 14 OCTOBER 2015

PETITION IN RESPECT OF MARLBOROUGH PRIMARY SCHOOL, DRAYCOTT AVENUE, SW3 3AP

1. SUMMARY

1.1 The Council is engaged with the John Lewis Partnership to achieve the following: an interim school on the Clearings site while Marlborough Primary School is demolished and replaced with a new school yielding more internal space and more external play space; once the new school is built, 67 new homes can then be built on the Clearings site; and part of the existing school site will be used to construct a new commercial building which will provide an income to help fund the Council‟s services to residents.

1.2 The entire project can be funded by the Council‟s share in the sale of the Clearings site, as this includes the Council‟s Denyer Street depot, and by section 106 receipts.

1.3 The petition asks for the Council to revoke the plans to demolish the Victorian school building.

1.4 The Council first announced its plans to demolish and replace Marlborough Primary School in November 2012, and in partnership with John Lewis, it has consulted extensively with school parents and teachers, local residents, community groups, amenity societies and others.

1.5 Further consultation with 3,655 residents was carried out as part of its planning application. Six letters of objection were received. The school is not listed and is not in a conservation area. The Victorian Society asked for the planning application to be referred to English Heritage, who decided not to list the building. The Mayor of London also recommended approval; and planning consent was granted on 20 December 2013.

1.6 The Council is required to obtain consent from the Department for Education to use land that is part of the existing school site for the commercial building and footpath.

1.7 On 21 June 2013, the Council therefore applied for consent under Schedule 1 of the Academies Act 2010 as amended by the Education Act 2011 for consent to appropriation; notification of 1

the change of use of school land; and notification of the temporary relocation of the school.

1.8 On 11 October 2013, consent from the Secretary of State was forthcoming, expressed as consent to disposal. The Council checked with external legal advisers, who confirmed that no further consents were required.

1.9 On 3 August 2015, the Education Funding Agency contacted the Council raising the issue of consent to disposal under section 77 of the School Standards and Framework Act 1998 (the Act) of two areas of playground forming part of the existing school site. The first parcel of playground will become the pedestrian link (212 sq m); the second part of the playground (347 sq m) which comprises part of the area on which the commercial building will be constructed.

1.10 The Council has been advised that the construction of the new school does not require consent under s77(3) as the new playing space will be used for exactly the same purposes as the existing playing area. The pedestrian link and commercial building on the school site, all of which will continue to remain in the ownership of the Council, constitute a change of use thus requiring consent under section 77(1) of the Act. The Council has applied for consent for a change of use, which consent is awaited.

1.11 Disposal consent for the pedestrian link and commercial buildings is required before the building works for the pedestrian link and commercial building commence and the Council is therefore currently consulting as is required by the DfE Advice guidelines and will make an application for disposal consent in early November 2015. In the light of the previous consents given by the Secretary of State, the Council is advised that it would be unreasonable, not to say surprising, if disposal consent was not forthcoming.

1.12 Accordingly, given the need to have the new school ready for the earliest school year feasible, and the lack of any legal impediment or objection to the demolition and replacement of the school itself, demolition work started as planned on site on 7 September 2015. Because the school is part of a series of related developments, those contracts and consents (which had been extensively consulted on in 2012 and 2013), entered into before the petition was started, include severe financial penalties for delay.

2. THE PETITION

2.1 Four months ago a petition, which is still open, in respect of Marlborough Primary School, Draycott Avenue, SW3 3AP was lodged on the 38 Degrees website. The petition has in excess of 1,500 signatures and, under the Council‟s petitions scheme, has been placed on the agenda for discussion as requested by the petitioners.

2.2 This petition at the time of writing this report has 1601 electronic signatures and 346 on the paper petition.

2.3 The plea of the petition is:

Stop the demolition of Marlborough School, SW3 (Draycott & Sloane Avenue) The petition asks for the Council to revoke the plans to demolish the Victorian school building, said by the petitioners to be one of the most important architectural and historic landmarks of Chelsea and one that is fit for purpose and could be upgraded and expanded as per the original 2007 LDF plan. The original planning brief was to upgrade the existing school but now the Council has approved plans to demolish it entirely and build offices and shops on a large part of the land. These offices and shops will account for up to 75% of the additional m2 created (compared to 25% additional m2 for the school) and will generate revenue for the council. The Architects Appraisal Panel has strongly advised against this use of the space. Residents believe that the demolition of Marlborough Primary School is tantamount to an act of vandalism and therefore urge the Council to reconsider the plans.

2.4 The Council‟s Petition Scheme states:

If a petition contains more than 1,500 signatures and you have so requested, it will be debated at a meeting of full Council. This means that the issue raised in the petition will be discussed at a meeting which all Councillors can attend.

2.5 Given the history of the project set out above, this campaign is plainly too late to have any practical impact on the outcome of the school redevelopment.

3. CABINET DECISION

3.1 At its meeting on 15 November 2012 Cabinet considered the decision attached at Appendix 1 and Minuted as follows:

This report sought Cabinet approval to the disposal of its freehold interest in the Denyer Street depot site in a joint disposal for a combined redevelopment with the adjacent sites owned by John Lewis Limited and known as the Clearings, which will also see the Marlborough Primary School Site on Draycott Avenue/Sloane Avenue redeveloped providing a brand new two form entry primary school and new commercial premises for the Council. This report also sought to establish a procurement strategy and budget for development costs required to deliver the project.

Councillor Coleridge spoke about the proposed redevelopment negotiated with John Lewis Limited and congratulated officers for the work completed to date. He referred to the s106 agreement and the benefits to the authority of a new school, income stream and capital receipt, the level of which would depend on the land value of the site. Local residents and Marlborough school have been consulted.

Councillor Campbell was particularly pleased about the opportunity to have a state of the art school and to provide an education for children with autistic spectrum condition, in line with the Special Educational Needs Strategy. The provision of a school for these children would give the Council flexibility with regard to out of hours and weekend play provision for disabled children. In addition, the school would be designed to be fully compliant with legislation governing access for people with disabilities.

RESOLVED – Cabinet 4

(i) approved the selection of the preferred party and consultant contractor team identified in the exempt part B appendix and approved the outlined budget for the procurement of a professional team, design and build contractor, and other development costs required to develop the project;

(ii) agreed to authorise entering into the agreement for joint disposal with John Lewis plc; and

(iii) agreed to delegate authority for any minor alterations to the Heads of Terms as well as final approval for any lease terms pertaining to the temporary school occupation of the Clearings site and agreement of the long stop dates to the Cabinet Member for Housing and Property.

4. THE HISTORY OF THE PROJECT

4.1 Marlborough Primary School is an effective school, rated “Good” by Ofsted, located within an area of high demand for school places. For several years, school place planning indicated the need to increase the supply of primary places in the area and Marlborough was, in geographical terms and in relation to performance, in a good position to do so.

4.2 A modest initial plan was developed in 2012 to expand the intake until 2015, chiefly by internal remodelling. Whilst it would have been possible to accommodate within the existing building all the classrooms necessary for 2FE up to year 6, because of the constraint of the existing building envelope, there would not have been room for separate group rooms for small group teaching, or space for rooms to accommodate an Autism Centre. Also, as a traditional Victorian school the existing building does not make best use of its space and suffers several limitations as a modern teaching environment. These include mezzanine levels that are inaccessible to those with mobility impairments, large halls on three levels doubling as circulation and break-out space, poor acoustic and thermal properties and an under-provision of external play/learning space.

4.3 The current proposal, in partnership with John Lewis, has given the Council an opportunity to expand the school and to design it to the highest standards, thus addressing the many difficulties inherent in the design and construction of a building that long predates current learning styles and operational requirements.

5. CONSULTATION

5.1 The Council, in partnership with John Lewis, has consulted extensively with local residents, community groups, amenity societies and others about the demolition of the existing school building, the Clearings and the street cleansing depot and building of: a new, larger primary school; an office building; a new cleansing depot; and 67 homes.

5.2 The Council first announced its plans to rebuild Marlborough, in November 2012.

5.3 The following month the Council and John Lewis held four drop- in consultation events for residents, parents and teaching staff. There were then four further events in February 2013 to share designs.

5.4 Display boards prepared at the time for the consultations, and widely seen by members of the public, showed the whole scheme, including the proposed new commercial building.

5.5 The planning application was submitted in May 2013 and shortly thereafter the Planning department carried out the separate statutory consultation required under law. At much the same time, John Lewis wrote to thousands of residents to let them know about the planning application.

5.6 The Council consulted occupants of 3,655 properties as part of its consideration of the original planning application in 2013. Six letters of objection were received. These objections were taken into account by the Council in reaching its decision to grant planning permission. The report to the planning committee explained in detail why the scheme was acceptable in relation to each comment made. The Milner Street Area Residents‟ Association did not make any comments for or against the proposals as part of the Council‟s statutory consultation on the planning application.

5.7 This development, up until now, has not attracted significant opposition. The school is neither listed, nor in a conservation area. The closest conservation area is the Chelsea Conservation Area, which is about 143 metres to the north east.

5.8 During the planning application process, the Council‟s architectural appraisal panel (AAP) reviewed the scheme twice. On the first occasion it made comments that the office building would have an impact on the proposed new school. The scheme was adapted following those comments. The innovative design provided a larger school with more external space on a smaller 6

overall site area. Subsequent comments from the AAP were taken into account by the planning officer when his report was produced recommending approval, with a commentary on the AAP‟s views. The valuable land thus released can be used to help pay for the many other Council services needed and valued by local residents

6. PLANNING PERMISSION

6.1 Setting its many educational challenges aside, there is no dispute that the current school is a handsome building. However it is not so special or rare that English Heritage saw it as worthy of listing. The Mayor of London also raised no objections to its demolition.

6.2 The new school will be a handsome building in its own right and the Council is convinced that, together with the related developments, it will improve the Chelsea townscape.

6.3 The scale, form and architecture of the new school are suited to its civic use and will ensure that the building retains its presence in the townscape while respecting the character of the area. Although it will be a distinctly modern building, its main facing materials are traditional in response to its context.

6.4 Having listened to the experts, Members carefully considered whether a building that the Council owns should be demolished, as there are fine examples within the Royal Borough of not just fine listed buildings but also buildings which are of good quality or have some architectural interest. Marlborough Primary School has undoubtedly made a significant contribution to the local community for more than 130 years. However, the Council believes that a new, modern, high quality and more fit for purpose, larger school on this site can make an even more significant contribution to this local community for many years to come.

6.5 While taking into account all representations from local residents and community groups, the Council‟s planning committee, determined at the time that the existing building could be demolished.

6.6 Prior to planning permission being granted, English Heritage was asked by the Victorian Society on 9 July 2013 to review whether the school building should be listed. The architectural and historic merits of the existing building were considered by English Heritage, who concluded in a letter of 27 November 2013 that the building was not of sufficient value to list.

6.7 The application was also referred to the Mayor of London in accordance with the Town and Country Planning (Mayor of London) Order 2008, notifying him of the Council‟s intention to grant planning permission. The Mayor directed the Council to determine the application, raising no objection to the proposals.

6.8 Planning permission was then granted on 20 December 2013.

6.9 Following the granting of planning permission, contracts were signed for the preconstruction work which culminated in a fixed price tender offer for construction work in January 2015, ready for construction contracts to be signed. The sale of Clearings was completed in May 2015, allowing Cabinet to approve signing of the construction contract in June 2015, ready for the work to begin, commencing with demolition, on site on 7 September 2015. Both the construction contract and the sale contract have severe financial penalties for delay, and were both agreed before the petition was presented in July 2015.

7. THE CASE FOR THE NEW SCHOOL

7.1 The current school has many significant design issues that can only be solved by a new building. The new school will be better in every practical way. It will be fully accessible. It will have more space inside and out and that space can be used more effectively. It will have the very latest ICT. It will be energy efficient. And it will have specialist provision for children on the autistic spectrum. The new school will also have space for more pupils, which Chelsea residents will require.

7.2 The new school exceeds the Department for Education school design (BB99) guidelines for internal space, and meets the requirement for external space. The new school will provide a significant increase in classroom and play space for children. The old school had a total gross external area (GEA) of 3,785 sq m; the new Marlborough Primary School will have 5,668 sq m, a 50 per cent increase. The old school had 1,536 sq m of playground space, the new school will, by effective use of terracing, have 2,605 sq m in total, a 70 per cent increase.

7.3 The new school will be one of the largest and highest quality primary schools the Council has built to date; almost double the size and cost of a recent primary academy the Council completed last year, which was then seen as a leading new primary school development.

7.4 The new school building will maximise the potential of the site and create a much-improved, purpose-built 21st century learning environment, whilst also offering specialist school-based 8

provision for children in the local area with Autistic Spectrum Disorder - a much-needed facility addressing a growing need. The design includes well provided and suited classrooms with direct access to outside space. The main hall will be of generous proportions and very flexible, with a studio for dance, drama and music. The building will be much more energy efficient and accessible to all throughout, and will offer excellent opportunities to both pupils and the local community which the current building could never achieve.

8. THE SITE OF THE PROPOSED NEW COMMERCIAL BUILDING AND NEW FOOTPATH

8.1 There is an area of the school site, which was occupied by an unused building in poor condition (previously used by Chelsea Academy); another building which was only used on the ground floor by the Nursery and intermittently by the Play Centre on the first floor, with the upper levels being derelict, and also by an underused yard. Another part of this land was used as a playground. The proposal will take part of this under-utilised land and create a wide footpath for local residents to walk through the site to make better connections between local streets. The balance of this land, at the end of the site, will then be used to generate much needed revenue for the Council to make up for reductions in central Government funding, by building an office building with a total floor area on all floors of 3,430 sq metres, (being 620 sq m at ground floor level), with retail space on the ground floor, and thus help protect the Council‟s many services to residents.

8.2 The Council is not a “for-profit” organisation; it is a provider of public services, so all its revenue streams contribute to that purpose. Like all Councils across the country, it has come under increasing financial strain as central government grants have been reduced. In order to compensate for the reductions in central government grant, the Council has looked for innovative ways to reduce management and overhead costs at the same time as making better and more efficient use of its publicly owned assets. Increasing rental revenue from under-utilised property assets is an important element of the Council‟s strategy to protect its services and continue looking after the needs and interests of its residents.

9. CONSENT FROM THE DEPARTMENT FOR EDUCATION

9.1 The Council is required to obtain consent from the Department for Education to use land that is part of the existing school site for the commercial building and footpath. Albeit some of this

land was underused or not operational school land, and was not being used by the school as noted above.

9.2 On 21 June 2013 the Council applied for consent under Schedule 1 of the Academies Act 2010 as amended by the Education Act 2011 for the following:

 consent to appropriation;  notification of the change of use of school land; and  notification of the temporary relocation of the school.

9.3 On 11 October 2013, consent from the Secretary of State was forthcoming, expressed as consent to disposal. The letter noted that: „Consent under Schedule 1 does not affect the requirement for separate consent under section 77 of the School Standards and Framework Act where disposal of school playing field land is proposed.‟ Since the new school will include the use of playing fields and have additional playground area in substitution for the existing playgrounds, the Council is not required to seek consent under 77(3) for the new school. The Council also checked with external legal advisers that no further consents were required, and was advised that they were not.

9.4 On 3 August 2015, the Education Funding Agency nevertheless contacted the Council raising the issue of consent to disposal under section 77 of the School Standards and Framework Act 1998 (the Act) of two areas of playground forming part of the existing school site, on which the new footpath and part of the commercial building will be built.

9.5 On 15 September 2015, the Council applied to the Education Funding Agency (EFA) for consent to change of use under section 77(3) of the School Standards and Framework Act 1977 (the Act) on the basis of the change of use of the two areas of land (footpath and commercial buildings) forming part of the existing school which were used as playground. The first relates to that parcel of land which will become the pedestrian link or new footpath (212 sq m); the second area is part of the land (347 sq m) on which the commercial building will be constructed. Consent is awaited from the EFA.

9.6 The Council is currently consulting under section 77(1) for disposal consent for the commercial building and footpath, and will make an application in November 2015 prior to commencement of the construction of the footpath and commercial building.

9.7 All other consents are in place to start the work, being the Planning permission received on 20 December 2013; the 10

consent to appropriation; notification of the change of use of school land; and notification of the temporary relocation of the school, received from the DfE on 11 October 2013.

FOR DISCUSSION

MICHAEL CLARK DIRECTOR OF CORPORATE PROPERTY AND TRI-BOROUGH DIRECTOR OF TOTAL FACILITIES MANAGEMENT

GRAHAM STALLWOOD EXECUTIVE DIRECTOR, PLANNING AND BOROUGH DEVELOPMENT

IAN HEGGS TRI-BOROUGH DIRECTOR OF SCHOOLS COMMISSIONING

Background papers: none

Contact officer: Guy Parks, Project Manager E mail: [email protected] Tel: 020 7361 3665

A7 THE ROYAL BOROUGH OF KENSINGTON AND CHELSEA

CABINET – 15 NOVEMBER 2012

REPORT BY THE DIRECTOR FOR CORPORATE PROPERTY AND CUSTOMER SERVICES

DENYER STREET DEPOT, SW3

This report seeks Cabinet approval to the disposal of its freehold interest in the Denyer Street Depot site in a joint disposal for a combined redevelopment with the adjacent sites owned by John Lewis Limited and known as the Clearings which will also see the Marlborough Primary School Site on Draycott Avenue/Sloane Avenue redeveloped providing a brand new 2 Form Entry Primary School and new commercial premises for the Council.

This report also seeks to establish a procurement strategy and budget for development costs required to deliver the project.

FOR DECISION

1. INTRODUCTION

1.1 Cabinet is requested to approve the proposed agreement with John Lewis Limited under which the sites known as the “Denyer Street Depot” and “The Clearings” will be disposed of for a joint residentially led development.

1.2 The disposal of the sites will secure the necessary funding and facilitate the redevelopment of the Marlborough Primary School Site to provide a significantly improved 2 Form Entry (2FE) Primary School and commercial premises for the benefit of the Council.

1.3 Endorsement of the procurement strategy of two stage design and build using the Improvement and Efficiency South East (IESE) framework. This aligns with Corporate Property’s previously approved model for procuring and delivering capital projects. 1.4 These properties are vested in the General Fund.

1.5 This decision relates to Hans Town Ward, Brompton Ward and Stanley Ward.

2. BACKGROUND

2.1 John Lewis are seeking to secure planning consent for a residentially led scheme to redevelop The Clearings Sites. Discussions commenced between the Council and John Lewis in December 2011 with regards to the possibility of John Lewis’ scheme being broadened to include redevelopment of the Denyer Street Depot site.

2.2 The Council have an identified need to expand the current Marlborough Primary School to accommodate a 2FE provision. In March 2012 Cabinet approved the appointment of a contractor to undertake works required to meet the school’s requirements up to July 2015. It was noted at the time of this approval that further works would be required by September 2015 to accommodate a full 2FE provision.

2.3 The Depot Review has identified that the Denyer Street Depot is an underutilised site and that the operational requirements for the site are capable of being accommodated on a significantly reduced footprint.

2.4 Corporate Property have identified that the current Marlborough School site holds land which is surplus to the School’s operational requirements and forecasted needs which is capable of being redeveloped to fulfil the Council’s wider requirements. As a traditional Victorian school the existing building has a general inefficient use of space and a number of limitations as a modern teaching environment. These include mezzanine levels that are inaccessible to those with mobility impairments, large halls on three levels doubling as circulation and break-out space, poor acoustic and thermal properties and an under-provision of external play/learning space.

2.5 A new school building would maximise the potential of the site, enhance the school’s presence in the local area and create a much- improved, purpose built 21 st century learning environment, whilst also offering specialist school-based provision for children with Autistic Spectrum Condition in the local area.

3. NEED

3.1 The Clearings site is surplus to John Lewis’ requirements and they are seeking to dispose of their interest in the site for a residential led scheme to be developed on the site.

3.2 In March 2011 a Key Decision was taken by the Cabinet Member for Education and Libraries to change the permanent admission number for Marlborough Primary School from 1FE to 2FE, in order to address a forecast shortfall in primary places available in the south of the Borough. There is a need to expand Marlborough Primary School to a full 2 Form Entry provision by September 2016 to meet this requirement.

3.3 Overall there has been a steady increase in popularity for Barlby (north), Marlborough (south) and Park Walk (south), which have all been undersubscribed schools in the past. This increase in demand, particularly for the two schools in the south, will put further pressure on the availability of places in this area.

3.4 The Special Education Needs Strategy has identified the requirement for school-based resource provision for children with Autistic Spectrum Condition in the Royal Borough. The redevelopment of the Marlborough School site would allow for this specialist provision to be included in the new school building for the benefit of children in the local area.

4. TERMS

4.1 See Confidential Part B Appendix.

5. PROCUREMENT

5.1 To date officers have not received formal authority from Cabinet to proceed with the project. This authorisation is required in order to commit to seeking tenders from constructors to meet the key programme requirement of the new school and commercial premises being completed by summer 2016.

5.2 It is proposed that the design team already engaged by John Lewis for The Clearings sites development is retained for the Marlborough School site development. The Architects are currently developing RIBA Stage A/B (Feasibility) proposals for the Marlborough School site scheme, and the temporary school on the Clearings site, through their appointment with John Lewis. These proposals are being reviewed by Corporate Property and School’s Quality and Standards officers together with professional consultants employed directly by the Council to provide advice during design development, to ensure they meet the client brief for both the new school and commercial premises.

5.3 Corporate Property have developed a strategy for delivering the project by using the established Improvement and Efficiency South East (IESE) Framework to procure a two stage Design and Build contractor.

5.4 This strategy involves:

5.4.1 The procurement of a professional client-side team with demonstrable experience of successfully delivering similar schemes, using an EU procurement law compliant process. This professional team will support the internal project managers in developing key project documentation and ensuring the design proposals meet the Employer’s Requirements. The team would be a direct RBKC appointment and would comprise a Project Manager, Quantity Surveyor, Construction Design & Management (CDM) Co- ordinator and Employer’s Agent The appointment will be for RIBA Stages C-L with break provisions at key RIBA Stages should the scheme not proceed for any reason.

5.4.2 The appointment of a design and build contractor for stage one of the two stage approach (RIBA Stages D-H) including the novation of JLP’s architect to undertake design development.

5.4.3 The estimated cost of the procurement strategy set out above and subsequent professional appointments is provided in the Confidential Part B Appendix. A budget for additional development costs including those for site investigations, communications activities, specialist consultants, internal costs and legal fees is also outlined in Part B.

5.5 It is the intention of officers to report back to Cabinet in February 2014, on receipt of evaluated tender packages, for the total cost of the development on the Marlborough School site comprising the new 2FE school and commercial/retail units.

6. OPTIONS

6.1 Do nothing, and hold onto the sites as currently being operated; i.e. Denyer Street as an operational depot and Marlborough Primary as a school operating from its existing buildings. Both sites would remain underutilised and the school’s expansion and operational ability would be constrained by the existing buildings on the site.

6.2 Proceed with the recommended agreement with John Lewis to seek a third party developer for the redevelopment of The Clearings and Denyer Street Depot Site and funding of a new School on the Marlborough School Site and approve a budget, as outlined in confidential appendix B for the procurement of a professional team, design and build contractor and other development costs

7. FINANCIAL AND PROPERTY, LEGAL, PROCUREMENT, SUSTAINABILITY, RISK, HR AND/OR EQUALITIES IMPLICATIONS

7.1 The procurement implications are set out in Section 5 of this report.

7.2 The Group Finance Manager, Corporate Services, has been consulted and comments that the financial implications are set out in this report and in the confidential Part B report. The exact costs and receipts will be dependent on the outcome of the tendering process to be undertaken prior to project details being finalised. It is anticipated that any costs incurred by the Council in respect of provision of the school and commercial premises will be covered by S.106 contributions or the anticipated capital receipt from the sale subject to any costs arising from post agreement design and specification changes relating to the schools falling to the Council. In the event of the project not proceeding to completion, the initial costs outlined in this report will need to be met from existing Council capital resources.

7.3 Finance and Corporate Property will continue to work together to ensure that a full assessment of the accounting and tax implications is prepared to support the project.

7.4 The Director of Law has been consulted and comments that care will need to be taken with the timing of Land transfers. The Secretary of State’s consent is required to dispose of land held for education purposes. The disposal of the commercial site at Marlborough may require consent. If the Clearings site was occupied for school purposes before the land’s disposal, then consent would be needed here too.

7.5 The Executive Director for Planning and Borough Development has been consulted and comments that there is no objection in principle the range of uses or the redevelopment subject to resolution of detailed issues of scale, design, housing mix and community facilities.

7.6 The Director for Cleaner, Greener and Cultural Services has been consulted and comments that the project team have been briefed on the required depot specifications for this location and has no objections in principle to the proposed arrangement subject to the final designs accommodating the depot requirements.

7.7 The Director of Schools Commissioning has been consulted and comments that he welcomes development of this programme as it has the potential to address not only the rising primary rolls issue, particularly evident in the south of the Royal Borough, but also the need for school-based resource provision for children with Autistic Spectrum Condition, in line with the Special Educational Needs Strategy.

7.8 Quality and Standards officers have been involved in discussions of preliminary designs and confirm that design development should enable an appropriate and effective scheme to be developed, both for the temporary and the permanent school, resulting ultimately in much improved educational opportunities and 21 st century facilities for children in the area.

8. RECOMMENDATION

8.1 Cabinet is recommended to approve the selection of the preferred party and consultant contractor team identified in the Confidential Part B Appendix and approve the outlined budget for the procurement of a professional team, design and build contractor, and other development costs required to develop the project.

Michael Clark Director for Corporate Property and Customer Services

Nicholas Holgate Town Clerk and Executive Director for Finance

Contact officer: Carl Ainley, Corporate Property Tel : 0207 361 2855 E-mail: [email protected]

6(i)

THE ROYAL BOROUGH OF KENSINGTON AND CHELSEA

COUNCIL MEETING – 14 OCTOBER 2015

INTRODUCING AN INTEGRATED AIR QUALITY AND CLIMATE CHANGE ACTION PLAN FOR THE ROYAL BOROUGH

The purpose of this paper is to present the draft Air Quality and Climate Change Action Plan and the opportunities and challenges specific to this portfolio.

FOR DISCUSSION

1. Background

1.1. The Council’s plans for tackling poor air quality and climate change have, until now, been considered and implemented separately. There is increasing recognition that the problems of air pollution and climate change need to be treated together. Not least because the emissions that pollute our air and those that warm the planet have common sources such as vehicles, buildings, power generation and industry.

1.2. Uncoordinated remedies for climate change and air quality can result in an imbalance where emissions targets for one of these focus areas are reached at the expense of the other. The recent Volkswagon emissions scandal has shone a light on this issue. A joint Air Quality and Climate Change Action Plan (AQCCAP or ‘Plan’) is therefore proposed to align agendas and eliminate contradictions whilst raising the profile of these twin issues.

1.3. The Plan presents the aims and objectives of the Council for the next five years (2016-2021) and the live actions. The actions listed are those being directly undertaken by the Council. However, many of those actions focus on awareness raising and changing the public’s behaviour to reduce emissions and protect their health. The Plan is currently out to public consultation until 19 October 2015.

1.4. This report written jointly by officers from both business groups (ELRS and TTS) highlights the aims, objectives and policy statement contained within the Plan and the timetable for the consultation. Officers are also looking for ways in which Councillors could influence and support initiatives in their local area and within their other Council’s responsibilities.

2. Main challenges and opportunities for RBKC

2.1. According to DECC data, the carbon emissions in the Royal Borough have remained stable since 2005 but have increased per capita by 8 per cent

because of a decline in population numbers. This makes the borough an exception in London, as carbon emissions elsewhere in the capital have decreased since 2005 by an average of 18.8 per cent. With a total of 9

tonnes of CO2 per capita, the carbon emissions are the second highest in London. Businesses, in terms of electricity and gas consumption, in the borough have by far the largest carbon footprint (60 per cent), well ahead of residents’ domestic consumption (29 per cent) and transport (11 per cent). Local CO2 emissions estimates (2012) - Nature of the challenge

Road Transport 11%

Residents (home) 29%

Businesses (building) 60%

2.2. It reflects higher utilities costs paid by residents and businesses in the Royal Borough with noticeable impact on small businesses and on vulnerable fuel poor residents living for the majority in the private rented sector.

2.3. There is no quick way to address this issue. Following its success to reduce carbon emissions in the Council’s own operations, the Council’s objective is to demonstrate a reduction of borough-wide energy used by 2020. To make a greater contribution to national and regional targets, and also minimise the reputational risk of under-performance in terms of carbon emissions, it is proposed that the Council accelerates the pace of the change in different ways. One of these ways is to increase its active engagement with the community including vulnerable residents suffering, or at risk of fuel poverty, Green Champions, and businesses.

2.4. The Council is also considering how to make the Borough more resilient to a change in climate. For example a number of projects are considering the installation of green infrastructure which could deliver a large number of benefits including helping to reduce the London heat island effect and managing the effects of more frequent heat waves. In the long term and as reinforced recently by the governor of the Bank of England, as we are anticipating broader global impacts on property, migration and political stability, as well as food and water security one could wonder why more is not being done to address climate change. Lack of progress will also be detrimental to the health of our residents and put them at risk from the heat stress and vector borne and other diseases.

2.5. The two main air pollutants of concern in the Borough, for which it has been

designated as an Air Quality Management Area, are nitrogen dioxide (NO2) and fine particulate matter (PM10). According to a recent King’s College

London report, the health impacts PM10 and NO2 on the borough’s residents is that they are responsible for 67 and 133 early deaths every year respectively; this is a total of 200 deaths per year.

2.6. In 2013, the UK Supreme Court recognised that the government had failed to meet European air polluting limits. This was followed by the European

Commission issuing the UK with a ‘Letter of Formal Notice’ for breaching NO2 limit values in 2014. This could lead to possible national fines for breaches

of the nitrogen dioxide limits which have been occurring since 2010. The Mayor of London has estimated the fines as potentially being £300 million per annum in London alone

2.7. Since the Formal Notice was issued, the GLA and Defra have written to the councils, where these exceedences have occurred, including the Royal Borough, calling for cooperation in tackling the problem, but also reminding us that the Localism Act 2014 could require local authorities to pay cascaded EU fines.

2.8. In April of this year, the UK Supreme Court ordered Defra to produce a new

plan of action to tack NO2 hotspots by Christmas this year. Their plan is currently out to public consultation.

2.9. The main sources of PM10 and NO2 in the borough are from vehicle traffic and buildings (see graphs below).

Estimated PM10 emissions RoadTransport Gas - Domestic Gas - Non- _Tyre 2% Domestic 6% 4% Industry 2% NRMM Construction 10% and RoadTransport Demolition _Exhaust 1% 17% Fires DieselRail 1% 6%

RoadTransport Resuspension _Brake 20% 30%

Estimated Nitrogen Dioxide Emissions

Aviation 1%

Gas - Domestic 8%

Gas - Non- Domestic 19% RoadTransport 48%

Construction 8%

Industry 2% DieselRail 14%

2.10. To meet the national objectives for NO2 in Kensington and Chelsea, reductions of almost 60μg/m3 are still required at the worst affected road side locations (i.e. more than halving the present level). There is also a

continued exceedence of the daily mean PM10 objective level.

3. AQCCAP Overview and Aims

3.1. The AQCCAP is comprised of three parts:  The Aims which we plan to review in five years time;  The Objectives which we also plan to review in five years time;  The Action Lists which will be live and reviewed on a regular basis.

3.2. This plan implements the Air Quality and Climate Change Policy and concentrates on both mitigation and adaptation either by direct actions or awareness raising actions. These actions are guided by the following three main aims:

 Reduce emissions: o Reduce Pollution: physical measures and requirements to lower Nitrogen Dioxide (NO2) and Particulate Matter (PM) emissions. o Reduce Greenhouse Gases: physical measures to reduce greenhouse gases – mainly carbon dioxide – which contribute to climate change.

 Reduce exposure and increase resilience: o Provide information on or otherwise make residents, visitors and workers in the borough aware of ways in which they can avoid exposing themselves to poor air quality and extreme weather events. o Manage climate change risks from extreme weather events through sustainable adaptation measures, in particular for more vulnerable people.

o Mitigate public exposure to poor air quality by installing green infrastructure and other physical measures.

 Influence change: o Raise public awareness of the sources and effects of poor air quality and climate change in order to empower individuals and businesses to take their own action to reduce emissions. o Urge the Mayor of London, central government and external bodies to introduce radical measures to reinforce local authority actions on emissions. o Act as a champion and lead by example in tackling poor air quality and climate change.

3.3. The Air Quality and Climate Change Policy and Objectives may be found in Appendix 1.

4. Consultation

4.1. The indicative timetable to consult on and agree the action plan is set out below.

Stage Timeline

Consult with key Cabinet April – June 2015 Members (done)

Public Realm Scrutiny 7 July committee (done)

Public consultation including 19 July to 19 October statutory consultees (currently)

Final draft and consultation 16 November report

Cabinet Member’s Policy Board 26 November

Confirmed Key Decision Report 27 November

Leader’s Group meeting 10 December

Cabinet Members’ Key decision 13 January 2016

Key decision confirmed 20 January

Air Quality and Climate Change 19 February Action Plan published

5. Recommendations

5.1. That the Full Council supports the joint approach to climate change and air quality, as well as the aims and objectives of the Air Quality and Climate Change Action Plan.

5.2. That the Councillors help to influence and support initiatives related to this agenda in their local area and within their other Council’s responsibilities.

6. Background papers used in the preparation of this report

6.1. AQCCAP, the Objectives and the Policy Statement – appendix 1

6.2. Draft Air Quality and Climate Change Action Plan – available on request

Sue Harris Interim Executive Director for ELRS

Nicholas Austin Director for Environmental Health

THE ROYAL BOROUGH OF KENSINGTON AND CHELSEA

COUNCIL MEETING

APPENDIX 1 - AIR QUALITY AND CLIMATE CHANGE ACTION PLAN: POLICY STATEMENT AND OBJECTIVES

Policy Statement:

There is an increasing recognition that the problems caused from air pollution and climate change need to be treated together. Not least because the emissions that pollute our air and warm our planet are from common sources such as vehicles, buildings, power generation and industry. The Council intends to give a high priority on the twin issues of climate change and poor air quality and will:

1. Use every effective means to raise awareness of the issues;

2. Take decisive action to reduce emissions of greenhouse gases and air pollutants from its own activities, buildings and road vehicles;

3. Engage with business, schools and the wider community to promote less polluting technology and modes of transport, and more energy efficient buildings in the borough;

4. Collaborate with other London boroughs, the Mayor of London and central government departments to achieve substantial reductions of harmful emissions across London;

5. Take actions to increase the resilience of the borough, residents, visitors and workers to anticipate and address the main risks related to the change of climate and decrease exposure to pollutants;

6. Lead by example and actively encourage responsible environmental practice amongst staff, contractors, suppliers and residents. Raise awareness and empower local communities to start taking actions and implement local air quality and carbon reduction projects.

Objectives:

Focus area Objectives Public Health  Increase community awareness of the potential local impacts of air quality and climate change and support vulnerable groups through appropriate adaptation measures.

 Address fuel poverty by improving heating and energy efficiency in residents’ homes.

 Keep residents with heart and lung conditions and vulnerable to heat stress in their homes and not in hospitals.

Building Usage  Lead by example by reducing pollution and improving the energy efficiency within the Council’s estate and and operations to achieve 30% carbon emission reduction by 2017 and 40% by 2020 vs. 2008, including by Development 2017: o 36% carbon reduction from the council buildings o 22% carbon reduction from schools o 30% carbon reduction from street lighting o 25% carbon reduction from the Council's main contractors o 53% carbon reduction from the Council's office waste

 RBKC’s social housing stock: o Improve energy efficiency and reduce emissions within the Council’s social housing stock with a particular focus on better insulation and individually controlled heating systems where the buildings can support this. o Reduce the number of the Council’s social housing tenants living in fuel poverty.

 Strive for energy efficiency measures, renewable energy and water efficiency to developers for new builds and retrofit in residential and commercial properties, encouraging them to set higher environmental standards from the beginning.

 Use the planning system to minimise local emission and exposure.

Transport:  Reduce levels of motor traffic in the Borough by increasing sustainable transport level, in particular cycling Cycling, Car and walking. and Goods  Use the Council’s policies to reduce local emissions. Vehicle Usage  Increase take up of less polluting vehicles.

 Lead by example by reducing the Council’s fleet and procuring a greener fleet.

Focus area Objectives

Business and  Reduce the greenhouse gas emissions from the borough (homes, buildings and transport). Community  Form partnerships to engage with and empower communities and businesses to take an active role in reducing carbon emissions and pollution.

 Enable the community to improve energy efficiency in their homes and reduce energy bills.

 Decrease general waste and increase recycling rate.

Greening  Ensure the Council’s operations are resilient to climate change impact. measures and  Develop local measures which reduce impact from poor air quality, heat waves and flooding. local Improvements  Use the Council’s policies to increase the installation of greening measures and local improvements.

 Create healthy outdoor spaces and green infrastructure to improve health and wellbeing.

Lobbying and  Ensure funding is available to implement local action plan. Partnership  Ensure policies and legislation holistically tackle poor air quality and climate change.

 Share expertise and knowledge within the Council and with external and local partners on climate change and air quality.

 Work in partnership and lobby external bodies to advance solutions which target the causes and effects of climate change and poor air quality.

6(ii) THE ROYAL BOROUGH OF KENSINGTON AND CHELSEA MEETING OF THE COUNCIL – 14 OCTOBER 2015 URGENT KEY DECISIONS TAKEN SINCE 24 JUNE 2015 REPORT BY THE LEADER OF THE COUNCIL

Article 7.10(f) of the Constitution allows for key decisions to be taken without giving the prescribed notice provided that the prior agreement of the relevant Scrutiny Committee Chairman is obtained. The Leader of the Council is required to report quarterly to the Council on how often the urgency procedure is used and to give details in each case. The urgent decisions taken during the previous quarter are set out in the table below. Members of the Council are asked to note these decisions; further details can be made available on request.

Subject Decision (Forward Plan Decision Taken Reason for urgency taken by reference) Because the project is time sensitive as the property is in use throughout the year with a significant drop in activity once annually over the summer period. As the works involve exposing the roof space to the Refurbishment / Repair Cllr To approve the appointment of Suttons Ltd elements, a period of extended works to the external Nicholas as the main contractor for the clement weather is also preferable. structure of the Carlyle Paget- refurbishment and repair works to the Failure to complete these works by 2 Building. Roof repair and Brown, external structure and roof of the Carlyle September 2015 could result in both replacement works Leader of Building. Please refer to Confidential Part B main tenants not being able to open to (KD04567/15/H/AB) the Council paper for cost information. fee paying students and therefore have to return fees. They would then seek to reclaim monies from RBKC. By following the established process, any delay could expose the Council to significant financial loss.

The works have been tendered and the order needs to be placed to the specialist contractor by 21 July 2015 in order for all works to be completed by 2nd September 2015.

Because Maxilla Nursery School needs to be decanted by 31 July 2015, due to the existing buildings lease expiring Refurbishment of Cllr The report approves the appointment of and incurring extension fees if they Golborne Road Nicholas Suttons Ltd as the main contractor for the have not moved out by then. The Children's Centre Paget- refurbishment of the Golborne Children’s works to refurbish Golborne Children's (KD04610/5/L/AB) Brown, Centre and Nursery on the terms set out in Centre needs to be carried out to Leader of the Confidential Part B appendix. make it suitable for the two services the Council operations and has to be completed by 30 August 2015 or the two services have nowhere to operate from.

FOR INFORMATION Cllr Nicholas Paget-Brown, Leader of the Council

Officer contact: Kathy Howard, 020 7361 3950 or [email protected]

7(i)

THE ROYAL BOROUGH OF KENSINGTON AND CHELSEA

MEETING OF THE COUNCIL - 14 OCTOBER 2015

REPORT OF THE INVESTMENT COMMITTEE

PENSION FUND ANNUAL REPORT AND ACCOUNTS 2014-15

1. The Council’s Pension Fund accounts for the financial year ending 31 March 2015 are now closed and the external audit has been completed. The Report and Accounts were presented to the Investment Committee on 16 September 2015 and the attached version incorporates comments from that meeting. There were no changes arising from the audit.

2. The Council publishes the Report and Accounts in order to provide members of the Pension Fund and other stakeholders with an accurate picture of the Fund as at the financial year-end and to ensure accountability to stakeholders. The report provides additional information to the summary included in the Council’s main financial statements, especially on any restructuring of the Fund’s assets and other significant changes during the financial year.

3. The auditors, KPMG, have issued a report to those charged with governance (ISA260) on both the main Statement of Account and the Pension Fund accounts. The accounts are unqualified.

4. The audited Pension Fund Report and Accounts will be published on the Council’s website in order to meet the statutory requirement for publication by December.

FOR INFORMATION

Councillor Quentin Marshall Chairman, Investment Committee

Royal Borough of Kensington and Chelsea Pension Fund Annual Report and Accounts

2014-15

Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

Contents Chairman’s report Introduction 1. Management and Performance Governance Arrangements Governance Compliance Statement Scheme Management and Advisers Financial Summary and Performance Risk Management

2. Investment Policy and Performance Strategic Benchmark and Objective Statement of Investment Principles Investment Strategy Investment Managers Investment Performance Responsible Investment Custody and Banking

3. Scheme Administration Service Delivery Membership of the Fund Communications Policy Statement Sources of information

4. Pension Fund Accounts Statement of Responsibilities Fund Account Net Assets Statement Independent Auditor’s report

5. Contacts

6. Glossary

2 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

Chairman’s report

Councillor Quentin Marshall, Chairman of the Investment Committee

The Investment Committee is responsible for the strategy for investing the pension fund’s assets and appoints and oversees a set of professional fund managers to undertake this task. If the Committee’s strategy and the fund managers’ decisions are sound, the costs to the Council should be contained. I am pleased to report that the Committee’s strategy continued to work well in 2014-15.

During 2014-15, the Fund received almost £26 million of contributions from its employers and members and it achieved an overall return of 19.1 per cent on its investments. The Fund aims for over-performance of about 2.3 per cent against market movements and actual performance exceeded the target by 3.3 per cent.

It is encouraging that, as at 31 March, the Fund’s actuary assesed that the funding position had improved to just over 100 per cent. This compares with 95 per cent at the 2013 actuarial valuation and is the first time that the level has exceeded 100 per cent since the 2001 valuation. This performance is mainly attributable to the excellent returns achived from equities in the years since the restructuring of the Fund following the 2010 valuation.

Two significant adjustments were made to the portfolio during 2014-15. In August concerns arose over the future management of the Barings absolute return mandate following the departure of key personnel, including the chief investment officer. As a consequence, the Fund’s advisers recommended selling the holding and this was done at the end of August. The proceeds of around £90 million were were reinvested with Legal and General, with equal amounts allocated to passive global equities and a Sterling Liquidity Fund in order to maintain similar characteristics in the balance of investments to those held in the absolute return fund, although it is appreciated that the current allocation to absolute return funds is now significantly below the 30 per cent agreed in the original strategy.

During the second half of the year, the investments which had been allocated to Kames were drawn down so that the full £15 million commitment had been invested by 31 March. This effectively restored the level of property investment to 5 per cent of the Fund, in line with the investment strategy.

A further review of investment strategy is currently underway, with a view to reducing the level of equity risk, while still producing a good level of income and capital growth for the Fund in the future. The Fund has also been preparing for the introduction of a Pension Board which will provide a statutory oversight function.

3 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

INTRODUCTION

The Pension Fund is part of the national Local Government Pension Scheme (LGPS) and is administered locally by the Royal Borough of Kensington and Chelsea. It is a contributory defined benefit pension scheme established by the Superannuation Act 1972, which provides for the payment of benefits to employees and former employees of the Council and the admitted and scheduled bodies in the Fund.

The Fund receives contributions from employees, the Council, the admitted and scheduled bodies and returns from the Fund’s investments. The employers’ contributions are set by the Fund’s actuary in discussion with the Council at the actuarial valuation, which is carried out every three years.

The benefits payable from the Fund are set out in the Local Government Pension Scheme regulations and in summary are:

 A guaranteed pension based on final salary (to 1 April 2014, career average since) and length of service;  The option to take up to 25% of pension as a tax-free lump sum;  Death and survivor benefits;  Early payment of pensions in the event of ill health; and  Pension increases in line with Consumer Price Inflation (CPI).

The Fund is governed by the Public Service Pensions Act 2013, the Local Government Pension Scheme Regulations 2013 (as amended) and the Local Government Pension Scheme (Management and Investment of Funds) Regulations 2009 (as amended).

A new LGPS scheme was introduced with effect from 1 April 2014. This continues to be a defined benefit scheme, but instead of final salary, contributions from that date form part of a Career Average Revalued Earnings (CARE) scheme, so that a scheme member’s pension will be based on their earnings throughout their career, rather than solely on their final salary.

This annual report starts with a section on Management and Performance, explaining the governance and management arrangements for the Fund, as well as summarising the financial position and the approach to risk management.

The Investment section then sets out the Fund’s strategy, arrangements and performance. This is followed by a section on Scheme Administration, which sets out how the administration of the scheme’s benefits and membership is undertaken. Section 2 outlines the funding position of the Fund and Section 4 provides a summary of the Fund’s annual accounts.

The report concludes with a glossary of some of the more technical terms in Section 6 and a list of contacts in Section 5.

4 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

1. MANAGEMENT AND PERFORMANCE

Governance Arrangements

The Council of the Royal Borough of Kensington and Chelsea has delegated decision making powers in respect of pensions to the Investment Committee (the Committee). The Committee comprises six elected representatives of the Council – four from the majority party and two minority party representatives. Up to four co- opted members may attend the committee meetings but have no voting rights.

The Committee meets at least four times a year and has the following terms of reference:

 To determine the overall investment strategy and strategic asset allocation of the Pension Fund;  To appoint the investment manager(s), custodian, actuary and any independent external advisors felt to be necessary for the good stewardship of the Pension Fund;  To monitor the performance of the custodians, actuary and external advisors to ensure that they remain suitable;  To review on a regular basis the investment managers’ performance against established benchmarks, and satisfy themselves as to the managers’ expertise and the quality of their internal systems and controls;  To prepare, publish and maintain the Statement of Investment Principles, and monitor compliance with the statement and review its contents;  To prepare, publish and maintain the Funding Strategy Statement, the Governance Compliance Statement, and the Communications Policy and Practice Statement and revise the statements to reflect any material changes in policy;  To approve the final accounts and balance sheet of the Pension Fund and approve this Annual Report;  To receive actuarial valuations of the Pension Fund regarding the level of employers’ contributions necessary to balance the Pension Fund;  To consider any proposed legislative changes in respect of the Compensation and Pension Regulations and to respond appropriately; and  To receive and consider the external auditors’ report on the governance of the Pension Fund.

The Committee reports to the full Council annually on its activities. The Committee obtains and considers advice from the Town Clerk and Executive Director of Finance, and as necessary from the Fund’s appointed actuary, advisors and investment managers.

5 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

The membership of the Investment Committee in 2014-15 was as follows:

Councillor Quentin Marshall Chairman Councillor Warwick Lightfoot Vice Chairman Councillor Emma Dent-Coad Councillor Andrew Lomas Councillor Andrew Rinker Councillor Paul Warrick

There are also four co-opted, non-voting members:

Sir Michael Craig-Cooper Hon Alderman John Cox Mr Dominic Johnson Mr Jonathon Read

Governance Compliance Statement

The Local Government Pension Scheme (Administration) Regulations 2008 require Pension Funds to prepare, publish and maintain a governance compliance statement; and to measure its governance arrangements against a set of best practice principles. This measurement should result in a statement of full, partial or non-compliance with a further explanation provided for any non or partial compliance.

The key issues covered by the best practice principles are:

 Formal committee structure;  Committee membership and representation;  Selection and role of lay members;  Voting rights; and  Training, facility time and expenses.

The Fund’s published statements can be found by following the link: https://www.rbkc.gov.uk/council/how-council-manages-money/council- spending-and-finances/pension-fund-2013-14

6 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

Scheme Management and Advisers

The City of Westminster, London Borough of Hammersmith & Fulham and the Royal Borough of Kensington and Chelsea have combined some operational areas to provide a more efficient service and greater resilience. This includes the Pensions and Treasury teams.

The combined team was formed in February 2012 and is responsible for the management of the pension fund investments and the treasury operations across the three boroughs. The team is based at Westminster City Hall.

The Pension Funds continue to be managed separately in accordance with each borough’s strategy and so each continues to have sovereignty over decision making. However, officers are continually seeking to improve efficiency and resilience and to minimise the cost of running the Pension Funds, in line with the tri-borough working aims.

Officers Town Clerk and Executive Director of Finance Nicholas Holgate Tri-Borough Pensions Team in 2014-15 Jonathan Hunt Alex Robertson Nicola Webb Nikki Parsons Pensions Manager Maria Bailey

Contact details for officers are provided in Section 5 of this document.

External Advisers Investment Adviser Hymans Robertson Investment Managers Adams Street Partners Baillie Gifford CBRE Global Investors Legal & General Investment Management Longview Asset Management Kames Capital Pyrford LLP Custodian & Bankers Northern Trust, NatWest Actuary Barnett Waddingham Auditor KPMG Legal Adviser Eversheds Scheme Administrators Capita Hartshead AVC Providers Prudential

7 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

Financial Summary and performance

The investment return in 2014-15 was positive both in absolute terms and relative to the Fund’s target. The return was 19.1 per cent, which was 3.3 per cent above the target set by the Fund. As with all performance reported here, this was net of fees. There were two changes of investment manager during the year. The absolute return contract with Barings was terminated on the investment adviser’s advice, due to a significant change in the management of the Fund. The proceeds from this sale were invested with Legal and General, split between their World Equity Index and their Sterling Liquidity Fund, to approximate the proportions of the absolute return fund. The £15 million Kames Capital investment which had been agreed in 2013-14 was funded from the Sterling Liquidity fund towards the end of 2014-15. The Investment Policy and Performance report in Section 2 provides more detail on the Fund’s investments and performance.

The table below shows how the value of the Fund’s investments have increased over time by showing the total value at 31st March every year for the last ten years:

900

800

700

600

500

400

300 Investmnet values £m 200

100

0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

For the first time in 2014-15, benefits paid from the fund exceeded the contributions made to it, by around £2.5 million, but it was possible to meet this shortfall from the Fund’s cash reserves. There are several reasons for this deterioration of the cashflow position, the most significant of which were further reductions in active members and increases in the numbers of pensioners, a continuing trend in the public sector. Pensions continued to rise at a faster rate than the income from contributors to the scheme.

A more detailed account is set out in Section 3.

8 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

Risk Management

The most significant long term risk is that the Fund’s assets are not sufficient to meet its liabilities. In the light of this, the Fund obtains quarterly reports from the actuary showing movement in the levels of liabilities as well as a smoothed asset position, so that the Committee can assess whether its strategy is succeeding or not.

In order to improve the funding level, the Investment Committee has invested in growth assets, the value of which can fluctuate significantly. To mitigate this risk, the investment strategy encompasses a range of asset classes and is generally invested globally to ensure diversification. All of the investments have been made in line with the Local Government Pension Scheme (Management and Investment of Funds) Regulations 2009 and only following advice from the Fund’s investment adviser.

All of the Fund’s assets (apart from cash) are managed by external investment managers. They are required to provide regular audited internal controls report or audited accounts to the Fund. These set out how assets are managed in accordance with the Investment Management Agreements the Council has signed with each investment manager. A range of investment managers is used to diversify manager risk. All the Fund’s assets are held for safekeeping by the custodian, who is independent of all the investment managers and also required to provide an audited internal controls report to the Fund on a regular basis.

2. INVESTMENT POLICY AND PERFORMANCE

The Fund’s investment policy, objectives and strategy are set out in detail in the Statement of Investment Principles, which can be found as an appendix to this report under Pension Fund Policy Statements. One of the Fund’s key objectives is to manage employers’ liabilities effectively and one of the key risks for the Fund is that the assets will fall short of the liabilities. As a result, the investment policy is set and performance measured by reference to a benchmark which reflects the liabilities.

Strategic Benchmark and Objective

The strategic benchmark for the Fund has been set with reference to the long term nature of the Fund’s liabilities, and is reviewed regularly. The current benchmark is set out in the table below, with the real returns taking account of assumed consumer price inflation (CPI) of 2.7 per cent:

Asset Benchmark Expected real Allocation long-term (%) return Global equities 60 4.2% Absolute return fund 30 1.8% Private Equity 5 4.2% Property 5 0.8% Total 100 3.2%

9 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

Cash is not included in the benchmark as there is no set allocation to it as an asset class.

The target of the Fund as a whole is to outperform the overall benchmark by 2.3 per cent per annum on a rolling three year basis.

Statement of Investment Principles

The Local Government Pension Scheme (Management and Investment of Funds) Regulations 2009 require Pension Funds to prepare, maintain and publish a statement setting out the investment policy of the Fund. In addition Pension Funds are required to demonstrate compliance with the six “Myners Principles”.

The “Myners Principles” are a set of recommendations relating to the investment of pension funds. The current version of the principles covers the following areas:

 Effective decision making;  Clear objectives;  Risk and liabilities;  Performance Measurement;  Responsible ownership; and  Transparency and reporting.

The Fund’s published statement can be found in the Pension Fund section of the following website: https://www.rbkc.gov.uk/council/how-council-manages-money/council- spending-and-finances/pension-fund-2013-14

Investment Strategy

The investment strategy of the Fund is to have four main portfolios - Global Equity, Absolute Return, UK Property and Private Equity. The investment strategy is intended to provide diversification and specialisation to reduce exposure to market risk and achieve optimum return against the Fund’s strategic benchmark.

The graph below shows how the Fund was split between the different portfolios at 31 March 2015.

10 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

3.6% 2.2% Global Equity

4.9% 5.5% Absolute Return

UK Property Fund of 11.2% Funds Global Private Equity Fund of Funds 72.5% Sterling Liquidity Fund

Cash

The strategic allocation of the Fund changed during 2014-15 as a result of the sale of the Barings Dynamic Asset Allocation Fund which has cut the allocation to absolute return funds. However, by reinvesting in equities and a liquidity fund, the Fund has attempted to minimise the impact on the underlying asset allocation.

A summary of the Fund’s assets is given in the table below: Assets UK Non-UK Global Total £'000s £'000s £'000s £'000s Equities 35,873 168,730 394,628 599,231 40,251 - - 40,251 Alternatives - 45,809 92,702 138,511 Cash and Equivalents 48,975 - - 48,975 Other (1,072) - - (1,072) 124,027 214,539 487,330 825,896

A summary of the investment income received in respect of these assets is given below: Investment Income UK Non-UK Global Total £'000s £'000s £'000s £'000s Equities 813 3,009 2 3,824 Pooled property 1,095 - - 1,095 Alternatives - 3 3,435 3,438 Cash and Equivalents 53 - - 53

1,961 3,012 3,437 8,410

Overall income from all sources (excluding market movements) exceeded overall expenditure for the year by £2.148 million during 2014-15 and this was generally reinvested. The equivalent figure was £3.734 million in 2013-14 (excluding the £6m additional contribution from the Council).

11 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

Investment Managers

The Fund has appointed external investment managers for each of the four main portfolios. The investment managers have clear benchmarks and targets, which place maximum accountability for performance on the manager. The detail of these is set out in the Statement of Investment Principles.

Investment Performance

The table below shows the performance of the Fund against the target for the three years to 31 March 2015. The current strategy commenced in April 2011.

Annualised return 2014-15 2013-14 2012-13 3 years Performance 19.1% 8.9% 15.1% 14.3% Target 15.8% 8.6% 14.5% 13.0% Out / (under) performance 3.3% 0.3% 0.6% 1.3% against target

Each of the investment managers has a benchmark and target set within their Investment Management Agreements with the Fund. Performance is measured quarterly and reported to the Committee. The tables overleaf show the performance of the investment managers against their targets over 2014-15 and annualised over three years.

2014-15 performance against targets 35.0%

30.0%

25.0%

20.0%

15.0% Performance Target 10.0%

5.0%

0.0% Whole Baillie Longview LGIM Pyrford CBRE Adams Fund Gifford Street

The active equity managers outperformed their targets in 2014-15, which led to outperformance against target for the Fund as a whole over the year. Pyrford’s target is to beat the Retail Prices Index (RPI) by 5 per cent over a rolling three year period which has been difficult with prevailing levels of inflation and low interest rates. Private equity valuations tend to lag behind the public markets against which

12 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

Adams Street is measured, and the considerable improvement in their performance reflects the improved opportunities to realise investments on appropriate markets. Since the strategy has been in place for over three years, we can see that overall performance over a three-year period is similar, as shown below:

25.0%

20.0%

15.0%

Performance 10.0% Target 5.0%

0.0% Whole Baillie Longview LGIM Pyrford CBRE Adams Fund Gifford Street

Responsible Investment

The Fund recognises that the neglect of corporate governance and corporate social responsibility may lead to poor or reduced shareholder returns. Following consideration of how to address the issue, and in the light of the resources available to the Fund, it has been decided to delegate responsibility for the consideration of responsible investment matters to the Fund’s investment managers. The Committee believes this is the most efficient approach for a Fund of this size.

All of the managers used by the Royal Borough Fund have signed up to the United Nations Principles for Responsible Investment.

Custody and Banking

Northern Trust is the global custodian for the Fund’s assets and is independent of the investment managers Northern Trust is responsible for the safekeeping of all of the Fund’s investments as well as for the settlement of all investment transactions and the collection of income.

The Fund’s bank account is held at with NatWest (part of the RBS Group). Funds not immediately required to pay benefits are invested in a NatWest Business Reserve Account.

13 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

3. SCHEME ADMINISTRATION

The LGPS is a statutory pension scheme whose regulations are made by the government. It is a defined benefit pension scheme and the benefits are currently based on combination of final salary career average earnings together with the length of scheme membership.

Service Delivery

Although the LGPS is a national scheme, it is administered locally. The Royal Borough of Kensington and Chelsea has a statutory responsibility to administer the records of active and deferred members, as well as the pension benefits payable from the Pension Fund on behalf of the participating employers and the past and present members and their dependents. Capita Hartshead have been contracted to perform the pension administration service for the Fund and the Council monitors their performance.

Membership of the Fund

The Fund provides pensions not only for employees of the Royal Borough of Kensington and Chelsea, but also for the employees of a number of Scheduled and Admitted Bodies. Scheduled Bodies are organisations which have the right to be a member of the LGPS under the regulations (e.g. academies). Admitted bodies participate in the scheme via an admission agreement, which is a legal document made between the Council and the organisation. Examples of admitted bodies are not for profit organisations with a link to the Council and contractors who have taken on the Council’s services where staff have been transferred and have a right to remain in the LGPS.

The number of employers in the Fund has increased over recent years as some services have been outsourced and as new academies have been started or existing schools have taken on academy status. During 2014-15 officers continued to work with the administrators of the Specialist Schools and Academies Trust (SSAT), which ceased to be an admitted body in 2012. Just over £2 million was received from SSAT’s liquidators in 2014-15.

A summary of the employers other than the Administering Authority is given in the table below:

Fund Employers Active Ceased Total

Scheduled Bodies 7 - 7 Admitted Bodies 7 5 12 Total 14 5 19

A full list of the Fund’s current active employers is set out below.

14 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

Admitted Bodies

Amey EPICS Hestia Medequip Octavia TMO Westway

Scheduled Bodies

Brunel Academy Chelsea Academy Holland Park Academy Kensington Aldridge Academy Latimer Academy Kensington and Chelsea College St Charles College

In addition, there are five employers which have no active members and have ceased: Ceased Admitted Bodies

Housing Action Centre Maxilla Nursery Portobello Business Centre Specialist Schools and Academies Trust West London Family Service Units

The table below shows how the Fund’s membership has changed over the last five years. The number of active contributing members in the Pension Fund has fallen by 8 per cent since 2011. In the same period, the number of pensioners and deferred members has risen, by 16 per cent and 29 per cent respectively. This pattern is similar to that seen in other local government pension schemes.

31st 31st 31st 31st 31st March March March March March 2011 2012 2013 2014 2015 Contributors 3,562 3,385 3,202 3,097 3,271 Pensioners & 2,331 2,430 2,515 2,656 2,693 Dependents Deferred 3,429 3,706 3,966 4,305 4,421 Total Membership 9,322 9,521 9,683 10,058 10,385

15 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

Communication policy statement

The Local Government Pension Scheme Regulations 2013 require Pension Funds to prepare, publish and maintain a communication policy statement. This statement sets out the methods used by the Fund to communicate with the various stakeholders, including scheme members, employers and their representatives.

The Fund’s Communication policy statement can be found on the following website: https://www.rbkc.gov.uk/council/how-council-manages-money/council- spending-and-finances/pension-fund-2013-14

Sources of information

Further information about the benefits payable from the Pension Fund can be found on the national Local Government Pension Scheme website www.lgps.org.uk . For further information about the administration of the scheme in Kensington and Chelsea, contact Maria Bailey by telephone on 020 7361 2333 or by email: [email protected]

16 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

4. PENSION FUND ACCOUNTS

The Pension Fund Account

2014-15 2013-14 Notes Dealings with members, employers and others directly involved in the fund £'000 £'000 Contributions From employers (normal) (18,290) (18,409) 6 From employers (special) - (6,000) 6 From members (6,374) (5,682) 6 Transfers in from other pension funds (1,240) (4,039) Other income - - (25,904) (34,130) Benefits Pension 21,391 20,209 7 Commutation and lump sum retirement benefits 4,637 5,860 7 Payments to and on account of leavers 54 20 Individual transfers out to other pension funds 2,279 2,582 Other expenditure - -

28,361 28,671

Net (additions) / withdrawals with members 2,457 (5,459)

Management expenses 3,733 3,751 8

Returns on investments Investment income (8,410) (8,167) 9 Other income (30) - Taxes on income 102 141

Profit and loss on disposal of investments and changes in the market value of investments Realised (27,660) (13,339) Unrealised (100,426) (39,100) (128,086) (52,439)

Net return on investments (136,424) (60,465)

Net (increase) / decrease in the net assets available for benefits during the year (130,234) (62,173)

Opening Net Assets of the Scheme (695,662) (633,489) Closing Net Assets of the Scheme (825,896) (695,662)

17 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

The Pension Fund Net Assets Statement*

nces

31 March 2015 31 March 2014

£'000 £'000 Notes Investment Assets

Fixed interest securities Equities: United Kingdom 35,873 28,732 12 Overseas 168,642 134,235 12

Pooled sterling liquidity fund 30,118 - 12 Pooled global equities 394,628 285,258 12 Pooled global absolute return funds 92,702 176,264 12 Pooled property investments 40,251 22,781 12 Pooled private equity funds 45,809 33,500 12

Cash (with managers) 9,469 3,656 12

Investment income due 88 103 12

Investment liabilities -

Net value of investment assets 817,580 684,529 12

Current assets 142 1,540 12/19

Current liabilities (1,214) (451) 12/20

Cash (held directly by fund) 9,388 10,044 12

Net assets of the fund available to fund benefits at the period end 825,896 695,662

* The Fund's financial statements do not take account of liabilities to pay pensions and other benefits after the period end. The actuarial present value of promised retirement benefits is disclosed in Note 18.

18 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

Notes to the Pension Fund Account nces

1. Description of The Royal Borough Of Kensington And Chelsea Pension Fund

(a) General

The Pension Fund (the 'Fund') is part of the Local Government Pension Scheme (LGPS) and is administered by the Council. It is a contributory defined benefits scheme established in accordance with statute, which provides for the payment of benefits to employees and former employees of the Council and the admitted and scheduled bodies to the Fund.

These benefits include retirement pensions, early payment of benefits on medical grounds and payment of death benefits where death occurs either in service or in retirement. The benefits payable are based on an employee’s final salary and the number of years of eligible service. Pensions are increased each year in line with the Consumer Price Index.

The benefits payable in respect of service from 1st April 2014 are based on career average re-valued earnings and the number of years of eligible service. The benefits payable in respect of service prior to 1st April 2014 are based on an employee’s final salary and the number of years of eligible service. Pensions are increased each year in line with the Consumer Price Index.

The Fund is financed by contributions from employees, the Council, the admitted and scheduled bodies and from interest and dividends on the Fund’s investments. Contributions from employees are made in accordance with the Local Government Pension Scheme Regulations 2013 and range from 5.5% to 12.5% of pensionable pay. Employer contributions are set based on triennial actuarial funding valuations, as detailed in Note 18.

(b) Investment Committee

The Council has delegated the investment arrangements of the scheme to the Investment Committee (the Committee), which decides on the investment policy most suitable to meet the liabilities of the Fund and has ultimate responsibility for the investment policy.

The Committee is made up of six elected representatives of the Council, including one opposition party representative, each of whom has voting rights. In addition, there are up to four co-opted members who may attend committee meetings, but have no voting rights.

19 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

The Committee reports to the full Council and has full delegated authority to make investment decisions. The Committee obtains and considers advice from the Town Clerk and, as necessary, from the Fund’s appointed investment advisers, managers and actuary.

The Local Government Pension Scheme (Management and Investment of Funds) (Amendment) Regulations 2009 require administering authorities to prepare and review from time to time a written statement recording the investment policy of their Pension Fund. The purpose of this document is to satisfy the requirements of the regulations, to explain how the Fund is managed and to set out the factors taken into account in doing so.

The latest Statement of Investment Principles (SIP) was approved in February 2015 by the Investment Committee. The SIP is available from the Council's website at: https://www.rbkc.gov.uk/committees/Meetings/tabid/73/ctl/ViewMeetingPublic/mid/669/M eeting/6773/Committee/1547/Default.aspx

The Fund's investment objective is to ensure that its assets are invested in a way that maximises the likelihood that benefits will be paid to members as they fall due and to ensure the continued long-term financial support from the sponsoring employers.

The Committee has delegated the management of the Fund’s investments to professional investment managers appointed in accordance with the regulations, and whose activities are specified in detailed investment management agreements and monitored on a quarterly basis. Please see Note 10.

(d) Membership

Membership of the LGPS is voluntary and employees are free to choose whether to join the scheme, remain in the scheme or make their own personal arrangements outside the scheme. Organisations participating in the Fund include scheduled bodies, which are local authorities and similar bodies whose staff are automatically entitled to be members of the Fund and admitted bodies, which are other organisations that participate in the Fund under an admission agreement between the Fund and the relevant organisation. Admitted bodies include voluntary, charitable and similar bodies or private contractors undertaking a local authority function following outsourcing to the private sector.

The following table summarises the membership numbers of the scheme:

31 March ‘15 31 March ‘14 No No Active members 3,271 3,097 Pensioners receiving benefits 2,693 2,656 Deferred Pensioners 4,421 4,305 Total 10,385 10,058

20 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

Details of the scheduled and admitted bodies in the scheme are shown in the Fund’s Annual Report.

(e) Tri-borough Working

The Council, the London Borough of Hammersmith & Fulham and the City of Westminster councils have combined certain operational areas to provide a more efficient service and greater resilience. Two of the first areas to be jointly operated across the Tri-borough were the treasury and pension teams of the three councils.

The pension fund and treasury operations are managed separately in accordance with Government regulations and the strategies agreed by each council, which retains sovereignty over decision making in relation to its pension fund.

2. Basis of the Preparation of the Financial Statements

The Statement of Accounts summarises the Fund’s transactions for 2014-15 and its position at year end as at 31 March 2015. The Statement of Accounts has been prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2014-15 (The Code) issued by the Chartered Institute of Public Finance and Accountacy (“CIPFA”) which is based on International Financial Reporting Standards (IFRS) as amended for the UK public sector.

The accounts have been prepared on an accruals basis, apart from transfer values which have been accounted for on a cash basis in accordance with the Code.

The accounts do not take account of obligations to pay pensions and benefits which fall due after the end of the financial year, nor do they take into account the actuarial present value of promised retirement benefits. The Code gives administering authorities the option to disclose this information in the Net Asset Statement, in the notes to the accounts or by appending an actuarial report, prepared for this purpose. The Council has opted to disclose this information in an accompanying report to the accounts which is disclosed in Note 18.

3. Summary of Significant Accounting Policies

Fund Account – Revenue Recognition (a) Contribution Income All contributions, both from the members and from the employer, are accounted for on an accruals basis.

21 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

(b) Transfers to and from other schemes Transfer values represent the amounts received and paid during the year for members who have either joined or left the Fund during the financial year and are calculated in accordance with the LGPS regulations. Individual transfers in and out are accounted for when received or paid, which is normally when the member liability is accepted or discharged. Bulk (group) transfers are accounted for on an accruals basis in accordance with the terms of the transfer agreement.

(c) Investment Income Dividends from quoted securities are accounted for when the security is declared ex-dividend. Interest income is accrued on a daily basis. Investment income is reported gross of withholding taxes which are accrued in line with the associated investment income. Irrecoverable withholding taxes are reported separately as a tax charge. Investment income arising from the underlying investments of the Pooled Investment Vehicles is reinvested within these and reflected in the unit price.

Fund Account – Expense Items

(d) Benefits Payable Pensions and lump-sum benefits payable include all amounts known to be due as at the end of the financial year. Lump sums are accounted for in the period in which the member becomes a pensioner. Any amounts due, but unpaid, are disclosed in the net assets statement as current liabilities.

(e) Taxation The Fund is an exempt approved fund under Section 1(1) of Schedule 36 of the Finance Act 2004 and as such is exempt from UK income tax on interest received and from capital gains tax on the proceeds of investments sold. As the Council is the administering authority for the Fund, VAT input tax is recoverable on all Fund activities, including expenditure on investment expenses. Where tax can be reclaimed, investment income in the accounts is shown gross of UK tax. Income from overseas investments suffers withholding tax in the country of origin, unless exemption is permitted. Irrecoverable tax is accounted for as a Fund expense as it arises.

(f) Management Expenses The Code does not require a breakdown of management expenses, however disclosure of expenses in accordance with the CIPFA guidance “Accounting for Local Government Pension Scheme Management costs” is provided in the interests of greater transparency.

All expenses are accounted for on an accruals basis to ensure costs for the full accounting period are accounted for in the Fund account. Staff costs associated with the running of the Fund are charged to the Fund along with an element of overhead charges. The fees of the Fund’s external investment managers reflect their differing mandates. Management fees are usually linked to the market value of the Fund’s investments and therefore may increase or reduce as the value of the

22 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

investment changes. Fees are also payable to the Fund’s custodian and other advisers.

Net Assets Statement

(g) Financial Assets Financial assets are included in the net assets statement on a fair value basis as at the reporting date. Quoted securities and Pooled Investment Vehicles have been valued at the bid price and fixed interest securities are recorded at net market value based on their current yields at the balance sheet date. Quoted securities are valued by Northern Trust, the Fund’s custodian.

The values of the private equity investments are based on valuations provided by the general partners to the private equity funds. Valuations are usually undertaken annually at the end of December. Cash flow adjustments are used to roll forward the valuations to 31 March as appropriate.

There are no significant restrictions affecting the ability of the Fund to realise its investments at the accounting date or at the value at which they are included in the accounts, apart from the investments in private equity which, by their nature, will be realised over a long period of time.

(h) Foreign Currency Transactions Where appropriate, market values, cash deposits and purchases and sales outstanding listed in overseas currencies are converted into sterling at the rates of exchange ruling at the reporting date.

(i) Cash and Cash Equivalents Cash and cash equivalents comprise cash in hand and deposits with financial institutions that are repayable on demand without penalty.

(j) Financial Liabilities The Fund recognises financial liabilities at fair value as at the reporting date. A financial liability is recognised in the net assets statement on the date the Fund becomes party to the liability. From this date, any gains or losses arising from changes in the fair value of the liability are recognised by the Fund.

(k) Actuarial present value of promised retirement benefits The CIPFA Code of Practice on Local Authority Accounting sets out that the actuarial present value of promised retirement benefits should be disclosed and based on the requirements of IAS19 Post Employment Benefits and relevant actuarial standards.

As permitted under the Code, the financial statements include a report from the actuary disclosing the actuarial present value of retirement benefits. See Note 18.

23 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

(l) Additional Voluntary Contributions Members of the Fund may choose to make Additional Voluntary Contributions (AVCs) into a separate scheme run by Prudential Assurance in order to obtain additional pensions benefits. The company is responsible for providing the investors with an annual statement showing their holding and movements in the year. AVCs are not included within the accounts in accordance with Regulation 4 (2)(b) of the LGPS (Management and Investment of Funds) Regulations 2009 . They are disclosed in Note 21.

(m) Recharges from the General Fund The Local Government Pension Scheme (Management and Investment of Funds) Regulations 2009 permit the Council to charge administration costs to the Fund. A proportion of the relevant Council costs have been charged to the Fund on the basis of actual time spent on Pension Fund business. Costs incurred in the administration, oversight and governance of the Fund are set out separately in Note 8.

4. Critical Judgements in Applying Accounting Practices

The accounts contain certain estimated figures that are based on assumptions made by the Fund and other bodies about the future or that are otherwise uncertain. Estimates are made because they are required to satisfy relevant standards or regulations and are on the basis of best judgement at the time, derived from historical experience, current trends and other relevant factors. As a result, actual results may differ materially from those assumptions.

The items for which there is significant risk of material adjustment are:

(a) Pension Fund Liability The Pension Fund liability is calculated triennially by the appointed actuary, with annual updates in the intervening years. The methodology used follows generally agreed guidelines and is in accordance with IAS 19. These assumptions are summarised in Note 17. The estimate of the net liability to pay pensions depends on a number of judgments and assumptions. In particular are those relating to the discount rate, the rate at which salaries are projected to increase, change in retirement ages, mortality rates and expected returns on the Fund’s assets.

The effect of changes in individual assumptions can be measured. A 0.5% increase in the discount rate would result in a decrease in the pension liability of £94.6m. A 0.25% increase in the pay inflation assumption would increase the value of liabilities by £6.3m, and a one-year increase in assumed life expectancy would increase liabilities by £37.9m.

(b) Unquoted Private Equity Investments The fair value of private equity investments is unavoidably subjective. The valuations are based on forward-looking estimates and judgements involving many factors. Unquoted private equity assets are valued by the investment

24 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

managers in accordance with industry standards. The value of private equity investments at the balance sheet date was £45.8m.

5. Events after the Balance Sheet Date

As at end May 2015 the Fund’s investments and cash had changed in value to £822 million compared to the value placed on the net assets statement as at the reporting date of 31 March 2015. This mainly reflects a combination of general equity and fixed-income market movements.

6. Contributions Receivable

Employees’ contributions are calculated on a sliding scale based on a percentage of their gross pay. The Council, scheduled and admitted bodies are required to make contributions determined by the Fund’s actuary to maintain the solvency of the Fund. The table below shows a breakdown of the total amount of employers’ and employees’ contributions.

2014-15 2013-14 £’000 £'000 Employees Employers Employees Employers By authority Normal Normal Normal Normal Administering Body Kensington and Chelsea 5,453 13,909 5,070 * 22,672 Scheduled bodies 388 901 265 665 Admitted bodies 533 # 3,480 347 1,072 Total 6,374 18,290 5,682 24,409 Of which, Employers’ Deficit Recovery Contributions Total 2,543 5,418 * The total employer contributions for 2013-14 include £6 million special contribution shown separately in the Pension Fund Accounts. # Includes £2.025m recovered from Specialist Schools and Academies Trust in 2014.

7. Benefits Payable

By category: 2014-15 2013-14 £’000 £’000 Pensions 21,391 20,209 Commutation and lump sum retirement benefits 4,104 4,710 Lump sum death benefits 533 1,150 Total 26,028 26,069

By authority:

The Fund paid benefits to members of the scheme who were previously employed by the bodies set out below (this summary excludes lump sum retirement benefits and death benefits as this information is not held at employer level).

25 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

2014-15 2013-14 £’000 £’000 Royal Borough of Kensington and Chelsea 19,740 18,612 Scheduled bodies 175 160 Admitted Bodies 1,476 1,437 Total 21,391 20,209

8. Management Expenses

2014-15 2013-14 £’000 £’000 Administrative costs 233 297 Investment management expenses 3,277 3,238 Oversight and governance costs 223 216 Total 3,733 3,751

Of the investment management fees for 2014-15, £23,000 was in respect of identifiable transaction costs . The majority of the Fund is held in pooled assets for which transaction costs are not available.

9. Investment Income 2014-15 2013-14 £’000 £’000 Equity dividends 7,259 6,781 Income from pooled property investments 1,095 739 Income from private equity 3 607 Interest on cash deposits 53 40 Total 8,410 8,167

10. Investment Strategy

The strategy of the Fund is to have around 60 per cent of the investments in global equities, diversified through three managers, Baillie Gifford and Longview managing active portfolios, with Legal and General managing a passive global equity allocation. For further diversification, the remainder of the Fund is allocated to a global absolute return strategy managed by Pyrford, a global private equity allocation, managed by Adams Street, UK commercial property funds of funds managed by CBRE and Kames and a liquidity fund managed by Legal and General.

The market value and proportion of assets managed by each manager at 31 March was:

26 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

31 March 2015 31 March 2014 Market Market Value % Value % Fund Manager £’000 £’000 L and G Liquidity 30,118 3.7 - Baillie Gifford 176,326 21.6 145,279 21.2 Longview 213,867 26.2 166,624 24.3 L and G Equities 218,302 26.7 139,979 20.5 Barings - 89,656 13.1 Pyrford 92,702 11.3 86,607 12.7 CBRE 25,660 3.1 22,781 3.3 Kames 14,616 1.8 - Adams Street 45,901 5.6 33,500 4.9 Total Fund Managers 817,492 100 684,426 100.0 Investment income due 88 103 Total Investments 817,580 684,529

Although several allocations exceed 5 per cent of the Fund’s value, all of the allocations to pooled funds are made up of underlying investments, each of which represents substantially less than 5 per cent.

The Fund has appointed Northern Trust as its global custodian. They are responsible for safe custody and settlement of all investment transactions, collection of income and the administration of corporate actions. The bank account for the Pension Fund is held by Nat West.

27 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

11. Reconciliation in Movements in Investments

Transaction costs are included in the cost of purchases and sale proceeds. Transaction costs include costs charged directly to the scheme such as fees, commissions, stamp duty and other fees.

Purchases Sales Changes during the during the in market Market Value year and year and Net assets value 1 April derivative derivative / liabilities during 31 March 2014-15 2014 payments receipts movement the year 2015 £’000 £’000 £’000 £’000 £’000 £’000 Stirling liquidity pooled fund (Legal & General) - 45,000 (15,000) - 118 30,118 Pooled active global equities (Baillie Gifford) 145,279 - - - 31,047 176,326 Active global equities (Longview) 166,624 19,954 (16,222) - 43,511 213,867 Pooled passive global equities (Legal and General) 139,979 45,000 - - 33,323 218,302 Pooled active global absolute return fund (Barings) 89,656 35 (92,273) - 2,582 - Pooled active global absolute return fund (Pyrford) 86,607 3,385 (417) - 3,127 92,702 Pooled UK property fund (CBRE) 22,781 - - - 2,879 25,660 Pooled UK property fund (Kames) - 15,025 - - (409) 14,616 Global private equity fund (Adams Street) 33,500 8,563 (8,070) - 11,908 45,901 Investment income due 103 - - (15) - 88 Sub-Total 684,529 136,962 (131,982) (15) 128,086 817,580

Current assets 1,540 - - (1,398) - 142 Current liabilities (451) - - (763) - (1,214) Cash deposits 10,044 - - (656) - 9,388

Net Investment Assets 695,662 136,962 (131,982) (2,832) 128,086 825,896

28 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

Purchases Sales Changes during the during the in market Market Market Value year and year and Net assets value values 31 1 April derivative derivative / liabilities during March 2013-14 2013 payments receipts movement the year 2014 £’000 £’000 £’000 £’000 £’000 £’000 Index-linked Gilt pooled fund (Legal & General) 4,745 - (4,647) - (98) - Pooled active global equities (Baillie Gifford) 128,840 - - - 16,439 145,279 Active global equities (Longview) 142,176 47,003 (43,817) - 21,262 166,624 Pooled passive global equities (Legal and General) 128,371 - - - 11,609 139,979 Pooled active global absolute return fund (Barings) 88,153 64 - - 1,440 89,656 Pooled active global absolute return fund (Pyrford) 86,514 2,606 - - (2,513) 86,607 Pooled UK property fund (CBRE) 21,070 - (236) - 1,947 22,781 Global private equity fund (Adams Street) 30,269 5,690 (4,799) - 2,340 33,500 Fixed-term cash deposits ------Investment income due 264 - - (161) - 103 Sub-Total 630,401 55,363 (53,499) (161) 52,426 684,529

Current assets 762 - - 778 - 1,540 Current liabilities (403) - - (48) - (451) Cash deposits 2,729 - - 7,302 13 10,044

Net Investment Assets 633,489 55,363 (53,499) 7,871 52,439 695,662

29 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

12. Classification of Financial Instruments

The following table shows the classification of the Fund’s financial instruments and also shows the split between UK and overseas. All investments are quoted unless otherwise stated.

31 March ‘15 31 March ‘14 £'000 £'000 Designated Designated Financial as fair value Financial as fair value liabilities through liabilities at through at profit and Loans and amortised profit and Loans and amortised loss receivables cost loss receivables cost Financial Assets Equities United Kingdom 35,873 28,732 Overseas 168,642 134,235

Pooled funds - investment vehicles UK pooled liquidity fund 30,118 - Pooled global equities 394,628 285,258 Pooled global absolute return funds 92,702 176,264 Pooled property investments 40,251 22,781 Pooled private equity funds (unquoted) 45,809 33,500 Investment income due 88 103 Cash 18,857 13,700 Debtors 142 1,540 Financial Liabilities Creditors (1,214) (451) Subtotal 808,111 18,999 (1,214) 680,873 15,240 (451) Total 825,896 695,662

The carrying value is the same as the fair value for all financial instruments held by the Fund.

13. Valuation of Financial Instruments carried at fair value

The valuation of financial instruments has been classified into three levels, according to the quality and reliability of information used to determine fair values. The definitions of the levels are detailed below and the table showing the analysis is overleaf.

Level 1 – Quoted market price Fair values are derived from unadjusted quoted prices in active markets for identical assets and liabilities. Examples are quoted equities, quoted index linked securities and unit trusts. All level 1 investments are shown at bid prices. The bid value of the investment is based on the bid market quotation of the relevant stock exchange.

30 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

Level 2 – Using observable inputs Quoted prices are not available for financial instruments at this level. The valuation techniques used to determine fair value use inputs that are based significantly on observable market data.

Level 3 – With significant unobservable inputs Financial instruments at Level 3 are those where at least one input that could have a significant effect on the instrument’s valuation is not based on observable market data e.g. private equity investments.

The values of the private equity investments are based on valuations provided by the General Partners to the private equity funds. These valuations are prepared in accordance with the International Private Equity and Venture Capital Valuation Guidelines, which follow the valuation principles of IFRS and US GAAP. Valuations are undertaken annually at the end of December and cashflow adjustments are used to roll forward the valuations to 31 March as appropriate.

31 March ‘15 31 March ‘14 £'000 £'000 With With Quoted Using significant Quoted Using significant market price observable unobserva market price observable unobserva inputs ble inputs inputs ble inputs Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Financial Assets

Financial assets at fair value through profit and loss 722,051 40,251 45,809 624,592 22,781 33,500 Loans and receivables 18,999 15,240 Total Financial Assets 741,050 40,251 45,809 639,832 22,781 33,500

Financial Liabilities

Financial liabilities at fair value through profit and loss Financial liabilities at amortised cost (1,214) (451) Total Financial Liabilities (1,214) (451) Net Financial Assets 739,836 40,251 45,809 639,381 22,781 33,500 Total 825,896 695,662

14. Nature of Risk Arising from Financial Instruments

Risk and Risk Management

(a) Market Risk The Fund's primary long-term risk is that the Fund's assets will fall short of its liabilities. The Fund’s liabilities are sensitive to inflation via pension and pay increases, to interest rates and to mortality rates. The assets that would most closely match the liabilities are a basket of index-linked Gilts, as the liabilities move in accordance with changes in the relevant Gilt yields.

31 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

In order to meet the Fund’s objective of being fully funded within 10 years of the 2010 actuarial valuation, the fund managers have been set differing targets appropriate to the types of assets they manage. The overall target for the scheme is to outperform a weighted average of these benchmarks by 2.3 per cent on a rolling three year basis.

The Fund’s assets are invested in a broad range of asset classes in terms of geographical and industry sectors and individual securities. This diversification reduces exposure to market risk (price risk, currency risk and interest rate risk) and credit risk to an acceptable level. The aim of the investment strategy is to minimise the risk of an overall reduction in the value of the Fund and to maximise the opportunity for gains across the portfolio.

Responsibility for the Fund's investment strategy rests with the Investment Committee and is reviewed on a regular basis, along with the Pension Fund Risk Register.

Price Risk Price risk arises from the potential for the value of financial instruments to fluctuate as a result of changes in market prices (other than those arising from interest rate risk or foreign exchange risk), whether those changes are caused by factors specific to the individual instrument or its issuer or factors affecting all such instruments in the market.

The Fund is exposed to price risk. This arises from investments held by the fund for which the future price is uncertain. All securities represent a risk of loss of capital. The maximum risk resulting from financial instruments is determined by the fair value of the financial instruments. The Fund’s investment managers aim to mitigate this price risk through diversification and the selection of securities and other financial instruments.

All assets with the exception of cash, forward foreign exchange contracts, other investment balances, debtors and creditors are exposed to price risk. The table overleaf shows the value of these assets at the balance sheet date (and the prior year) and what the value would have been if prices had been 10% higher or 10% lower.

Assets exposed to price risk Value + 10% -10% £000 £000 £000 At 31st March 2015 808,023 888,825 727,221 At 31st March 2014 680,770 748,847 612,693

Interest Rate Risk The Fund invests in financial assets for the primary purpose of obtaining a return on investments. Fixed interest securities and cash are subject to interest rate risks, which represent the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

32 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

The Investment Committee recognises that interest rates can vary and can affect both income to the Fund and the value of the net assets available to pay benefits.

Index linked gilts, cash and some elements of the pooled investment vehicles are exposed to interest rate risk. The table below shows the value of these assets at the balance sheet date (and the prior year) and what the value would have been if interest rates had been 1% higher or 1% lower.

Assets exposed to interest rate risk Value + 1% -1% £000 £000 £000 At 31st March 2015 114,357 115,501 113,213 At 31st March 2014 103,705 104,742 102,668

Currency Risk

Currency risk represents the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Fund is exposed to currency risk on financial instruments that are denominated in any currency other than pounds sterling.

Overseas equities, overseas index linked securities, cash in foreign currencies, the value of the forward foreign exchange contracts and some elements of the pooled investment vehicles are exposed to currency risk. The table below shows the value of these assets at the balance sheet date (and the prior year) and what the value would have been if currencies had been 10% higher or 10% lower.

Assets exposed to currency risk Value + 10% -10% £000 £000 £000 At 31st March 2015 611,786 672,965 550,607 At 31st March 2014 513,994 565,393 462,595

(b) Credit Risk Credit risk represents the risk that the counterparty to a transaction or a financial instrument will fail to discharge an obligation and cause the Fund to incur a financial loss. The market values of investments generally reflect an assessment of credit in their pricing and consequently the risk of loss is implicitly provided for in the carrying value of the Fund’s financial assets and liabilities.

In essence the Fund’s entire investment portfolio is exposed to some form of credit risk. However, the selection of high quality fund managers, counterparties, brokers and financial institutions minimises credit risk that may occur through the failure to settle a transaction in a timely manner.

33 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

Liquidity risk represents the risk that the Fund will not be able to meet its financial obligations as they fall due. The Fund therefore takes steps to ensure that the Fund has adequate cash resources to meet its commitments. This will particularly be the case for cash to meet the pensioner payroll costs and also cash to meet investment commitments. The Council has immediate access to its pension fund cash holdings.

The only assets in the Fund which cannot be liquidated within a month are the private equity assets which amounted to £45.8m at 31st March 2015 (£33.5m at 31st March 2014). The majority of the investments can in fact be liquidated within a matter of days.

15. Contingent Liabilities and Contractual Commitments

As at 31 March, the Fund had a commitment to invest a further £18.8 million into the Adams Street private equity funds of funds. It is anticipated that these commitments will be spread over the next 10 years and will be largely offset by cash distributions from the investments made since 2007.

16. Stock Lending

The Fund does not participate in stock lending.

17. Funding Arrangements

The Scheme Regulations require that a full actuarial valuation is carried out every third year. The purpose of this is to establish that the Fund is able to meet its liabilities to past and present contributors and to review employer contribution rates.

The most recent full triennial valuation of the Fund was carried out by Barnett Waddingham, the Fund’s actuary, as at 31 March 2013, in accordance with the Funding Strategy Statement of the Fund and Regulation 36 of the Local Government Pension Scheme (Administration) Regulations 2008. The results were published in the triennial valuation report dated 31 March 2014.

The 2013 valuation certified a common contribution rate of 17.8 per cent of pensionable pay to be paid by each employing body participating in the Fund, based on a funding level of 95 per cent. In addition, each employing body has to pay an individual adjustment to reflect its own particular circumstances and funding position within the Fund. Details of each employer’s contribution rate are contained in the Statement to the Rates and Adjustment Certificate in the triennial valuation report. It should, however, be noted that the employers’ contributions for the period to 31 March were based on the results of the 2010 valuation.

The actuary’s smoothed market value of the scheme’s assets at 31 March 2013 was £630 million and the actuary assessed the present value of the funded obligation at £663 million indicating a net liability of £33 million.

34 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

The actuarial valuation, done using the projected unit method, is based on economic and statistical assumptions, the main ones being:

i. The rate of accumulation of income and capital on new investments over the long-term and the increase from time to time of income from existing investments.

ii. Future rises in pensionable pay due to inflation and etc, and pension increases.

iii. Withdrawals from membership due to mortality, ill health and ordinary retirement.

iv. Progression of pensionable pay due to promotion.

The contribution rate is set on the basis of the cost of future benefit accrual, increased to bring the funding level back to 100 per cent over a period of 7 years, as set out in the Funding Strategy Statement. It is set to be sufficient to meet the additional annual accrual of benefits allowing for future pay increases and increases to pension payments when these fall due, plus an amount to reflect each participating employer’s notional share of value of the Fund’s assets compared with 100 per cent of their liabilities in the Fund in respect of service to the valuation date.

The next actuarial revaluation of the Fund will be as at 31 March 2016 and will be published in 2017.

18. Actuarial Present Value of Promised Retirement Benefits

The table below shows the total net liability of the Fund as at 31 March 2015. The figures have been prepared by the Fund’s actuary, only for the purposes of providing the information required by IAS26. In particular, they are not relevant for calculations undertaken for funding purposes or for other statutory purposes under UK pensions legislation.

In calculating the required numbers the actuary adopted methods and assumptions that are consistent with IAS19.

31 March ‘15 31 March ‘14 £’000 £’000 Present value of promised retirement benefits* 1,066,149 887,960 Fair value of scheme assets (bid value) (825,896) (695,662) Net Liability 240,253 192,298

*Present value of promised retirement benefits comprises £952,402,000 in respect of vested obligation and £113,747,000 in respect of non-vested obligations.

35 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

19. Current Assets

31 March ‘15 31 March ‘14 Debtors £’000 £’000 Contributions due - employers 100 208 Contributions due - employees 42 80 Sundry debtors - 1,252 Total 142 1,540

31 March ‘15 31 March ‘14 Analysis of debtors £’000 £’000 Local authorities - 1,252 Other entities and individuals 142 288 Total 142 1,540

20. Current Liabilities

31 March ‘15 31 March ‘14 Creditors £’000 £’000 Sundry creditors 793 451 Benefits payable 421 - 1,214 451

31 March ‘15 31 March ‘14 Analysis of creditors £’000 £’000 Government bodies 280 - Other entities and individuals 934 451 Total 1,214 451

21. Additional Voluntary Contributions

The Local Government Pension Scheme (Management and Investment of Funds) Regulations 1998 do not permit Additional Voluntary Contributions (AVCs) to be paid into the Fund, so they are not included in these accounts. The Council has made arrangements for current members to make additional payments through its payroll into a variety of funds operated by Prudential Assurance according to individuals’ preferences. These funds are invested in equities, bonds, property and cash. A total of £516,000 was invested by members of this fund in this way during 2014-15. The value of AVCs invested in 2013-14 was £478,000.

Market Value Market Value 31 March‘15 31 March‘14 £’000 £’000 Prudential 2,647 2,431 Total 2,647 2,431

36 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

22. Related Party Transactions The Fund is administered by the Royal Borough of Kensington and Chelsea. The Council incurred costs of £0.5 million in the financial year 2014-15 (2013- 14 £0.4 million) in relation to the administration of the Fund and was reimbursed by the Fund for the expenses. The Fund uses the same banking providers as the Council and no additional charges are made in respect of this. In year, and in total, the Council contributed £14 million to the Fund compared to £22 million in 2013-14.

The Council has a significant relationship with one admitted body, the Kensington and Chelsea Tenant Management Organisation (TMO). The Fund received £1.1 million in employer contributions, deficit and early retirement costs from the TMO.

37 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

Independent auditor’s report to the members of Kensington and Chelsea Pension Fund on the pension fund financial statements published with the Pension Fund Annual Report

We have examined the pension fund financial statements for the year ended 31 March 2015 on pages 17 to 37.

Respective responsibilities of the Section 151 Officer and the auditor As explained more fully in the Statement of the Section 151 Officer’s Responsibilities the Section 151 Officer is responsible for the preparation of the pension fund financial statements in accordance with applicable law and the Code of Practice on Local Authority Accounting in the United Kingdom 2014/15.

Our responsibility is to report to you our opinion on the consistency of the pension fund financial statements included in the Pension Fund Annual Report with the pension fund financial statements included in the annual published statement of accounts of the Royal Borough of Kensington and Chelsea, and their compliance with applicable law and the Code of Practice on Local Authority Accounting in the United Kingdom 2014/15. In addition, we read the information given in the Pension Fund Annual Report to identify material inconsistencies with the pension fund financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Our report on the administering authority’s annual published statement of accounts describes the basis of our opinion on those financial statements.

Opinion In our opinion, the pension fund financial statements are consistent with the pension fund financial statements included in the annual published statement of accounts of the Royal Borough of Kensington and Chelsea for the year ended 31 March 2015 and comply with applicable law and the Code of Practice on Local Authority Accounting in the United Kingdom 2014/15.

We have not considered the effects of any events between the date we signed our report on the full annual published statement of accounts TBC and the date of this report.

Matters on which we are required to report by exception

The Code of Audit Practice for Local Government Bodies 2010 requires us to report to you if:

38 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

 the information given in the Pension Fund Annual Report for the financial year for which the financial statements are prepared is not consistent with the financial statements; or

 any matters relating to the pension fund have been reported in the public interest under section 8 of Audit Commission Act 1998 in the course of, or at the conclusion of, the audit.

We have nothing to report in respect of these matters

Andrew Sayers for and on behalf of KPMG LLP, Appointed Auditor Chartered Accountants 15 Canada Square Canary Wharf London E14 5GL XX September 2015

39 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

5. CONTACTS

Tri Borough Pensions Team c/o Westminster City Council City Hall 64 Victoria Street London SW1E 6QE Telephone: 020 7641 6000 Email: [email protected]

Pensions Manager Royal Borough of Kensington and Chelsea Town Hall Hornton Street London W8 7NX

Capita Hartshead Capita Employee Benefits (Re RBKC) Castle House Park Road Banstead SM7 3BX

National Local Government Pension Scheme information website www.lgps.org.uk

The Pensions Advisory Service (TPAS) 11 Belgrave Road London SW1V 1RB Telephone: 0845 601 2923 Email: www.pensionsadvisoryservice.org.uk/online-enquiry

The Office of the Pensions Ombudsman 11 Belgrave Road London, SW1V 1RB Telephone: 020 7630 2200 Email: [email protected]

40 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

6. GLOSSARY

Active member: Current employee who is contributing to a pension scheme.

Actuary: An independent professional who advises the Council on the financial position of the Fund. Every three years the actuary values the assets and liabilities of the Fund and determines the funding level and the employers contribution rates.

Additional Voluntary Contributions (AVC): An option available to active scheme members to secure additional pension benefits by making regular contributions to separately held investment funds managed by the Fund’s AVC provider.

Admitted Body: An organisation, whose staff can become members of the Fund by virtue of an admission agreement made between the Council and the organisation. It enables contractors who take on the Council’s services with employees transferring, to offer those staff continued membership of the Fund.

Asset Allocation: The apportionment of a fund’s assets between different types of investments (or asset classes). The long-term strategic asset allocation of a Fund will reflect the Fund’s investment objectives.

Benchmark: A measure against which the investment policy or performance of an investment manager can be compared.

Deferred members: Scheme members who have left employment or ceased to be an active member of the scheme whilst remaining in employment, but retain an entitlement to a pension from the scheme.

Defined Benefit Scheme: A type of pension scheme, where the pension that will ultimately be paid to the employee is fixed in advance, and not impacted by investment returns. It is the responsibility of the sponsoring organisation to ensure that sufficient assets are set aside to meet the pension promised.

Dynamic Asset Allocation Portfolio: A portfolio that involves the movement of assets through different investment markets as market conditions change.

Employer Contribution Rates: The percentage of the salary of employees that employers pay as a contribution towards the employees’ pension.

Equities: Ordinary shares in UK and overseas companies traded on a stock exchange. Shareholders have an interest in the profits of the company and are entitled to vote at shareholders’ meetings.

Fixed Interest Securities: Investments, mainly in government stocks, which guarantee a fixed rate of interest. The securities represent loans which are repayable at a future date but which can be traded on a recognised stock exchange in the meantime.

41 Royal Borough of Kensington and Chelsea Pension Fund Annual Report 2014-15

Index: A calculation of the average price of shares, bonds, or other assets in a specified market to provide an indication of the average performance and general trends in the market.

Indexed Linked Securities: Bonds on which the interest and ultimate capital repayment are recalculated on the basis of changes in the Retail Price Index.

Pooled Investment Vehicles: Funds which manage the investments of more than one investor on a collective basis. Each investor is allocated units which are revalued at regular intervals. Income from these investments is normally returned to the pooled fund and increases the value of the units.

Private Equity: Investments in companies not quoted on public stock exchanges. Commonly these are start up businesses (also known as venture capital) or buyouts of companies with a view to restructuring and selling on.

Return: The total gain from holding an investment over a given period, including income and increase or decrease in market value.

Scheduled Body: An organisation that has the right to become a member the Local Government Pension Scheme under the scheme regulations. Such an organisation does not need to be admitted, as it’s right to membership is automatic.

Unrealised Gains/Losses: The increase or decrease in the market value of investments held by the fund since the date of their purchase.

7(ii) THE ROYAL BOROUGH OF KENSINGTON AND CHELSEA

AUDIT AND TRANSPARENCY COMMITTEE – 25 JUNE 2015

COUNCIL MEETING – 14 OCTOBER 2015

REPORT BY THE TOWN CLERK AND EXECUTIVE DIRECTOR OF FINANCE

ANNUAL TREASURY REPORT 2014-15

The Council‟s treasury management practices require this report to be made to the Cabinet Member for Finance and Strategy and to the Audit and Transparency Committee. The latter is the body identified as being responsible for the scrutiny of treasury management. The report must be submitted by 30 September each year. The report must also be presented to the full Council for information. FOR INFORMATION

1. Introduction

1.1 This is the Treasury Report for 2014-15.

2. Background

2.1 Introduction

2.1.1 The Code of Practice on Treasury Management 2011, adopted by the Chartered Institute of Public Finance and Accountancy, requires the following:  Creation and maintenance of a treasury management policy statement which sets out the policies and objectives of the Council‟s treasury management activities. This was reported to the Cabinet in February 2012;  Creation and maintenance of treasury management practices which set out the manner in which the Council will seek to achieve those policies and objectives;  Receipt by the full Council of an annual treasury management strategy report for the year ahead and a mid-year review of the strategy;  Receipt by the Cabinet Member for Finance and Strategy, the Audit and Transparency Committee and full Council of an annual review of the previous year (this report);  Delegation by the Council of responsibilities for implementing and monitoring treasury management policies and practices and

the execution and administration of treasury management decisions; and  Delegation by the Council of the role of scrutinising of treasury management strategy and policy to a specific named body, which for this Council is the Audit and Transparency Committee.

2.1.2 Treasury management in this context is defined as:

“The management of the Council‟s investments and cash flows, its banking, money market and capital market transactions; the effective control of the risks associated with those activities; and the pursuit of optimum performance consistent with those risks.”1

2.1.3 This annual treasury report covers:  the treasury position as at 31 March 2015;  the borrowing strategy for 2014-15;  the borrowing outturn for 2014-15;  compliance with treasury limits and prudential indicators;  investment strategy for 2014-15; and  investment outturn for 2014-15.

2.2 Current Treasury Position

2.2.1 The Council‟s debt and investment position at the beginning and end of the year was as follows:

Rate/ 31 March Rate/ Return 31 March Return at £ million 2014 at 31 March 2015 31 March Principal 2014 Principal 2015 Fixed Rate Borrowing - Public Works 157.740 6.81% 149.944 6.69% Loan Board

- Special 0.002 0.50% 0.002 0.50%

Total / Weighted 157.742 6.81% 149.946 6.69% Average Investments

- In House 235.925 0.36% 241.212 0.38%

- Investec 29.482 0.20% 0 0.00%

Total / Weighted 265,407 0.34% 241.212 0.38% Average

1 Treasury Management Policy Statement adopted by Cabinet – 22 February 2012 2

2.2.2 The table below shows the allocation of interest paid and received during the year:

Interest Paid Interest Received Net Fund Apportionment Amount Apportionment Amount £m % £m % £m General 0 0.00 89 0.90 0.90 Fund Housing Revenue 100 10.51 8 0.08 (10.43) Account Other* 3 0.03 0.03 Total 100 10.51 100 1.01 (9.50) *Other includes Section 106, London Residuary Body etc.

2.2.3 Following the implementation of the self-financing initiative for housing, the Housing Revenue Account (HRA) is responsible for servicing all of the Council‟s external debt.

2.2.4 In addition to the above, the HRA has paid interest totalling £761,432 to the general fund for use of general fund cash balances under the initiative.

2.3 The Strategy for 2014-15

2.3.1 The treasury strategy for 2014-15, approved by the Council on 5 March 2014, was based on the expectation that Bank rate would remain at the current level for the year.

2.3.2 Taking into account the worldwide economic climate it was considered appropriate to keep investments short-term and only invest with high-rated or UK Government-backed institutions, resulting in relatively low returns compared to borrowing rates.

2.3.3 Due to the level of cash balances held by the Council (£265 million at 31 March 2014), it was anticipated that there would not be any need to borrow during 2014-15. However interest rates would be monitored and if any opportunity to borrow at historically low rates occurred this would be considered, with 4 per cent regarded as the trigger for reviewing the borrowing position.

2.4 Outturn for 2014-15

2.4.1 UK Gross Domestic Product growth showed a 3 per cent increase for the year. Unemployment continued to fall, dropping from 6.6 per cent in April to 5.5 per cent in February and now stands at a seven- year low.

2.4.2 Oil prices initially increased in the first quarter of 2014-15 as geopolitical risks in the Middle East caused concerns over supply. This was reversed over the following quarter as concerns over growth in China as well as a strengthening dollar exerted downward pressure. Over the rest of 2014 the decline steepened as North American use of fracking and extraction of oil sands reduced overall demand from global markets. The subsequent decision taken by Saudi Arabia to maintain market share and allow the price to drop contributed further to the fall in price. Despite a small recovery in the first quarter of 2015, oil prices ended the year at approximately half their value at the start of the year.

2.4.3 This had a direct bearing on the Consumer Prices Index (CPI) inflation rate which reached a twelve-year low in November 2014 of 1 per cent. The decline continued, reaching zero in February and remaining at that level in March.

2.4.4 The market began the year with an expectation that interest rates would be unlikely to rise until 2015. Despite positive messages from Governor Carney suggesting rises sooner than expected and that the point at which interest rates begin to normalise was getting closer, the drop in CPI proved more of a driving force behind the markets. The consensus of expectations at the year-end was for the first rate rise to occur in the third quarter of 2016.

2.5 Treasury Borrowing

2.5.1 No new long-term borrowing was undertaken during the year. Public Works Loans Board (PWLB) debt maturing during the year, which was not refinanced, totalled £7.796 million with an average nominal interest rate of 9.22 per cent. This resulted in a reduction in average interest rates from 6.81 per cent to 6.69 per cent.

2.5.2 The following graph shows the levels of Bank of England Bank rate, three-month London Interbank Offer Rate (LIBOR), PWLB 25- and 45-year rates during the year:

PWLB Long-term Rates 2014-15

7.00%

6.00%

Bank Rate 5.00% PWLB 25 year

PWLB 45 year 4.00% 3 Mth Libor

3.00%

2.00%

1.00%

0.00%

14 14

14 14 14 14

14 15

15 15

- -

- - - -

- -

Jul

Apr Oct

Jun Jan

Feb Mar

Dec

Aug Sep Nov May

2.6 Housing Revenue Account (HRA) Self Financing

2.6.1 Following the implementation of the self-financing initiative the HRA has continued to be partly funded using the Council‟s general fund cash reserves. The HRA has paid interest to the general fund for the use of this money.

2.6.2 The take-on amount of £24.96 million is funded at a fixed rate of 1.24 per cent for five years, equivalent to the rate that would have been available from the PWLB had the additional debt been funded externally. The balance of the cash used to fund the HRA averaged £29.92 million over the year and was charged at an average rate of 1.51 per cent based on PWLB three-month variable rates.

2.7 Compliance with Treasury Limits

2.7.1 During the financial year the Council operated within the treasury limits set out in the Council‟s Treasury Policy Statement and Treasury Strategy Statement. The outturn for Treasury Management Prudential Indicators is shown in Appendix A.

2.8 Investment Strategy for 2014-15

2.8.1 The Council strategy allowed investments in the following areas:  up to 50 per cent with certain UK financial institutions (HSBC, Barclays, Royal Bank of Scotland, Lloyds Group, Santander UK and Nationwide);  up to 30 per cent with other UK local authorities that meet the Council‟s criteria;  direct investments in UK Government stock with a maturity of up to two years on a buy-to-hold basis;

 bonds or commercial paper issued by a financial institution that is backed by the UK Government; and  the balance of investments to be held with the Debt Management Office (DMO).

2.8.2 Notwithstanding the above, due to the continued uncertainty in world financial markets, investments for the year were placed with the DMO, acceptable local authorities or in UK Government stock (with the exception of small deposits in two call accounts held with Lloyds Group and Royal Bank of Scotland to aid cash flow).

2.8.3 Following discussions with the Cabinet Member for Finance and Strategy and in line with the investment strategy, investments in bonds issued by the European Investment Bank (EIB) were made from May. Investments are made in stock with less than one year left to maturity.

2.8.4 By 31 March 2015 the portfolio was invested as follows:

a) £22.19 million invested with other UK local authorities.

b) £6.152 million in overnight call accounts with Lloyds Group and Royal Bank of Scotland

c) £40.33 million with the DMO

d) £126.33 million in Gilts and Treasury Bills

e) £21.75 million in Network Rail bonds

f) £24.46 million in EIB bonds

2.9 Investment Outturn for 2014-15

2.9.1 The investments outstanding at 31 March 2015 amounted to £241.21 million invested in short-term deposits. This compares with £265.41 million short-term investments at 1 April 2014.

2.9.2 The investments outstanding each week during the year are shown in the following diagram:

Weekly Investments 2014-15

350 300 250 200 150 100

50 Investment Sum£m Investment 0 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 Week Number

2.9.3 Internally Managed Cash

The average return achieved on investments managed internally for the year was 0.38 per cent compared to the average seven-day money market rate (uncompounded) of 0.35 per cent. Interest rates remained low throughout the year; the Council follows a low-risk strategy and does not seek potential higher returns which would increase counterparty risk. The following graphs show the weekly average return on investments held compared with market rates and the variance from the seven-day LIBID rate:

Weekly Average Return

0.60%

0.50%

0.40%

% 0.30%

0.20%

0.10%

0.00% 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 Weeks

Performance 7 day LIBID Base Rate

Investment Performance v 7 Day Rate 2014-15

0.100% 0.080% 0.060% 0.040% 0.020%

Variance % Variance 0.000% -0.020% -0.040% 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 Weeks

2.9.4 The following graphs show the short-term deposits that were placed during the year; the range of interest rates achieved on the deposits, and the maturity profile of in-house investments at the beginning and end of the year:

Investments Made by Period

1,300 200 1,200 180 1,100 160 1,000 900 140 800 120 £m 700 100 600 500 80 400 60 Deals of No. 300 40 200 100 20 0 0 1 2 3 4 5 6 7 8 9 10 11 364 O/N Call S/F 1Yr+ Mth Mth Mth Mth Mth Mth Mth Mth Mth Mth Mth days Total Value £m 426 35 1,006 736 66 283 53 0 103 0 0 15 11 5 4 0 No. of Deals 35 42 179 116 13 32 7 0 13 0 0 2 2 1 1 0

Interest Rate High /Low on New Investments

3.00%

2.00%

1.00%

0.00% 10 11 364 O/N Call S/F 1 Mth 2 Mth 3 Mth 4 Mth 6 Mth 9 Mth Mth Mth days High 0.25% 0.40% 0.45% 0.50% 0.45% 0.50% 0.51% 0.56% 0.49% 0.50% 0.57% 0.75% Low 0.25% 0.25% 0.25% 0.25% 0.25% 0.29% 0.28% 0.36% 0.48% 0.50% 0.57% 0.75%

Investment Maturity Profile

60% 50% 40% 30% 20% 10% 0% 1 2 3 4 5 6 7 8 9 10 11 364 O/N Call S/F 1Yr+ Mth Mth Mth Mth Mth Mth Mth Mth Mth Mth Mth days 31-Mar-14 2% 2% 16% 48% 16% 6% 0% 0% 4% 0% 0% 6% 0% 0% 0% 0% 31-Mar-15 7% 3% 8% 31% 22% 8% 10% 0% 2% 0% 9% 0% 0% 0% 0% 0%

The graph reflects a slight increase in the duration of investments made during the year. The DMO‟s interest rates remained at 0.25 per cent for the year.

2.9.5 Appendix B shows the volume and value of investments made with approved counterparties. These are summarised as follows:

Counterparty Per cent based Per cent based Group on Value on Volume

DMO 62 60 Gilts/Treasury Bills 26 15 UK Local Authorities 7 12 UK Banks 1 9 Bonds/Commercial Paper 2 2 Supranational Banks 2 2

These figures reflect the decision to keep the Council‟s deposits with the DMO, local authorities or in tradable paper issued by the UK 9

Government, institutions backed by the UK Government and the EIB. The credit ratings shown in the appendix are those in force at the end of the financial year and the limits shown are calculated using these ratings and the limits agreed in the 2014-15 Strategy.

2.9.6 External Fund Managers

Due to the limited investment remit given to the fund manager, coupled with the Council‟s own ability to invest directly in tradable stock it was decided to withdraw the funds held by the external manager. The final payment was received in June 2014.

FOR INFORMATION

Nicholas Holgate Town Clerk and Executive Director of Finance

Background papers: CIPFA Code of Practice on Treasury Management for the Public Sector CLG Guidance on Local Government Investments

Contact officer: Jonathan Hunt Tel: 020 7641 1804 E-mail: [email protected]

APPENDIX A

RBKC – TREASURY MANAGEMENT PRUDENTIAL INDICATORS 2014-15

Indicator Approved Actual Debt No. of days Limit Limit Exceeded Authorised Limit1 £293.81m None

Operational Boundary2 £239.70m £149.9m None

Interest Rate Exposure Lower Upper Limit Actual at Limit 31 Mar 2015 Fixed Rate Debt £120.9m £241.8m £149.9m

Variable Rate Debt £0m £120.9m £0m

Maturity Structure of Lower Upper Limit Actual at Borrowing Limit 31 Mar 2013 Under 12 Months 0% 10% 6% 12 Mths to within 24 Mths 0% 10% 5% 24 Mths to within 5 years 5% 20% 13% 5 years to within 10 years 10% 50% 32% Over 10 years 30% 85% 44%

1 The Authorised Limit is the maximum requirement for borrowing taking into account maturing debt, capital programme financing requirements and the ability to borrow in advance of need for up to two years ahead.

2 The Operational Boundary is the expected normal upper requirement for borrowing in the year. 11

RBKC – AUTHORISED INVESTMENTS – ACTUAL USAGE 2014-15 APPENDIX B Credit Rating as at 31st March 2015 Limit Peak Year End No. of Turnover (see below for definitions) Exposure Exposure Deals £m £M £M Long Term Short Support Term UK GOVERNMENT Debt Management Account AAA/AA+ N/A N/A 100% 146.475 40.33 263 1,693.39 Deposit Facility Gilt AAA/AA+ N/A N/A 100% 5.068 0 1 5.07 Treasury Bills AAA/AA+ 100% 186.79 126.33 67 721.27

UK GOVERNMENT TOTAL 166.66 331 2,419.73

LOCAL AUTHORITIES Barnsley N/A N/A N/A £10M 2.60 0 1 2.60 Bournemouth N/A N/A N/A £10M 10.00 0 7 29.40 Bradford City N/A N/A N/A £10M 10.00 0 1 10.00 Clackmannanshire N/A N/A N/A £10M 5.00 0 1 5.00 Conwy N/A N/A N/A £10M 2.00 2.00 1 2.00 Dudley N/A N/A N/A £10M 2.90 0 3 10.40 Dumfries and Galloway N/A N/A N/A £10M 5.75 0 2 5.75 Gloucestershire N/A N/A N/A £10M 5.00 5.00 2 10.00 Kingston upon Hull N/A N/A N/A £10M 5.00 0 1 5.00 L B Croydon N/A N/A N/A £10M 2.2 0 1 2.20 L B Havering N/A N/A N/A £10M 5.80 0 2 9.15 Leeds City N/A N/A N/A £10M 10.00 10.00 13 38.05 Lincolnshire N/A N/A N/A £10M 0.30 0.19 4 1.09 North Somerset N/A N/A N/A £10M 3.30 0 1 3.30 Plymouth City N/A N/A N/A £10M 10.00 5.00 7 29.98 Tameside N/A N/A N/A £10M 6.90 0 4 11.80 Wirral N/A N/A N/A £10M 5.00 0 1 5.00 Wokingham N/A N/A N/A £10M 2.00 0 1 2.00

Credit Rating as at 31st March 2015 Limit Peak Year End No. of Turnover (see below for definitions) Exposure Exposure Deals £m £M £M LOCAL AUTHORITIES TOTAL 22.19 53 182.72

CORPORATES Network Rail AAA/AA+ F1+ 21.75 21.75 4 21.75 Transport for London AA+ F1+ 14.98 0 4 33.96

CORPORATES TOTAL 21.75 8 55.71

UK BANKS Lloyds Group (Including Bank of A F1 1 £15m 1.29 1.29 12 0.01 Scotland) Royal Bank of Scotland A F1 Ulster1 Bank (Ireland)£15m 10.211 4.86 27 34.56

UK BANKS TOTAL 6.15 39 34.57

SUPRANATIONAL BANKS European Investment Bank AAA N/A N/A £25m 24.69 24.46 9 51.04

SUPRANATIONAL BANKS 24.46 9 51.04 TOTAL

TOTAL INVESTED 241.21 440 2,743.77

CREDIT RATING DEFINITIONS:

Fitch Moody’s S&P Definition Long Term AAA Aaa AAA Highest credit quality. „AAA‟ ratings denote the lowest expectation of credit risk. They are assigned only in case of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events. AA+ Aa1 AA+ Very high credit quality. „AA‟ ratings denote AA Aa2 AA expectations of very low credit risk. They AA- Aa3 AA- indicate very strong capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events. A+ A1 A+ High credit quality. „A‟ ratings denote A A2 A expectations of low credit risk. The A- A3 A- capacity for payments of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to changes in circumstances or in economic conditions than is the case for higher ratings. BBB Baa BBB Good credit quality. „BBB‟ ratings indicate that there are currently expectations of low credit risk. The capacity for payment of financial commitments is considered adequate but adverse changes in circumstances and economic conditions are more likely to impair this capacity. This is the lowest investment grade category. Short Term F1+ P1 A1+ Highest credit quality. Indicates the F1 P1 A1 strongest capacity for timely payment of financial commitments; may have an added “+” to denote any exceptionally strong credit feature. F2 P2 A2 Good credit quality. A satisfactory capacity for timely payment of financial commitments, but the margin of safety is not as great as in the case of the higher ratings.

F3 P3 A3 Fair credit quality. The capacity for timely payment of financial commitments is adequate; however, near term adverse changes could result in a reduction to non investment grade. Support 1 n/a n/a A bank for which there is an extremely high probability of external support. The potential provider of support is very highly rated in its own right and has a very high propensity to support the bank in question. This probability of support indicates a minimum long-term rating floor of „A-„. 2 n/a n/a A bank for which there is a high probability of external support. The potential provider of support is highly rated in its own right and has a high propensity to provide support to the bank in question. This probability of support indicates a minimum long-term rating floor of „BBB-„. 3 n/a n/a A bank for which there is a moderate probability of support because of uncertainties about the ability or propensity of the potential provider of support to do so. This probability of support indicates a minimum long-term rating floor of „BB-„.

16 7(iii) THE ROYAL BOROUGH OF KENSINGTON AND CHELSEA

AUDIT AND TRANSPARENCY COMMITTEE - 21 SEPTEMBER 2015

COUNCIL MEETING – 14 OCTOBER 2015

REPORT BY THE CHAIRMAN OF THE AUDIT AND TRANSPARENCY COMMITTEE

The terms of reference of the Audit and Transparency Committee require that the Chairman provides an annual report to full Council on the activity of the Committee during the year.

FOR INFORMATION

1. INTRODUCTION

1.1 The Royal Borough has a history of strong corporate governance and scrutiny of which the Audit and Transparency Committee forms an integral part. The Committee comprises Councillors and independent members. The Councillors are highly experienced, and the three independent members bring to the Committee a wealth of commercial and governance experience and have, over several years, contributed effectively to its work.

2. COMMITTEE ACTIVITY 2014/15

2.1 The Committee’s programme of work, as agreed at the start of the year, has been achieved.

2.2 The Committee’s membership during 2014/15 was as follows:

Cllr Paul Warrick Chairman Cllr Charles Williams Vice-Chairman Cllr William Pascal Member Cllr Emma Dent Coad Member

Mr Andrew Ling Independent member Ms Lorraine Mohammed Independent member Mr Ian Luder CBE Independent member

2.3 The Committee met on the following dates during the year:

26 June 2014 22 September 2014 12 January 2015 23 March 2015

2.4 The meetings were quorate on each occasion. The Town Clerk and the Tri-borough Director for Audit, Fraud, Insurance and Risk were in attendance at each meeting.

2.5 In June 2014 The Committee approved minor changes to the Audit Charter and Strategy to align the document with Hammersmith & Fulham where appropriate. The Committee noted that the self assessments and the internal reviews undertaken by Audit Management across Tri-borough confirmed that the Council’s audit arrangements were compliant with the Public Sector Internal Audit Standards and noted that external reviews of the Tri-borough audit arrangements by other London Boroughs’ Heads of Audit were expected during 2015/16.

Audit and Fraud Service Delivery Models

2.6 During 2014/15 the Committee continued to receive reports on audits undertaken during the year both against the agreed audit plan and on ad hoc audits identified during the year. The Committee was pleased to note that the standards of reporting had been maintained under the new Tri-borough arrangements. The Committee noted that the cross-borough working of the Audit and Fraud teams would be further enhanced when staff transferred to the RBKC teams from Westminster’s audit contractors on 1 April 2015.

2.7 The Committee received updates on the transfer of the Housing Benefit fraud investigation work and associated staff to the Department of Work and Pension in February 2015 and noted a team of investigators would remain with the Borough to cover predominantly Housing and Tenancy fraud along with other corporate fraud.

2.8 The Committee was pleased to note that the level of investigative work and the values of frauds successfully prosecuted were maintained during the year.

Audit Plan

2.9 The Committee reviewed the 2015/16 Internal Audit Plan at its March 2015 meeting. Members were able to add emphasis to some of the planned audits, particularly in Children Services and Audit Social Care, through their knowledge in these areas and were satisfied the plan would provide sufficient coverage of the Council’s key systems and processes. The Tri-borough Director was able to assure the Committee that there was sufficient staff resource to fulfil the plan with the frontline audit resource available. The Committee noted there was a strong emphasis within the plan on the Tri-borough Managed Services Programme, whereby significant Tri-borough finance and HR functions were being outsourced.

2.10 During the year the Committee received regular reports on the progress against the plan and on the outcomes from the individual audits undertaken. As a result the Committee was satisfied that the plan was completed by the year end. Through the results of the work undertaken, the Committee was assured that a satisfactory level of internal control was being maintained across the Council’s key systems during the year including those reported on in relation to Bi- and Tri-borough operations.

2.11 The Committee was updated during the year on the outcomes of follow-up audits where the original audits could only assign a ‘Limited’ or ‘No’ assurance rating and noted the relatively low numbers of audits receiving inadequate assurance ratings. The Committee was pleased to note that operational managers were taking appropriate actions to bring about the required improvement in controls. The Committee noted that a new system of reporting updates on the actions taken to implement agreed action from all audits would be introduced during 2015/16.

2.12 The Committee received a report from the Tri-borough Director of Audit in September 2014 on the follow-up of issues at a primary school and noted that the Management Intervention Board had not had the initial impact originally envisaged. In January 2015 the Committee received an update from the Cabinet Member and Director of Schools Commissioning regarding the movement in progress on the arrangements put in place by the Management Intervention Board. The Committee advised that it should be provided with updates at appropriate intervals in 2015/16 to confirm that the recommended improvements in governance and financial performance had been successfully embedded.

Cumulative Assurance

2.13 In relation to its principal role in providing the Council with independent assurance on the Council’s governance arrangements, including the risk management framework and the associated control environment, the Committee gained assurance from a number of sources.

2.14 The Committee received a report from the Town Clerk in June 2014 regarding the Council’s corporate governance arrangements for 2013/14. The Committee sought and received appropriate assurance that in combining the role of the Chief Executive and Director of Finance there would be no adverse effect on governance arrangements and controls.

2.15 At the March 2015 meeting the Director of Audit confirmed the subsequent meeting in June would receive the annual audit report and the Governance statement which would likely report that the Council’s governance arrangements and control environment continue to be strong with no significant gaps in the Council’s compliance with CIPFA/SOLACE’s Delivering Good Governance in Local Government: Framework.

2.16 During the year the Committee continued to be mindful of the Tri- borough working arrangements with Westminster City Council and the London Borough of Hammersmith & Fulham. Committee Members continued to be conscious of the potential impact of these changes on the Royal Borough’s controls and systems, if not managed appropriately. The Committee gained a level of assurance during the year from External Audit that, in their view, the new arrangements had not detracted from the strong control environment at the Royal Borough.

2.17 The Committee will continue to call-in Cabinet Members and senior officers where appropriate, to reinforce the need to strengthen controls and risk management processes and to implement agreed recommendations. The Committee took some assurance from the fact that the number of call-ins was low during 2014/15 compared to previous years.

Risk Management

2.18 The Committee received regular reports and information on key risks across the Council functions and was reassured that risks were being managed to an appropriate level. Members recognised the continuing need for regular scrutiny by the Committee.

2.19 The Committee considered a report relating to risk management within the Council Scrutiny functions and there was strong endorsement for scrutiny committees receiving and reviewing the risk registers in their areas on a regular basis in future.

2.20 A report was also received on risks associated with Information Technology and the Committee noted work was being undertaken to balance the requirement of the Transparency agenda with the needs to adequately protect personal information. There was now an agreed IT Strategy covering all three Councils which included Risk Management. The Committee noted the relatively cautious approach to considering the merits of placing Council data on the ‘Cloud’ with a recognition that not all data held was suitable for this method of storing and access.

Fraud Updates

2.21 The Committee continued to receive regular reports during the year on the Council’s anti-fraud activity and welcomed the continuing high profile focus of anti-fraud resources on tenancy fraud and Housing Benefit claims.

Statement of Accounts

2.22 The Committee is required, under its terms of reference, to recommend for approval the Council’s Annual Statement of Accounts and to consider whether appropriate accounting policies have been followed. In relation to that role the Committee received reports from officers on the Statement of Accounts for 2014/15 during the year.

2.23 The Committee was encouraged that the External Auditors (KPMG) continued to find the accounts and supporting working papers to be to high standards with no significant issues to report to the Council.

2.24 The Committee considered the draft accounts for 2013/14 at its June 2014 meeting and appreciated the efforts made by officers to prepare the accounts within the relatively tight deadlines. The Committee received the External Auditor’s report on the 2013/14 accounts in September 2014 when the Committee noted that the External Auditor intended issuing unqualified opinions on both the

Council’s Statement of Accounts and the Pension Fund Statement of Accounts, subject to no significant issues arising from the final stages of the Auditor’s work.

2.25 In January 2015 the Committee received the External Auditor’s Annual Audit Letter in relation to the Audit of the 2013/14 accounts. No concerns arose from the financial statements or from their audit which required the attention of the Committee.

2.26 The Committee continued to receive quarterly reports on the Council’s Treasury Management activity and noted the continuing cautious nature of the Council’s investment strategies.

3. MEMBER CONDUCT

3.1 During the year the Committee received no issues regarding Councillors’ conduct or complaints which required its consideration or attention.

4. INDEPENDENT COMMITTEE MEMBERS

4.1 The independent members continue to play a vital role within the Committee, providing a strong external challenge to the Council’s systems of internal control and risk management and to the audit process itself. The Committee has been fortunate to retain the continued services of three professional independent members who between them share extensive experience of the public and financial services sectors and of risk management. I would like to record my appreciation of their support and that of my fellow Councillors in an active and effective year for the Committee.

5. CONCLUSION

5.1 The Audit Committee continues to present a focused and professional challenge to the Council’s systems of governance, risk and financial reporting arrangements.

5.2 The Royal Borough’s governance processes, including the system of internal control are highly regarded by both internal and external agencies. It will be the Committee’s task in the next year to ensure that high standards of internal control are maintained and that its work is not compromised by financial constraints to its budget.

5.3 The Committee will continue to monitor the implementation of recommendations raised in audit and fraud reviews to ensure a strong corporate governance framework remains in operation and to ensure that Cabinet Members and Senior Management are brought

to account where standards in any area are considered to be inadequate or falling.

5.4 The Committee will seek assurance as to the robustness of the Council’s risk management policies and procedures and will be looking to see a strong response to risk from the Shared Services arrangements across the three Councils.

6. RECOMMENDATION

6.1 That the report be received and forwarded to full Council for information.

COUNCILLOR PAUL WARRICK CHAIRMAN OF THE AUDIT AND TRANSPARENCY COMMITTEE FOR 2014/15

Background papers: None other than previously published Committee documents

Contact officer: John Barnett, Senior Audit Manager: (E) [email protected] and (T) 020 7361 3783

7(iv) THE ROYAL BOROUGH OF KENSINGTON AND CHELSEA

MEETING OF THE COUNCIL – 14 OCTOBER 2015

REPORT OF THE ADMINISTRATION COMMITTEE

The Council is recommended to (i) approve changes to the current arrangements for Council meetings; (ii) agree changes to the Tri- Borough Appointment Panels; and (iii) consider whether any further amendments are necessary to Members’ Code of Conduct or arrangements for dealing with complaints about Members. FOR DECISION

1. COUNCIL MEETINGS

1.1 The report attached at Appendix A was submitted to the Administration Committee on 16 September 2015.

1.2 Recommendations

The Council is recommended to approve the following changes to Council meetings:

(i) That with effect from the 2016 calendar year the April and December Council meetings be deleted from future annual meetings calendars but that the date that would normally be set aside for the December Council meeting be instead allocated to a themed meeting for all Councillors, with the first ‘themed’ meeting to be held in December 2016;

(ii) That the recommendations in respect of length of meetings, questions to Cabinet Members and petitions be adopted with effect from the next Council meeting;

(iii) That these changes be reviewed by the Administration Committee after one year of operation.

2. TRI-BOROUGH APPOINTMENT PANELS

2.1 The report attached at Appendix B was submitted to the Administration Committee on 16 September 2015.

2.2 The Committee discussed changes to the Appointment Panels. It noted that the reference in Panel A to the Director of Law in Panel should be removed as this was now a Tri-Borough appointment and therefore fell within the terms of reference of Panel C.

2.3 The Committee considered that in respect of paragraph 2.2 of the report it be made clear that for Bi-or Tri-Borough appointments any Council could veto an appointment if it did not agree.

2.4 Recommendations

The Council is recommended to approve the following changes and to amend the Constitution accordingly:

(i) That, in view of the fact that the Director of Law is a Tri-Borough appointment, to amend the terms of reference for Panel A as follows:

In respect of the Town Clerk, the Director of Law and executive directors to carry out interviews and make appointments. (ii) That the membership of Panel C be amended as per the recommendation and that an asterisk be added to Panel C to clarify that the footnote relates only to that Panel.

3. ANNUAL REVIEW OF THE CODE OF CONDUCT AND ARRANGEMENTS FOR DEALING WITH COMPLAINTS

3.1 The report attached at Appendix C was submitted to the Administration Committee on 16 September 2015.

3.2 Recommendation

The Council is asked to:

(i) note the report; and (ii) consider whether any further amendments should be made to the Code or Arrangements.

FOR DECISION

Nicholas Paget-Brown Chairman

Background papers used in the preparation of this report: Reports to the Administration Committee on 16 September 2015. Contact officer: Martyn Carver, Governance Services, on tel: 020 7361 2477 or e-mail: [email protected]

2 APPENDIX A

THE ROYAL BOROUGH OF KENSINGTON AND CHELSEA

ADMINISTRATION COMMITTEE – 16 SEPTEMBER 2015 FULL COUNCIL – 14 OCTOBER 2015

JOINT REPORT OF THE DIRECTOR FOR STRATEGY AND LOCAL SERVICES AND THE TRI-BOROUGH DIRECTOR OF LAW

COUNCIL MEETINGS

The Administration Committee is invited to consider changes to the current arrangements for Council meetings and make any necessary recommendations to full Council. FOR DECISION

1. BACKGROUND

1.1 Currently there are seven meetings of the Council scheduled each year. By law these have to include an annual Budget Meeting before the end of March (at which the Council Tax is set) and an Annual Meeting, usually in late May (at which the Mayor and committees are appointed for the ensuing Municipal Year).

1.2 Council meeting dates scheduled for the 2015/16 Municipal Year are as follows:

24 June 2015 14 October 2015 2 December 2015 27 January 2016 2 March 2016 (Budget meeting) 13 April 2016 25 May 2016 (Annual meeting)

1.3 Since the Local Government Act 2000 and the establishment of Cabinet and Scrutiny arrangements, full Council meetings - both here and elsewhere – have not had significant volumes of mandatory business to transact, i.e. few matters now have to go to full Council for decision and major decisions within the Council’s budgetary and policy framework are, by law, taken by the executive (Cabinet). Furthermore the role of holding the executive to account on behalf of Borough residents is now primarily a scrutiny role.

1.4 Local authorities have responded to this in different ways – some have reduced Council meetings (e.g. Wandsworth and Hammersmith & Fulham have only five Council meetings each year), whilst others have introduced Councillor and/or public question times, ‘State of the Borough’ or themed debates, increased time for motions etc. Here at the Royal Borough, ‘spare’ Council meeting time has largely been filled with motions, often as many as three per meeting.

1.5 The last systematic look at the operation of Council Meetings took place between in 2007/08. A working party chaired by Cllr. Ian Donaldson met four times and made various recommendations to full Council which, at its 23 April 2008 meeting, agreed to:

 the reduction in the length of most speeches to 5 minutes;  give the discretion to a Member speaking to give way to an intervention by another Member;  up to three, but normally two, themed meetings per year*; and  the introduction of the ‘Two Minute Rule’ (now Standing Order 11). * Note: History here suggests that the April and October meetings each year are often ‘lighter’ in terms of business and it is these meetings that have sometimes in the past been utilised for ‘themed meetings’ and, to better enable these to take place flexibly, Standing Orders have, on most such occasions, been suspended.

2. PUBLIC CONSULTATION

2.1 During March and April a public consultation was undertaken, with the following item appearing in ‘The Royal Borough’ and on the Council website:

Only a handful of decisions – such as setting the annual budget and council tax – are now taken each year at full Council. However Council meetings are an important opportunity for the Borough’s fifty Councillors to meet as one to debate key local issues and demonstrate community leadership. Council meetings need to evolve over time so as to remain relevant and inclusive both for Councillors and local people. In Spring 2015 therefore, Councillors will consider making changes to the way Council meetings operate. No decisions have yet been taken on this but changes may include:  introduction of a facility to enable Councillors to ask questions directly of Cabinet Members;

 arrangements to ensure that petitions which attract wide local support are presented at, and discussed by Councillors at, full Council meetings;  a reduction in the number of Council meetings, perhaps to four or five ‘business meetings’ per year (rather than the current six);  a reduction in the length of Council meetings; and  introduction of an annual themed meeting of Councillors each Autumn, to address a topical local issue The Council is interested to hear your views before it takes any decisions on these matters. If you have any thoughts on the above please email [email protected] or post your comments to The Consultation Team, Kensington Town Hall, FREEPOST LON 16042, London W8 7BR. 2.2. The consultation elicited no responses.

3. PROPOSED REDUCTION IN THE NUMBER OF MEETINGS, AND INTRODUCTION OF AN ANNUAL THEMED MEETING

3.1 The existing provision for seven meetings per year is, arguably, excessive given the low volume of mandatory Council business.

3.2 Whilst still somewhat experimental, the themed meetings that have been ‘trialled’ over recent years have generally proven a success. They have provided an opportunity for the Council to engage with residents and external partners, to demonstrate community leadership and for Members to get to grips with, and share views on, important issues or policy areas.

It is recommended that the April and December Council meetings be deleted from future annual meetings calendars but that the date that would normally be set aside for the December Council meeting be instead allocated to a themed meeting for all Councillors.

3.3 This would reduce the number of formal Council meetings from seven to five per annum - however it is proposed that the dates of the annual themed meeting, whilst not a formal Council meeting, should continue to appear in the Council diary so that Members can best ensure they remain available to attend.

3.4 It is proposed that these annual ‘themed meetings’ should operate outside the constraints of Standing Orders but should be subject to some simple procedural rules that have been agreed between party groups on a consensual basis. These might include:

(i) the principle that the subject matter of the debate must be a service, policy or other matter over which the Council has at least some reasonable degree of control; or something of particular relevance to the local area; but, so as to avoid duplication, not something that is currently the subject of active consideration by one of the Council’s scrutiny committees. (ii) a mechanism satisfactorily to bring the meeting to a conclusion – probably with the Mayor (or Chairman as appropriate) summing up the key issues or conclusions and indicating that a note of the key issues aired in the debate, with any conclusions reached, will be published on the Council website once drafted and agreed. (iii) attendance at these meetings by an appropriate panel of officers and the relevant Cabinet Members and external partners who would give their presentation then respond to questions as necessary; and (iv) some public involvement, if and when appropriate.

3.5 It is proposed that if and when the arrangements for themed meetings have been agreed, the subject of each year’s themed meeting be agreed before the Summer Recess each year, allowing officers 3-4 months to put the necessary arrangements in place, i.e. invite speakers, publicise etc.

4. LENGTH OF MEETINGS

4.1 Council meetings tend generally to run for the full three hours provided for under Standing Orders. However formal business rarely takes up more than an hour, with the remaining time being spent on motions.

It is recommended that Standing Order 23.01 be amended such that after two hours, rather than three hours, “the Mayor put to the meeting without discussion all reports (which shall be deemed to have been moved and seconded) and notices of motion appearing in the agenda which remain to be dealt with, taking a vote where appropriate . . .”

4.2 If Council wished to continue debate beyond two hours on an ad hoc basis, a motion could be moved to suspend Standing Orders to allow this, as happens each year at the Budget meeting. This would introduce a presumption in favour of shorter meetings, which could be extended where business justifies additional time.

5. QUESTIONS TO CABINET MEMBERS

5.1 Some other councils have found effective ways better to enable non-executive Members to ‘hold the executive to account’ and, whilst this function remains primarily a scrutiny one, there may be ways to enable Council to play a role without unduly cutting across scrutiny.

It is recommended that a half hour „Questions to Cabinet Members‟ slot be introduced on a trial basis at each ordinary Council meeting on the basis set out in the Appendix to this report and that the success or otherwise of these arrangements be reviewed after one full year‟s operation.

5.2 A proposed Standing Order to bring this into effect is included at Appendix 1. The key principles are as follows:

(i) Questions will only be permitted on matters that are within the Constitutional remit of the Council’s executive. (ii) Questions must be submitted in writing by noon seven clear working days before the meeting and will be published with the Council agenda. (iii) Only three questions per Council meeting will be accepted from the Members of any one party group, and these will be accepted in the order received. (iv) No Member can ask more than one question per Council meeting. (v) No Cabinet Member will be required to respond to more than two questions per Council meeting and only one from each party group. (vi) Questions to Cabinet Members will be limited to 30 minutes, with any outstanding questions unanswered at the end of the allowed time answered subsequently in writing by the Cabinet Member. (vii) The questions asked at the meeting will, in normal circumstances but at the Mayor’s discretion, alternate between party groups.

6. PETITION-HANDLING

6.1 A review of the Council’s Petitions Scheme* will be undertaken over the Summer to ensure it remains ‘fit for purpose’ in the light of experience.

* Note: The Scheme was adopted in 2009 to comply with the requirements of the Local Democracy, Economic Development and Construction Act 2009 and is based on model scheme published at the time by DCLG. Whilst the requirement for a Council to have a

scheme for the handling of petitions (and the requirement that that the Council accept petitions electronically) was removed by the Localism Act 2011, the Council retains both.

6.2 In the meantime it is proposed that existing Standing Order 10 be amended to make specific reference to the Petitions Scheme by the insertion of new paragraph 10.03 as shown in italics below.

10. Petitions

10.01 There is no expectation or requirement that petitions should be submitted to full Council. However this does not preclude Members from tabling petitions at full Council where a matter is considered to be of significant public importance. In such instances, Group Whips should agree the arrangements in advance with the Mayor.

10.02 Any petitions presented by Members at ordinary meetings of the Council shall not be accompanied by any speech or comment. Every petition so presented shall stand referred to the Executive or to the relevant committee within whose terms of reference it falls. Where a petition consists of more than one sheet only, those signatures shall be considered valid which are written on sheets headed by the prayer of the petition or on the back of such sheets.

10.03 All petitions will be handled in accordance with the provisions of the Petitions Scheme that has been agreed by the Council and is in force at the time a petition is received by the Council.

7. RECOMMENDATIONS

7.1. The Administration Committee is invited to consider these proposed changes to the current arrangements for Council meetings and make any necessary recommendations to full Council.

FOR DECISION

Tony Redpath Director for Strategy and Local Services

Tasnim Shawkat Tri-Borough Director of Law

Background papers used in the preparation of this report: None Contact officer: Robert Sheppard, Head of Governance Services, at (E) [email protected] and on (T) 020 7361 2265.

APPENDIX 1 Proposed new Standing Order QUESTIONS TO CABINET MEMBERS 1. Questions on matters that are within the Constitutional remit of the Council’s executive may be asked by Members of the Council at any ordinary meeting of the Council, subject to the following conditions: (i) The number of questions, not including supplementary questions, which may be asked by any one Member at any one meeting under this Standing Order shall be limited to one; (ii) No more than three questions shall be accepted from the Members of any one party group on the Council; (iii) No Cabinet Member will be required to respond to more than two questions per Council meeting and will only be required to respond to matters within their remit and to only one question from each party group (or ungrouped member); (iv) Where a question falls within, or relates to the remit of, more than one Cabinet Member, a combined reply may be given by one of the relevant Cabinet Members; (v) Where a Cabinet Member is unable to give their reply at the meeting in question (for example where they are unable to attend the meeting), that reply may be given by another Cabinet Member acting on their behalf (in which circumstances (iii) above will apply as amended to cover these circumstances); (vi) Notice of any question must be given in writing to the Director of Strategy and Local Services so as to reach him not later than noon seven clear working days before the day of the meeting (i.e. normally on the Friday over a week before the Wednesday Council meeting in question). In accepting questions, the Director will apply the criteria at (i)-(iii) above and he shall be authorised to edit or amend the wording of such questions if and as appropriate before circulating the questions to the Mayor and otherwise as appropriate; (vii) The Mayor may: (a) rule at any time that a question is frivolous or derogatory to the dignity of the Council and rule not to permit it to be asked at the meeting; (b) determine the order in which questions (that have been accepted by the Director of Strategy and Local Services under the provisions above) are taken at the meeting, with questions to the Leader of the Council normally dealt with first, and the Leader of the main Opposition Group having the right to ask the first of these.

(viii) The form of a reply to a question shall be within the discretion of the Leader or Cabinet Member giving the reply, or by the Cabinet Member delivering the reply on their behalf. In determining the form of his/her reply, that Member may take into special consideration whether a full reply would involve excessive labour or cost, in which case he/she may decline to answer the question in whole or part; (ix) Following an oral reply to a question given in pursuance of this Standing Order the Mayor may permit one supplementary question, from the Member who asked the original question, which should relate to the subject of the question but need not be restricted to elucidation of the reply; (x) Questions relating to the receipt of letters, reports, circulars or other documents by the Council, and to any action proposed thereon, will not normally be accepted until a fortnight has elapsed from the date of receipt of the same by the Council; (xi) Where the answer to a question cannot conveniently be given orally it shall be, at the discretion of the Cabinet Member giving it, to reply by subsequently issuing a written statement; and (xii) Any Member giving notice of a question pursuant to this Standing Order may, at the same time, indicate that he/she does not intend to ask it orally, in which case it shall not be asked or answered orally; and unless withdrawn pursuant to paragraph (4) below it shall at the conclusion of question time be deemed to have been asked and shall be answered in writing. 2 Every question asked and the reply given thereto shall be recorded briefly in the minutes. 3 The time taken up at any meeting of the Council with questions and their answers shall be limited to a continuous period of thirty minutes and any questions of which notice has been given under the foregoing paragraphs but which cannot be asked because of the time limit, shall be deemed to have been asked and shall be answered in writing; and every such question and answer thereto shall also be recorded in the minutes. 4 A Member may at any time withdraw notice he/she has given of his/her intention to ask a question provided that he/she notifies the Director of Strategy and Local Services to that effect by not later than two hours before the due time of commencement of the meeting of the Council at which the question is due to be asked.

APPENDIX B

THE ROYAL BOROUGH OF KENSINGTON AND CHELSEA

ADMINISTRATION COMMITTEE – 16 SEPTEMBER 2015 COUNCIL MEETING - 14 OCTOBER 2015

REPORT BY THE TOWN CLERK TRI-BOROUGH APPOINTMENTS PANELS

This report recommends a revision to the Constitution in respect of the composition of Appointments Panels for bi- and tri-borough appointments. FOR DECISION

1. BACKGROUND

1.1 In June 2011, as part of the Shared Services initiative a Joint Appointments Panel was established to appoint joint Chief Officers and Deputy Chief Officers for the Royal Borough of Kensington and Chelsea, City of Westminster and the London Borough of Hammersmith and Fulham. The current composition of the Joint Appointments Panel is four members from each authority (including the relevant Cabinet Member from each). This report seeks to reduce the number of Members on the panel from four to three from each authority, with a quorum of two from each authority.

2. PROPOSALS AND ISSUES

2.1 The membership of the current panel comprises four Council members from each relevant authority including the relevant Cabinet member. There is a split in the ratio of administration to opposition members in each Council on the Panel. From experience, the Panel of twelve members has been large and unwieldy. Members have expressed a preference for a smaller Panel while retaining the appropriate safeguards in respect of political proportionality and sovereignty.

2.2 This report proposes a panel of nine Members, comprising three Members from each authority; two Majority Party Members and one Minority Party Member. The sovereignty guarantee ensures that the Council cannot be ‘outvoted’ by the other two councils and so forced to accept an appointment in relation to Kensington and Chelsea.

1 3. LEGAL IMPLICATIONS

3.1 The Authorities have the power to share officers under Section 113 of the Local Government Act 1972. They also have the power to establish joint committees for the joint discharge of non-executive functions, such as appointments, under s. 102 of the 1972 Act.

4. RECOMMENDATION

4.1 The Administration Committee is asked to recommend the Council to amend the Constitution at Part 3B, Non-Executive Functions, in respect of Panel C as shown in bold in Appendix 1.

FOR DECISION

Nicholas Holgate Town Clerk

Background papers used in the preparation of this report: None other than previously published documents. Contact officer: Martyn Carver, Principal Governance Manager, on (T) 020 7361 2477 or at (E) [email protected]

Appendix 1 3.B.04 Appointments Panels

PANEL A (a) Membership Nine Council members (to be determined on each individual appointment but shall include at least one Cabinet member). (b) Terms of Reference In respect of the Town Clerk, the Director of Law and executive directors to carry out interviews and make appointments.

PANEL B (a) Membership Five Council members (to be determined on each individual appointment but shall include at least one Cabinet member). (b) Terms of Reference To carry out interviews and make appointments in respect of service directors for all business groups.

PANEL C (a) Membership For each authority, three Council members (to be determined on each individual appointment, but shall include at least one Cabinet member) with a quorum of two from each authority.

(b) Terms of Reference

To carry out interviews and make appointments in respect of Chief Officers with responsibility for shared services covering more than one Council. Other joint appointments, other than at Chief Officer level, may be conducted by Members under these arrangements where all relevant authorities agree that the appointment should be made by Members.

Note: Each authority involved shall convene its own Panel, though in normal circumstances the Panels will meet concurrently. Appointments other than at Chief Officer level may be conducted by Members where all relevant authorities agree that the appointment should be made in that way.

3 APPENDIX C

THE ROYAL BOROUGH OF KENSINGTON AND CHELSEA

ADMINISTRATION COMMITTEE – 16 SEPTEMBER 2015

REPORT OF THE MONITORING OFFICER

ANNUAL REVIEW OF THE CODE OF CONDUCT AND ARRANGEMENTS FOR DEALING WITH COMPLAINTS

The Council adopted the current Members’ Code of Conduct in July 2012. The Committee is asked to note the complaints received in the year since the last review and to consider whether any amendments are required to the Code of Conduct. FOR DECISION

he current Members’ Code of Conduct in July 2012. The Committee is 1. askedBACKGROUND to note the complaints received in the past year and to consider whether any amendments are required to the Code of Conduct 1.1 With effect from 1 July 2012 the Council adopted the new local Members Code of Conduct (“the Code”) and FOR the DECISION Arrangements for dealing with complaints alleging a breach of the Members’ Code of Conduct (“the Arrangements”).

1.2 The Administration Committee is responsible for advising the Council on the adoption and revision of the Code.

1.3 The Audit and Transparency Committee is charged with considering any complaints referred to it following an investigation and to decide what sanctions, if any, should be imposed if a Member has been found to have breached the Code. When recommending the adoption of the Code and the Arrangements to the Council, the Administration Committee indicated that a review would be undertaken after a year. This took place in September 2013 when the Committee recommended minor changes to the Arrangements which were subsequently approved by the Council. The Administration Committee further reviewed the Code at its meeting in September 2014 and recommended further amendments to the Arrangements which were adopted by the Council.

1.4 Over the past year certain local authorities have been in the headlines for the wrong reasons. In most cases the poor behaviour of individual councillors or a directly elected mayor has been a common theme. A robust but proportionate code of conduct with

appropriate arrangements for dealing with breaches is a key part of effective governance arrangements.

2. REGISTER OF INTERESTS

2.1 All Members have submitted the requisite forms to register their disclosable pecuniary interests. Most have done so via the online system for the registration of interests and the majority of Members are using the system to update their registrations and to declare any gifts or hospitality. Members should make sure that their register of interests is kept up to date firstly, because it is a requirement of the Localism Act 2011 and a criminal offence if they do not and secondly, because members of the public, as they are entitled to, do regularly check that Members have updated their interests.

3. COMPLAINTS

3.1 The Code and the Arrangements are all on the Council’s website.

3.2 In the past 12 months two complaints have been made to the Monitoring Officer alleging a breach of the Code. In both cases the Monitoring Officer decided not to refer the complaint for investigation as there was no evidence of a breach. Both decisions were appealed to the Town Clerk who upheld the Monitoring Officer’s decisions.

4. COMMMITTEE ON STANDARDS IN PUBLIC LIFE

4.1 In July 2015 the Committee on Standards in Public Life published its Annual Report for 2014-15 which includes a section on Local Government Standards. The relevant extract from the Annual Report is attached at Appendix 1 to this report.

5. THE INDEPENDENT PERSON

5.1 Ms Johanna Holmes has been consulted during the preparation of this report and about both complaints noted above.

6. RECOMMENDATION

6.1 The Administration Committee is invited to recommend that the Council:

(i) Notes the report; and (ii) Considers whether any further amendments should be made to the Code or Arrangements.

FOR DECISION

LeVerne Parker Monitoring Officer

Background papers used in the preparation of this report: None other than publicly available documents

Contact Officer: LeVerne Parker, Chief Solicitor and Monitoring Officer (t) 020 7361 2180 (e) [email protected]

THE ROYAL BOROUGH OF KENSINGTON AND CHELSEA

HOUSING AND PROPERTY SCRUTINY COMMITTEE WORKING GROUP

REPORT BY THE SCRUTINY COMMITTEE CHAIRMAN, BUY TO LEAVE LINES OF ENQUIRY AND POLICY OPTIONS

Chairman’s Foreword

London goes from strength to strength, attracting people from around the UK and from overseas. Our population is expected to grow from 8.6m to 11m by 2050 according to the Mayor of London. This rise in population will increase the demand for housing, as will the continuing trend of smaller average household size. Without an increase in the supply of housing, this demand will be checked by house prices rising faster than incomes and declining living standards. In short, London needs more new homes.

Kensington and Chelsea is a special place to live. The attractions of the borough have propelled average house prices here to amongst the highest in the world. Already, it is hard for even those on very high incomes to afford to buy in the borough. The Council is addressing the potential polarisation of the borough into an area inhabited only by the very rich or the very poor through the provision of more affordable housing for those on middle incomes.

Despite the absence of large numbers of high rise buildings and the presence of many garden squares and tree lined streets, Kensington and Chelsea has one of the highest population densities among the London boroughs. In addition, over 70% of the borough lies in a conservation area - for good reason. Therefore, the scope to add significantly more new housing is constrained. Again, the Council is looking hard at its own estate to see how new supply can be brought forward, while enhancing the homes and environment for our existing tenants.

It is too easy to characterise a house as “empty” or “lived in”. The truth is there is a spectrum of intensity of occupation, ranging from unused to permanent. The use of much of our housing stock lies somewhere in the middle. Kensington and Chelsea has the highest rate in London of second home ownership outside of borough at 18% (other than the City of London whose residential population is very small). In addition, over 9000 homes in the borough are second homes (or 59 per thousand). This

suggests perhaps almost a quarter of our housing stock is empty at times, either when owners are using their second home elsewhere or when non-residents are dwelling in their primary home. There are other categories of use in between permanent and empty.

Over the ten years to 2013, Kensington and Chelsea added 2945 new properties but saw a reduction in the number of households living here. A falling residential population can be damaging. Not only does it indicate Kensington and Chelsea is not contributing to London‟s wider growth but it can also lead, especially if concentrated in particular areas, to the „desertification‟ of the borough as vital facilities cease to be economic. To our immediate east, in Belgravia and Mayfair, the consequences are visible.

There has been much popular discussion about “buy to leave”. At its April 2014 meeting a motion to full Council on the subject was referred to the Housing and Property Scrutiny Committee. This report is the product of the Committee‟s work to investigate the subject. The study focused on three areas: firstly to define the term “buy to leave”; secondly to develop evidence rather than rely on hearsay; and lastly to identify possible policy responses should the Council be minded to take action. The premise of the study is that, given the situation above, it is damaging to the vitality of the borough if houses are left empty rather than being used.

We have defined buy to leave to refer to the practice of owning a property with no intention to use it for residential occupation. Where the distinction lies between occupation and non-occupation is grey and we have not sought to define a sharp boundary, preferring to allow the data (which reflects different gradations) to speak for itself. We have attempted to draw together all publicly available data, as well as commissioning data from private sources. We have also explored the policy choices open to the Council, recognising that the Council‟s ability to affect what may be occurring is limited at best.

It is important to distinguish buy to leave, which is a phenomenon relating to the intensity of housing occupation, from other parallel trends which may be occurring such as (i) changes in the nationality of either our residents or of property owners or (ii) changes in tenure. Kensington and Chelsea is an internationally open borough. We welcome all who want to live here legally, of whatever nationality. If an overseas buyer wants to buy in Kensington and Chelsea in order to reside here, or to rent to someone else who wants to reside here, it means our housing stock is being used and the community strengthened. Our concern in relation to buy to leave is that our housing stock is being used as an asset class, rather than as homes.

The study does find evidence that the intensity of occupation of our housing stock is declining, especially in the south eastern corner of the borough. This may mean any policy response should be targeted rather than sweeping. Our residents find it particularly galling to see new build properties lie empty. Given new builds have to pass through the planning process, our study finds there may be grounds in planning law to insist on occupation. However, we should not delude ourselves about either how effective such policies would be or indeed how easy it would be to put them in place. Not only would the hurdle set by the Planning Inspectorate be high, but we would also have to develop a clear definition and then be able to enforce around that definition. It is inevitable that whatever definition we might develop, it could have perverse consequences, which we would have to accept if addressing buy to leave were the priority.

The Committee recommends the Council reflect on the information provided and the suggestions made.

Cllr. Quentin Marshall Chairman, Housing and Property Scrutiny Committee

EXECUTIVE SUMMARY AND RECOMMENDATION

 This report presents the findings of a study of housing occupancy in Kensington and Chelsea in relation to „buy to leave‟ which the Housing and Property Scrutiny Committee was requested to research following a motion to Full Council.

 For the purposes of this study, buy to leave is defined as the purchase of a property with no intention on the purchaser‟s part of using it for full time occupation (either personally or by renting it to a third party). It would also include properties purchased solely for capital investment not occupation.

 The study set out to establish the extent to which buy to leave is occurring in the borough. An evidence based approach was developed using official data sources to establish patterns of occupation and population trends. These data sources were complemented by some specifically commissioned research. The study has also attempted to identify the powers available to the Council should it wish to deter this practice.

 The key findings from the data analysis study are summarised below and set out in greater detail in Part Two of this report.

o There is no official recorded data set of buy to leave properties and so it is not possible to produce a definitive list for the borough.

o Analysis of the Council Tax register reveals a number of empty properties. However, this is a stark definition based on length of time a property has been empty and whether it is furnished. Analysis of second home ownership and population gives a more nuanced and finely graded understanding of patterns of occupation in the borough.

o Compared to regional and national averages, there are high numbers of second home owners and empty homes in the borough. Second home owners include residents who own a second home in the borough and residents who have their primary residence in the borough and own a second home elsewhere.

o There has been a small decrease in the population of the borough. The composition of households is changing with a net- inflow of single households and to a lesser extent multi-adult (no

children) households. There has also been an increase in the number of households migrating to the borough from abroad.

o The research indicates that the South and East areas of the borough, particularly Brompton and Hans Town wards (prior to the boundary review) may have higher than normal levels of vacant properties which should be an indicator of buy to leave.

o The 2011 Census data, Council Tax and utility datasets indicate lower than average occupancy within the south eastern wards. Electoral Roll data combined with Census data contributed to the understanding of where unregistered residents might reside. Land Registry information combined with utility data was also used to determine that Brompton and Hans Town has a high turnover of residents.

 The policy options relating to existing stock and also new build properties are explored in Part Three and they cover: Council Tax Empty Dwellings Orders Planning Policy The Mayoral Concordat The London Local Authorities Bills

o The existing planning policy options available to the Council are limited. Planning can only influence new homes granted planning permission. Setting a new planning policy would have to be based on a robust evidence base and be subject to public consultation and an independent examination hearing overseen by an inspector appointed by the Secretary of State

o There is an option to lobby with other local authorities to use the London Local Authorities Act. This would require demonstrating that buy to leave is a London issue that requires a London response.

RECOMMENDATION

The Committee recommends the Council reflect on the information provided in this report and the suggestions made.

REPORT INTO BUY TO LEAVE IN THE ROYAL BOROUGH OF KENSINGTON AND CHELSEA

The report is structured as follows:

Part One Background information

Part Two Definitions and to what extent is buy to leave occurring in the borough?

Part Three The powers available to the Council

1 BACKGROUND INFORMATION

1.1 There have been a number of reports and studies into property in London which touch on buy to leave. A summary of some of the reports is listed below as this gives the context for this study.

1.2 The Department of Communities and Local Government (CLG) published in 2006 a report Housing Markets and Planning Expert Panel, What is the extent of Buy to Leave Empty in England. The report concluded that this was a feature of housing markets in large northern cities and did not find evidence of it as an issue in London with the exception of some isolated incidents. However, over the intervening years, buy to leave has been referenced increasingly as an issue for some central London boroughs including Islington, Camden and Kensington and Chelsea.

1.3 In 2014 the British Property Federation launched a report, Who buys new homes in London and why, by Molior London Limited. The report stated that overseas buyers accounted for 15% of new homes purchases in London in 2013. The report made the following observations:  Very few, if any, major developments are marketed exclusively overseas.  Overseas sales drives tend to focus on the earlier launches, often to secure the release of project finance. The best funded developers can be selective with overseas marketing and sell some schemes exclusively in the UK, but this is often not an option for smaller builders.  The proportion of overseas buyers in any particular development is highly location dependent - it can be higher than 80% in Prime Central London but lower than 10% for much of outer London.

1.4 Savills produced a report, The World In London, Dynamics of a Global City. Although this report was produced in 2014, it still contains some useful insights. In summary, the report focuses on

London‟s prime residential market which have developed as London has become a centre of global commerce. The report states that 7% of Greater London properties for sale were bought by purchasers from overseas in 2013-14.

1.5 Analysis of the data relating to Kensington and Chelsea within the report revealed some interesting key facts and these are summarised below.

 Reasons for purchase: o 37% as a main residence o 31% as a second home o 30% as investment / redevelopment o 2% other

 Chelsea had a „Price Forecast: 3% (2014) and 23.1% (5 years) within international buyers making 38% of sales‟.  Kensington and Notting Hill had a „Price Forecast: 3% (2014) and 23.1% (5 years) within international buyers making 53% of sales‟.  Although the data does show that international buyers make up an increasing part of the market, it cannot be inferred from the data that these are buy to leave purchases.

1.6 In July 2014, Westminster City Council published an independent report by Ramidus Consulting, The Prime Residential Market in Westminster. The focus of the report is the impact of the prime residential market in Westminster and not buy to leave. However, it does touch on the issue and states the study found there was “little tangible evidence” of widespread year-round vacancy in prime properties.

1.7 The topic has featured in articles in the Evening Standard (11 July 2013, 21 March 2014 and 14 May 2015). The article of 11 July 2013, highlighted the issue of buy to leave from an Islington Council perspective where concerns were expressed about the impact of the phenomenon. The article of 21 March 2014 suggested that the Royal Borough had one of the highest rates of empty homes in the country and that foreign buyers were purchasing properties as an investment. The article of 14 May 2015 claimed that in one street in Kensington seven in ten properties were second homes (although it cannot be assumed these were buy to leave properties).

2 DEFINITIONS AND TO WHAT EXTENT IS BUY TO LEAVE OCCURRING IN THE BOROUGH?

Definitions

2.1 The first stage of this study was to develop a workable definition of buy to leave. For the purposes of this study, buy to leave is defined as the purchase of a property with no intention on the purchaser‟s part of using it for full time occupation (either personally or by renting it to a third party). It would also include properties purchased solely for capital investment not occupation.

2.2 This is distinct from a second home which does have an official definition. A second home is defined by the Office of National Statistics (ONS) as „a property that isn’t the main residence for a usual resident but is occupied for at least 30 days a year‟.

Methodology

2.3 The primary lines of enquiry for the study were developed in order to determine the structure of the work and these are summarised below:

 To what extent is buy to leave occurring within the borough?

 What powers, if any, has the Council to deter this practice and what other consequences would there be if we were to use any powers that we might have? This would include consideration of the borough‟s Planning powers and policies.

2.4 There is no official recording mechanism for buy to leave (neither the Office of National Statistics nor the Department for Communities and Local Government keep statistics). For this reason, it was necessary to determine the data sources which the potential to provide insights into housing occupancy.

2.5 The data sources below were analysed:

 The Census  The Electoral Roll  The Council Tax Register  The Tax Base  Land Registry deeds  Planning information  Commissioned research in relation to length of residency and utility usage

2.6 These data sets illustrate the borough‟s housing trends and may go some way into providing a greater understanding of the borough‟s housing occupancy patterns. However, if the Council decided to develop a policy response to buy to leave, then more detailed evidence would most likely be required, particularly in relation to planning policy.

Summary of Comparison Information from the Data Sets

2.7 As noted above, the Census, the Electoral Roll, the Council Tax Register, the Tax Base, Land Registry deed and planning information were all identified as potentially useful sources of information. These data sets were supplemented by commissioned research in relation to length of residency and utility usage.

2.8 Paragraphs 2.9 to 2.18 below draw summary comparisons between the information contained within the data sets.

2.9 Census second homes figures suggest that 10.9 per cent of the housing stock is left vacant for most of the year (London average 3.6 per cent). Empty homes figures from the Census were validated using Council Tax data which show similar numbers. Both data sources indicate concentrations in the Hans Town and Brompton wards.

2.10 The population of Kensington and Chelsea has remained stable (within about 2 per cent) and monitoring of housing stock would allow for continued research. However, the borough has a very transient population which makes predicting future estimates very difficult. It is estimated that the borough‟s population will increase in 2014-15 to 156,200 from 155,600.

2.11 Electoral Roll data ranges from 54.1 per cent to 69.4 per cent with the lowest levels in the centre of the borough which does not show a correlation with other data sources. However, Census data illustrates that there are higher percentages of foreign born residents in the central areas of the borough which could be the cause of the lower electoral roll figures. The data also has a small range which indicates that it would be better suited to postcode or street level analysis.

2.12 Nationwide figures for „home ownership‟ show a downwards trend is replicated in Kensington and Chelsea. Higher levels of renting in an area with high turnover may give the impression of empty housing during periods where tenants temporarily move out of properties. Home ownership decreased 11.9 per cent from 2001 to 2011. High increases in „renting‟ proportion have occurred in Abingdon,

Brompton, Earl's Court, Hans Town and Stanley wards. This has been caused by large decreases in „home ownership‟ but also the reduction in „social rented‟ properties. Properties classified as „living rent free‟ have increased in Brompton, Campden, Redcliffe and Royal Hospital.

2.13 The Council‟s Empty Homes Review, based on Council Tax data, confirmed that 941 properties are long term empty, with a further potential 237 properties which were unconfirmed at the time of the research. This figure correlates well with the Tax Base data and shows increasing numbers (apart from 2015). Concentrations occur in the Brompton and Hans Town ward as well as in Courtfield ward.

2.14 Interrogating Council Tax data, „long term empty‟ specifically, reveals another concentration in the Brompton and Hans Town wards, however Courtfield appears to be below the borough average. SW3, SW10 and W8 postcodes contain high numbers of empty properties.

2.15 Land Registry data indicates that there are higher numbers of property transactions in the Brompton and Hans Town wards in comparison to the rest of the borough.

2.16 Analysis of utility usage datasets reveals that short term residency is more common in the south eastern area of the borough. This modelled consumption data shows Campden and Brompton and Hans Town are more likely to consume less electricity and water. Gas consumption shows a trend towards the south and eastern sides of the borough using less gas but this is statistically less significant.

2.17 In conclusion, a large share of the research points towards the south and east areas of the borough, particularly Brompton and Hans Town ward which should be an indicator that there may be higher than normal levels of vacant properties. Further detailed and geographically specific research to understand the nuances in the levels of vacant properties would be required to understand the situation fully.

2.18 Paragraphs 2.19 to 2.70 below contain more detailed analysis of the datasets.

The Census

2.19 The returns for 2001 and 2011 were analysed, although it should be noted that they are not directly comparable due to changes in methodology. The results reflect residents and households rather

than properties so that if a household does not respond then no data is collected for that property.

Second Homes

2.20 Kensington and Chelsea is an area which attracts second homes owners and a comparatively high proportion of our residents own a second home elsewhere. Analysis of the 2011 Census reveals information in relation to people who own a second home in the borough as well as residents of the borough who own a second home in another location.

 In total 9,303 residents of England and Wales own a second home in Kensington and Chelsea. Expressed as a rate, Kensington and Chelsea has 59 domestic second home owners per thousand residents. This ranks Kensington and Chelsea third in London behind Westminster (61 per thousand) and City of London (185 per thousand).

 Around 18 per cent of residents of Kensington and Chelsea have a second home elsewhere, with a higher proportion of these owning a second home outside the United Kingdom. Seven per cent (11,773 residents) of the borough‟s residents have a second home elsewhere in the United Kingdom. This is the second highest proportion of any London borough after the City of London (15 per cent). Eleven per cent (17,794 residents) of the borough‟s residents own a second home outside of the United Kingdom. This equates to a rate of 112 people per thousand residents, the highest rate in England and Wales.

Empty Homes

2.21 The 2011 Census includes a category for „Household Spaces‟ in which an estimate of the number of vacant properties is made. A vacant household is defined as where “a household space with no usual residents may still be used by short-term residents, visitors who were present on census night or a combination of short-term residents and visitors. Vacant household spaces, and household spaces that are used as second addresses, are also classified in census results as 'household spaces with no usual residents'. ” In Kensington and Chelsea, it is reported that there are 9,169 vacant homes according to the Census (2011) which shows that 10.9 per cent of the total housing stock is left vacant for most of the year. Particularly high levels of vacant housing can be found in Hans Town and Brompton (24.7 and 19.5 per cent respectively). The London average is 3.6 per cent with the City of London showing the highest rates at 20.7 per cent and Westminster at 11.9 per cent.

2.22 Empty Homes information from the Census was compared to Council Tax information from the same period with a view to ascertaining whether there was any correlation in relation to vacant properties on a ward basis. The data in the tables below does show a geographical concentration of vacant homes in the Hans Town and Brompton Wards. The first table shows the actual numbers and the second table shows the same information in percentage format.

Actual numbers Council Tax 2012 2011 Census Total Housing Stock 87,361 87,705 Vacant Households 10,564 9,169 Brompton 1,207 1,137 Hans Town 1,463 1,621

Percentages Council Tax 2012 2011 Census Vacant Households 12.1% 10.5% Brompton 11.4% 12.4% Hans Town 13.8% 17.7% Source: Census returns 2011

Population

2.23 Over the 10 years between the two Census returns, the population of the borough decreased by 0.1 per cent and the ONS estimates that there are 610 fewer households than in 2001. This does not mean a reduction in the number of properties, rather a reduction in the number of households normally resident in the borough. Properties becoming vacant or used as second homes are not counted as „households‟ in the Census.

2.24 The Electoral Roll was also used to determine population trends. Previous Electoral Registration data before the 2015 General Election identified 31,716 properties with no registered voter attached to them. This data was updated during the single voter registration process.

2.25 The Electoral Register was compared with the 2011 Census data to ensure that the data was valid and to give an estimation of the likely number of residents that have not registered per ward as a percentage.

2.26 As the data from the Census falls in 2011, midyear estimates were used to see if the population had changed. It is estimated that there is a declining population and a reduction of -1.9% should be applied

to any Census estimates of population in the borough. However, at ward level, there are no midyear estimates so adjustments to the data in this analysis will not be made but a note of caution should be made to the accuracy of the percentages produced.

Year RBKC est. % of Census 2011 % Population difference 2010 160,500 101.2% 1.2% 2011 158,300 99.8% -0.2% 2012 155,900 98.3% -1.7% 2013 155,600 98.1% -1.9% Midyear estimates compared to Census 2011 estimate

2.27 The analysis included looking at the number of registered voters in each ward and this is shown in the diagram below. Smaller percentages suggest a lower number of voters that have registered and there is a slight continuation of lower numbers found in the central and eastern sides of the borough.

Source: ONS 2011: Map showing the estimated number of voters within each ward population

Tenure

2.28 Analysis of housing tenure reveals that, 36 per cent of the population own their home, 37 per cent rent privately and 24 per cent of homes are socially rented. This means that between the 2001 and 2011 Census, owner occupation has decreased by 7 per cent from 44 per cent, private renting has increased by 6 per cent and social renting has decreased by 2 per cent.

2.29 This change is reflective of a national trend. There has been a decrease nationally in levels of owner occupation and the private 14

rented sector has increased. Nationally, 64 per cent (14.9 million) of households owned their own home in 2011, either with a mortgage or loan, or outright. Home ownership has decreased four percentage points since 2001. The group that rented from a private landlord or letting agency increased by six percentage points from 9 per cent in 2001 to 15 per cent in 2011 (ONS 2012).

Overseas Buyers and Second Homes

2.30 In February 2014, Savills produced a report entitled The World in London. In this report, sales in prime central London were analysed and the diagram below summarises the key findings. The diagram shows the importance of overseas buyers for second homes and investment in the prime central London area (which includes most of the borough).

Overseas Buyers in Prime Central London

Source: The World in London Savills 2014

2.31 Records of new build properties held by Planning and Borough Development show there has been a net gain in residential properties since the financial year 2003 of 2,945 new properties. Whilst it would be expected that a new property would lead to an additional new household forming, the Census data shows that this is not the case, with a reduction in the overall number of households over the last 10 years. There has been on average of 222 new net residential units in the Royal Borough per year.

Net new dwellings per financial year by bed size 2003 – 2013

600 5+

2 4 34 500 3 22

37 2 10 1 bed/ 26 400 178 61 16 studio/bedsit 15 16 96 12 52 300 36 20 31 18 153 76 5 50 36 6 3 135 19 189 12 163 200 8 38 29 113 41 7 116 105 59 85 10 76 44 100 209 165 39 139 122 103 117 122 119 79 95 55 0 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013

Source: Planning and Borough Development Records

2.32 Crudely applying Savills findings to sales volumes in the Royal Borough since 2009 shows that the increase in sales to overseas investors could be a contributing factor to the reduction in the number of households in the Royal Borough. Using Land Registry data for property sales per month from 2009, there were on average 2,157 property sales per year in the Royal Borough (which gives an annual average of around 180 per month). Assuming 59 per cent of these properties are sold to overseas investors and of these 17 per cent are used for investment purposes and not lived in (which translates as 366 properties per year), there would be a net loss of households each year despite the net gain in properties granted planning permission and completed.

Impact on the Housing Market

2.33 The possible impact of the continuing trend of second home ownership and increasing investment properties in the borough can most clearly be seen in the increase in the private rented sector and the reduction of the owner occupied sector. Coupled with this are the high rents within the private rented sector. Areas of London, particularly inner London, are simply out of reach of those on median incomes who live locally. To rent a two bedroom property in the lower quartile of rent in Kensington and Chelsea would take 65

per cent of the median income of a resident of Kensington and Chelsea (Heywood 2012).

2.34 House prices have continued to rise in the borough despite the economic downturn and lack of mortgage lending. There has been a particular increase in price of properties valued over £1 million. In 2011, 38 per cent of properties were sold for over £1 million and nearly 20 per cent for over £2 million (Land Registry January 2013). As overseas buyers seek out homes for investment purposes they risk pushing prices up and reducing the availability of homes to buy for local people. (Heywood 2012).

2.35 The combined effect of overseas investment into property within the Royal Borough is to increase prices whilst decreasing the number of households who reside here.

2.36 The analysis of the Census and the Electoral Roll does not provide direct evidence of de-population, however the market trends outlined below in this report may go some way to explaining the current levels of housing occupancy.

The Council Tax Register

2.37 Council Tax records relating to long term empty properties on the Council Tax Register were reviewed and updated during 2014. These empty properties are referred to as „Class C‟ properties and are defined within the The Council Tax (Exempt Dwellings Order) 1992, Article 3 as „a dwelling which is unoccupied and has been so for a period of less than 6 months since the last occupation day and which is substantially unfurnished and has been so throughout that period‟.

2.38 The analysis does give an insight into the geographic areas where a concentration of empty homes are situated. However, it does not contain the nuances of occupation that other data sets may provide.

2.39 Mapping the locations of the properties that were found to be empty, indicates a trend towards the south east with small clusters of properties. High numbers of empty properties can be found in the Brompton and Hans Town Ward as well as Courtfield. There is no spatial trend for the length of time the property has been known to be empty.

Results mapped to address level in RBKC

2.40 The total number of properties according to Council Tax is 87,361. According to the Empty Homes Review 941 properties were confirmed as long term empty, 51 properties used as second homes and a further 237 properties that could potentially be empty. The total number of long term empty could be as high as 1,137 which is a much lower estimate than that of the Census. However, this figure does correlate with the Tax Base information which is set out below.

Tax Base

2.41 Tax base data spanning 2011 to 2015, focusing only on the month of January, was used to analyse the entire housing stock and the Council‟s „best‟ knowledge of empty homes.

2.42 Analysis of housing stock levels each year shows a steady increase year on year. The number of units increased by 1,074 from 86,858 in 2011 to 87,932 in 2015.

2.43 Tax base exemptions can be used to estimate the number of second homes and empty homes within the borough. Analysis shows an increasing number of properties being used as second homes in the borough, from 6,406 in 2011 to 8,069 in 2015. The number of homes declared as empty has seen an increase from 2011 to 2013 (1,087 to 1,293) with a large increase in 2014 (2,208), ending in a decline in the 2015 figures (1,906). This represents an increase in second homes of 26.0 per cent and an increase of 75.3 in empty homes from 2011 to 2015.

2.44 Percentages each year by the relevant exemption shows that there is an increasing share of the total housing stock being used as second homes and homes classified as empty, with the exception of 2015 where the proportion of empty homes reduced (most likely due to the work to update the Council Tax Register during 2014).

Tax Base Exemptions 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 2011 2012 2013 2014 2015

Second Home Exemption Empty Home Exemption

Tax Base: split by property tax band and year showing “second home” figures

2.45 The increase in second homes year on year is consistent throughout the property bands and that band G contains the highest proportion of second homes with band H being the second highest, the two top tier tax brackets. Further analysis reveals a similar situation with the number of empty homes split by tax bracket. However, there is a much larger increase in empty homes for 2014 and 2015 across all bands in comparison to second home exemptions. As before,

higher numbers of empty homes can be found in the G and H bands.

Council Tax

2.46 Ward level data from Council Tax records is stored in the pre 2014 ward boundary format. The graph below reveals the spread of long term empty properties through the wards with the borough average in purple. The lowest numbers can be found in Earl‟s Court (below 1.0 per cent) and the highest can be seen in Hans Town, over twice the borough average (4.1 per cent).

Council Tax - Long Term Empty (%) 4.5%

4.0%

3.5%

3.0%

2.5%

2.0%

1.5%

1.0%

0.5%

0.0%

Council tax data split by Ward showing long term empty properties (pre 2014 ward boundaries)

2.47 Mapping the data at ward level as shown in the diagram below reveals that areas with relatively high numbers of empty homes reside typically towards the south of the borough, with Hans Town showing the highest level and it is also surrounded with wards that have levels over 2.0 per cent.

Map of RBKC showing pre 2014 wards and aggregated long term empty council tax records

2.48 The results were also mapped at post code level with a view to determining if there was any pattern or „clustering‟ of empty properties.

2.49 As expected, the analysis shows empty properties spread throughout the borough. However, some post codes contain higher numbers of empty properties and these are in SW3, SW10 and W8. At a more detailed level, the analysis revealed clusters of of empty properties within the Hans Town area as well as Campden and Courtfield wards.

2.50 Focusing in on the Brompton and Hans Town region of postcodes shows large areas where empty properties are much higher than the borough average, particularly clustered around the far eastern

side of the ward. Certain areas within the wards contain a collection of streets that could have a high percentage of empty properties but further research would be required to validate these results and to determine if they are being used for investment purposes.

Land Registry

2.51 Land registry data has been aggregated to ward level which is in the latest 2014 boundary format. The chart below indicates that Brompton and Hans Town together with Redcliffe wards have the highest number of property transactions over the 2008 to 2014 period. These are 1,452 and 1,434 for Brompton and Hans Town respectively whereas Notting Dale has the lowest number of transactions (254).

Land Registry Deeds by Year (sorted by Ward)

Notting Dale Dalgarno Golborne St. Helen`s Norland Pembridge Chelsea Riverside Colville Holland Abingdon Campden Stanley Queen`s Gate Earl`s Court Royal Hospital Courtfield Redcliffe Brompton & Hans Town

0 200 400 600 800 1000 1200 1400 1600

2008 2009 2010 2011 2012 2013 2014

Source Land Registry: Chart showing the number of transactions (deeds) per ward and split by year

2.52 There is a clear trend towards higher levels of property transactions in the south of the borough where levels can be over four times higher than the north of the borough. Analysis of Land Registry deeds data by the number of property transactions per year was also used. Holland ward has seen a large increase since 2008 where as Courtfield has seen a decrease since 2010 levels. Dalgarno and other northern wards have seen consistently lower transaction levels compared to Redcliffe, Brompton and Royal Hospital etc. Areas within the central part of the borough have seen fairly consistent transaction numbers throughout the study period. 22

2.53 The table below shows the Land Registry deeds data by year and ward concerning „new build‟ properties only which totals 338 over the seven year period. The highest activity can be seen in 2014 which is likely due to the Charles House development outside Holland Park. Dalgarno and Golborne wards feature the second and third highest number of new builds after Holland ward.

Number of New Builds per Ward per Year

Stanley St. Helen`s Royal Hospital Redcliffe Queen`s Gate Notting Dale Norland Holland Golborne Earl`s Court Dalgarno Courtfield Colville Chelsea Riverside Campden Brompton & Hans Town Abingdon 0 20 40 60 80 100 120

Brompton Chelsea Earl`s Notting Queen`s Royal St. Abingdon & Hans Campden Colville Courtfield Dalgarno Golborne Holland Norland Redcliffe Stanley Riverside Court Dale Gate Hospital Helen`s Town 2008 0 0 1 0 0 0 0 1 4 0 0 0 0 0 0 0 0 2009 0 0 0 0 1 0 1 1 15 0 0 4 0 0 0 0 0 2010 1 0 0 0 0 0 36 0 21 0 0 0 0 6 0 0 0 2011 0 0 5 0 0 0 0 4 1 0 0 0 0 0 0 0 10 2012 0 0 1 0 2 1 0 3 0 0 1 0 1 1 0 4 5 2013 0 5 1 0 1 0 0 1 30 20 0 1 2 1 3 2 4 2014 4 1 1 11 2 1 4 12 9 82 2 1 0 2 3 0 1

Land Registry deeds data by year and ward concerning „new build‟ properties only

Planning Data

2.54 The map below shows a visualisation concerning new build property in the borough from the past year and their location. This 3D visualisation aims to highlight the areas with higher numbers of units being built and also highlight any reduction in the number of residential units in a property.

3D visualisation of the number of housing units (blue), the number proposed (orange) and the change in number (purple)

2.55 The Charles House development dwarfs the map with only smaller notable developments taking place in Chelsea Riverside and Brompton and Hans Town. It should be noted that the smaller developments fall within the areas already shown to contain empty properties.

Utilities Data

2.56 In addition to the existing data sets, research was commissioned specifically for this study relating to length of residency and also utility consumption. This data (provided by Experian) enhances the analysis by providing a more nuanced view of occupation.

Length of Residency Analysis

2.57 The information contains data for both renting and owned properties at ward level across the borough and is based on the head of the household.

2.58 At person level, length of residency identifies the length of time that an individual has been at the same address. At household level, length of residency identifies the length of time that the longest residing head of household has been at the same address.

2.59 Analysis focused on short term property ownership/renting (0-2 years). The map below, based on the post 2014 boundaries, shows wards in the south eastern side of the borough (Courtfield and Queen‟s Gate) had a high number of households with a residency of 2 years or less.

Source: Experian 2015: Short term residency in RBKC

2.60 The analysis was extended to cover longer term property ownership/renting (of 7 or more years). Wards in the North Western side of the borough (Notting Dale, Dalgarno and Golborne) featured the highest with the exception of Chelsea Riverside which lies in the south. Queen‟s Gate and Courtfield feature lowest. This is shown in the map below, which is again based on the post 2014 ward boundaries.

Source: Experian 2015: Long term residency in RBKC

2.61 It should be noted that there is a trend for shorter term occupancy within the borough in the south eastern and central wards and longer term residency in the north (with the exception of Chelsea Riverside). This data could be influenced by the higher number of students who live in temporary accommodation in the Brompton vicinity (however, this information cannot be confirmed).

Utility Consumption Data Analysis

2.62 The utility consumption analysis was based on modelled data obtained from Experian. The base data for the model was derived from a sample of households which was used in combination with a number of data sets to measure likely annual energy consumption.

2.63 The data was grouped into numbered bands ranging from band one, containing households with the highest electricity consumption, through to band 10, containing those households with the lowest electricity consumption.

2.64 The analysis for electricity consumption is shown in the graph below. It shows high percentages of households that are less likely to consume electricity to the left (shown in the blue bars) and low percentages of households with a higher likelihood of high energy consumption (shown in the red bars). At a ward level, households in Campden, Brompton & Hans Town, and Royal Hospital consume lower levels of electricity (represented below with a high percentage score in the blue bars and low percentage score in the red bars).

Source: Experian 2015: Electricity consumption showing the highest/lowest three bandings at ward level, sorted by lowest user

2.65 The analysis indicates a slight north/south split. Band 10 (lowest electricity consumption banding) features more prominently in central and eastern wards across the borough whereas band one (highest electricity consumption banding) features more prominently in the north (and Earl‟s Court). This is represented in the two diagrams below.

Source: Experian 2015: Electricity consumption showing the lowest band and highest band at ward level

2.66 The chart below illustrates the range of consumption across the wards identified as being the three highest consumers (Dalgarno, Colville and St Helen‟s) and the three lowest consumers (Campden, Brompton & Hans Town and Royal Hospital). The ward lines indicate a steady increase towards low usage bands for Campden, Brompton and Hans Town and Royal Hospital and the reverse for the highest consumers.

Source: Experian 2015: Electricity consumption showing the three highest and three lowest consumers of electricity

2.67 The data for water consumption at household level demonstrates a similar trend to electricity consumption as shown by the graph below.

Source: Experian 2015: Water consumption showing the highest/lowest three bandings at ward level, sorted by lowest user

2.68 The diagrams below demonstrate this trend geographically showing a mixed spread of consumption across the borough. Small correlations appear to show a concentration of low users in the central area and eastern side of the borough and high users in Golborne, Notting Dale, Queen‟s Gate and Earl‟s Court wards.

Source: Experian 2015: Water consumption showing the lowest band and highest band at ward level

2.69 Gas consumption was again banded from band one (high usage) through to band 10 (low usage). The analysis indicated a large variance across the borough and did not produce trends similar to electricity and water consumption. This could be due to factors such as the irregularity of insulation, heating systems and nature of the property.

2.70 For the purposes of this analysis it was decided it would be most useful to focus on those households in band 8 (as 9 and 10 show “no consumption”). The diagram below illustrates a trend in the central and eastern wards of lower usage. In conjunction with the other bands, usage appears to be very low in Abingdon, Brompton and Hans Town, Campden, Royal Hospital, St. Helen's and Stanley. Notting Dale, Colville and Golborne all show higher than average consumption.

Source: Experian 2015: Gas consumption showing band 8 at ward level

3 THE POWERS AVAILABLE TO THE COUNCIL

3.1 This section of the report summarises policy options relating to existing stock and also new build properties. It covers:

 Council Tax  Empty Dwellings Orders  Planning Policy  The Mayoral Concordat  The London Local Authorities Bills

Council Tax

3.2 In 2013, the Council ended the discount for second home owners so that all eligible properties are charged the full Council Tax rate. This is in accordance with Section 11B of the Local Government and Finance Act 2012.

3.3 Further changes were proposed and agreed as part of the Budget Proposals for 2015/16 relating to the Council Tax base. As a consequence of the changes, owners of properties which have been empty for more than two years will be charged Council Tax of 150 per cent.

3.4 This change provides a small financial incentive on owners to bring an empty property back into use and discourages property owners from leaving properties unoccupied for a significant length of time.

3.5 This is a policy which has been adopted by other local authorities including by July 2014 a total of eighteen London boroughs.

3.6 Camden Council adopted this policy and in August 2013, claimed that empty homes had been reduced by 34 per cent since applying the premium. In 2013, Camden called on the government to give councils greater powers. In summary, this included suggesting raising the rate from 50 per cent to 100 per cent, applied after one year and extending it to cover residences claimed by international investors as second homes.

3.7 Scottish local authorities have the power under the Council Tax (Variation for Unoccupied Dwellings) (Scotland) Regulations 2013/44 to charge additional Council Tax on dwellings vacant for more than 12 months. There are certain conditions that apply. In summary, councils can at their discretion, impose an increase of up to 100 per cent of the relevant council tax rate for homes that have been empty for one year or longer.

3.8 The Council may wish to consider lobbying government for changes to enable it to charge higher council tax rates on empty homes.

Empty Dwellings Orders

3.9 Empty Dwellings Management Orders (EDMOs) were introduced by the Housing Act 2004 and in summary enable a local authority to bring a property which has been empty for more than two years back into use. Unlike Compulsory Purchase orders and Enforced Sale, EDMOs do not involve an enforceable change of ownership.

3.10 Any local authorities wishing to use an EDMO must apply to a Residential Property Tribunal and demonstrate that certain conditions have been met. Under Regulations introduced in 2012, the local authority must be able to demonstrate to the Tribunal that the property has been empty for two years, is heavily vandalised, used for „anti-social purposes‟, is „causing a nuisance to the community‟ and that there is local support for an EDMO. The Tribunal is not compelled to grant Orders even when conditions have been met and owners have the right of appeal.

3.11 If a local authority is successful in obtaining an EDMO, this lasts for twelve months during which time the local authority and the owner are expected to work together to bring the property back into use. If no agreement is reached, the local authority may apply to the Tribunal again.

3.12 EDMOs are generally used by local authorities as a last resort to tackle problems associated with derelict houses. Since the policy was introduced 108 properties have been the subject of an EDMO. EDMOs were used only 17 times in 2014 (15 times were in the North, once in the East and once in London).

3.13 It is unlikely that even if the Council wished to pursue a buy to leave strategy based on using EDMOs that it would find many properties that fitted all of the prescribed criteria.

3.14 The Council may wish to consider lobbying for changes to the criteria for obtaining an EDMO. For example, it could be argued that the prevalence of buy to leave properties is a „nuisance‟ that interferes with the Council‟s objectives in relation to providing new homes. This would require lobbying for amendments to the Regulations of The Housing Act 2004.

Planning Options

3.15 Another strand of the policy options work has been to establish whether occupancy of a residential property can be enforced under the Planning regime, for instance using „section 106 planning obligations‟ (s106s) that require that a property must be occupied for a minimum period each year.

3.16 The planning system cannot have any influence on established existing uses but can influence new build properties and changes of use.

Legal context

3.17 Since the introduction of the Town and Country Planning Act in 1947 it has been a widely held view that the pattern of occupancy, or indeed occupancy itself, is not an aspect that can be controlled under the Planning Acts and a local authority would be acting ultra vires if they sought to do so. However, as is the nature of such matters, interpretation of what may have been a generally accepted truth can evolve.

3.18 As such the Council has sought legal advice in this matter. Counsel is of the view that, while it will still be necessary to consider the reasonableness and enforceability of the precise mechanism chosen to control buy to leave, it is not considered there is any in principle reason why such controls cannot be introduced. A policy is then appropriate when it serves a legitimate planning purpose. The legal opinion concludes that subject to there being evidence which demonstrates that buy to leave is a genuine issue in the borough, a policy seeking to restrict the incidence of the phenomenon in RBKC would be intra vires (or lawful). In relation to S106 planning obligations, Counsel advised that it would be a better mechanism for achieving controls on occupancy rather than planning conditions, should the policy approach be pursued by the Council.

Evidence 3.19 The legal opinion offers some useful advice on how much evidence will be required were the Council to choose to develop a buy to leave planning policy. Whilst the Council will not have to prove conclusively that buy to leave takes place at any particular rate it must produce such evidence as might reasonably be expected.

3.20 In essence before the Council attempts to use the planning system to control the buy to leave market it must, produce evidence to demonstrate that buy to leave is a real (as opposed to merely perceived) phenomenon, and that it is occurring with sufficient frequency to justify the introduction of new controls.

3.21 To support a formal development plan „policy‟, such evidence would have to go through several formal stages of public consultation and an independent examination overseen by an inspector appointed by the Secretary of State.

3.22 Evidence-gathering to support a robust policy may prove challenging. However, initial research is included in Part 2 of this report, above.

Reasonableness 3.23 Some thought will have to be given to the nature of the s106s used to resist the excesses of buy to leave. The Council will want to reach

a position by which it can ensure that a property is in “permanent occupation”, yet which offers sufficient flexibility to reflect particular personal circumstances. This challenge cannot be taken lightly. The Council must be fair and consistent, yet not unduly impact upon the lives of those who have chosen to live within the borough.

Planning monitoring and planning enforcement 3.24 The planning system is only as effective as the ability of the local planning authority to monitor what is being built, how it is being used, and where necessary the ability to enforce the rules that it has set. Given the complexity of the issue of buy to leave, the Council‟s normal powers of investigation are likely to require significant additional recourses if the policy is to be policed effectively.

3.25 For enforcement to be effective proof may have to be provided that a property is occupied. As well as costly, this has the potential to be intrusive, and is likely to attract opposition.

Impact on the nature and the quantum of the borough’s housing supply 3.26 Regard must be had to the impact that a restriction of the buy to leave sector may have upon housing provision within the borough. Evidence may suggest that this sector provides a premium on the values that can be achieved by developers. Conversely the reduction in this market may have the potential to reduce margins with knock on effects on viability. The quantum of housing is unlikely to be reduced, but the surplus available for, for example, affordable housing may be reduced. A proper understanding of these implications will be necessary.

Islington’s Supplementary Planning Document (SPD) 3.27 In December 2014 Islington Council began a public consultation on a draft Supplementary Planning Document (SPD), Preventing Wasted Housing Supply1. A second consultation draft of the SPD was published on 15 May for consultation until 15 June 2015. In summary, Islington is seeking to prohibit properties being left empty for more than a given period. It is Islington‟s view that new properties in the borough are being purchased by investors whose intention is to benefit from capital appreciation and who have no intention of either living in or renting out the property.

3.28 The final SPD was adopted by Islington Council on 16 July 2015. The SPD is only „guidance‟ and not „policy‟ - formal development plan „policy‟ would have to go through several formal stages of

1http://www.islington.gov.uk/services/planning/planningpol/pol_supplement/Pages/pr event-wasted-housing.aspx 35

public consultation and an independent examination overseen by an inspector appointed by the Secretary of State. Such a policy may not survive such an examination. The SPD will only apply to developments „creating 20 or more residential units‟. The SPD could be open to legal challenges for example judicial review, and is likely to require significant resources for it to be enforced.

3.29 Islington Council will now need to agree S106 agreements with developers along the lines of the new SPD to meet its objectives. If a S106 agreement is not possible, any refusal of planning permission by the Council may be appealed by the applicant for which the outcome would not be certain. Planning Inspectors would need to take into account government guidance on the subject which includes that such agreements are necessary to make the development acceptable in planning terms. There would therefore have to be a very clear link between the fact that a property could be left vacant and this being unacceptable in planning terms. If a S106 agreement is possible, the implementation of it would need to be monitored and enforced where there is non-compliance.

Mayoral Concordat

3.30 In March 2014, the Mayor of London, launched the Mayoral Concordat on new homes for Londoners. This is a voluntary commitment by developers to market new homes in London to Londoners.

3.31 At the launch, 50 signatories committed to market the homes in their developments to Londoners before or at the same time as they are available to buyers from other countries.

3.32 To date the main signatories to the Concordat are developers, including registered providers of housing. The Council could consider signing the Concordat and it would then apply to any new homes that it develops. However, doing so would have no impact on buy to leave as it would would only affect the nationality of ownership rather than whether a home is used for residence.

The London Local Authorities Bills

3.32 Another policy option for the Council would be to use the London Local authorities Bills which are deposited in Parliament in November of any given year. These can be promoted for a multitude of purposes and the promoters are required to demonstrate to Parliament that there is a London issue which needs to be addressed by local legislation. London Councils take the lead and promote on behalf of the London Boroughs.

CLLR QUENTIN MARSHALL

CHAIRMAN

HOUSING AND PROPERTY SCRUTINY COMMITTEE

(Report contact: Jacqui Hird, Scrutiny Manager, [email protected], tel 02073612634)

Background Papers

Census 2001 and 2011 Royal Borough of Kensington and Chelsea Core Strategy CLG Housing Markets and Planning Expert Panel, What is the extent of Buy to Leave Empty in England British Property Federation Who buys new homes in London and why, by Molior London Limited Heywood London for Sale Islington Council, Preventing Wasted Housing Supply, Discussion Paper and Questionnaire Ipsos Mori, Survey of Empty Properties, Research Study Conducted for North London Sub-Region Ramidus Consulting, The Prime Residential Market in Westminster Savills, Spotlight the World in London Public Finance CIPFA Update 30 August 2013 Guardian 11 February 2015 Evening Standard (11 July 2013, 21 March 2014, 15 May 2015)