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Boris's strange call

Filed: Wednesday, 5th December 2012
By: Laurence Everitt

Earlier today we discovered that West Ham are preferred bidders for the Olympic Stadium. After numerous years, legal challenges and botched bidding processes, we are finally close to finding out what will become of our Olympic Stadium. All along West Ham have been in the ascendancy and it seems likely that they will be allowed to move in some time around 2016.

Strangely, however, Boris Johnson has decided that West Ham are getting so good a deal that, should the co-chairmen David Gold and David Sullivan sell the club, the state should get a share of the windfall. This amounts to a part-nationalisation of West Ham, something that surely would be an anathema to a right-wing Tory such as Boris Johnson.

You would think that it would be troubling not only to his Thatcherite principles but also to his common sense. There are numerous reasons why the state shouldn't take a share of any windfall of the chairmen; here are the ones that I feel are most pressing:

1). Investments go up as well as down - there is no guarantee that this move will be a success. Were West Ham to get relegated (not the most unlikely scenario), crowd levels would drop and the club could well be tenants of a half-full stadium that leaks money. Without the fixed asset of a ground, their future could look very insecure. This is not the sure-fire move that the government believe it to be.

2). How much of a percentage do you take? Given that this is an arbitrary decision, there is hardly a precedent as to how much of any windfall should be taken by the state. Do you take 10%? 15%? 50%? Where is the justification for the figure? How much value does the stadium actually add? Would the state be liable for any losses should the plan not work out? Do you include the investment that Gold and Sullivan put in to ensure club escaped from the Championship? The only useful precedent is the City of Manchester Stadium, which was given to Manchester City on very generous terms. Since they moved in, Manchester City have been sold twice and guess how much of the windfall the state took? Zilch.

3). What is the alternative to West Ham? A once a year Formula One race that doesn't currently exist? An NFL franchise that doesn't currently exist? Leyton Orient, who do exist, but whose gate of 4,190 in their last home game was a bumper crowd for them? The truth is that, just like the City of Manchester Stadium, having an established team in as anchor tenants will provide a solid revenue base and go a long way towards paying for the stadium.

4). The state could make a hefty profit out of the deal. As part of the deal, the state gets to keep the naming rights of the stadium. In their contract with the Emirates Airline, Arsenal pocket £30m a year from the naming rights of their Ashburton Grove stadium. Clearly, Arsenal with their constant (for now) qualification to the Champions League are a greater proposition than West Ham. Even when you allow for the ongoing 'Farah factor' of the association with the Olympics, as well as the extra events that the multi-use stadium will have, you probably wouldn't get £30m a year. But say you got £15m. Over 20 years, that would work out at £300m. Plus the state would get the catering revenue, share of the ticket stream and an annual rental fee of £2.5m. Which could work out as a very nice return over the course of a 99-year lease.

5). Why should the club pay for the redevelopment of the stadium? One of the key reasons behind Boris Johnson's demands is the large (over £100m) cost of making the stadium fit for purpose. But he should be asking Tessa Jowell for the money, not West Ham. In 2006, the year after London won the bid, West Ham declared their interest in taking on the stadium after the Olympics. The interest crystalised into a bid in January 2007 to take over the stadium, offering £100m up front to take on the stadium as long as the design brief of the yet unbuilt stadium was altered to include retractable seating in the manner of the Stade de France stadium.

However, the Olympic Development Agency, headed by Tessa Jowell and Ken Livingstone and backed by the Treasury, wanted to build an 80,000 seater stadium, complete with temporary seats and a temporary partial roof, that would then be reduced to a 25,000 seat capacity after the games. They went as far as commissioning a report into the future of the stadium which was told to explicitly ignore Premier League football from its considerations, a staggering decision given their later U-Turns (see: www.guardian.co.uk/...west-ham-athletics).

That you would spend £537m on what would, after the Olympics, become a 25,000 seater stadium used by athletics 20 days a year was clearly a hare-brained idea - no wonder Ed Warner, the UK Athletics chairman called it a 'Stratford Farce'. Now that the Treasury and other Olympic organisations are balking at the cost of transforming a badly designed stadium, perhaps they should consider looking at their previous staggering ineptitude rather than looking to pass the costs on.

6). There is a fundamental underlying point - should Messrs Gold and Sullivan want to sell a successful business, why should the state get an extra windfall? They will already have paid Capital Gains Tax on any profit. Since buying Birmingham for £1, they have done a good job of improving the fortunes of the clubs they have run. Given their age (Gold is 76, Sullivan 63) it is not far fetched to see them wanting to sell rather than burden their next generation with running the club. Having recently criticised the French 'sans culottes', it is odd that Johnson would suggest the state should requisition a windfall from a successful business - a strategy more akin to Lenin's Russia than to the modern United Kingdom. It is hard to imagine George Osbourne's next budget calling for a windfall on every Capita or Serco share sold, or any other company that makes money off deals with the state. So why West Ham?

Rather than being the good deal for West Ham, this is a great deal for the country - the one option that will ensure that the Olympics legacy is not tarnished by an unfilled, unloved stadium casting a shadow over both east London and the Treasury's books. So why are they trying to kill the golden goose with ridiculous demands?

Please note that the opinions expressed in this article are those of the author and do not necessarily represent the views of, nor should be attributed to, KUMB.com.

Your Comments

by Mark in Singapore
12:27PM 7th Dec 2012
''You make some good points, but governments both local and national are a law unto themselves. Ken Livingstone is probably the killjoy that scuppered the original plans. The main thing is we now have the stadium and we must make proper plans to use it and fill it - getting as many youngsters into claret and blue as possible.''

by g portugal
05:58PM 6th Dec 2012
''Agree. Boris is being an absolute moron about this and not doing his own overall credibility as a politician any good either.''

by chris
11:39AM 6th Dec 2012
''A very well written article, with very clear arguments.''

by John Sharp
09:02AM 6th Dec 2012
''Laurence. Thank you for this fine article. It summarises my own views very nicely. Boris is playing a dangerour game with the only viable proposal on the table. Without WHU as anchor tenant he will be looking at a white elephant in E15.''

by West Ham Fan no 32
12:22AM 6th Dec 2012
''Good article but I completely understand the point of view of the Government. They have learned a lot from giving away the City of Manchester Stadium.

Gold and Sullivan will redevelop the old stadium which should raise enough to wipe out our debt and it is very likely that foreign investors will buy the club at some point purely because of the age of our directors and also because they are businessmen. I hope they continue to own us because they have been good but most businessmen are successful because they take the deal at the right time and both have been on the record saying if the right foreign investor came in they would listen to them and welcome their interest.

I am more than happy for us to help repay some of the countries debt if a huge profit was realised on the sale of the club. I suspect Gold and Sullivan are both willing to do that deal the only question is what percentage do the governement want and whether or not it can be agreed. I hope we move in there Gold and Sullivan would make football affordable again for the local people which is something commendable, they mentioned somwhere, the Guardian perhaps or the BBC website today that the capacity could be up to 100,000 which is about 40,000 more than I understood it to be.

Lets hope a good deal can be agreed by all as soon as possible and we can move in at some point in the next three years. COYI! ''

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