[A-List] UK corporate state: PPPs in disarray

[Keaney Michael]

Euro inquiry into £4bn GHA housing transfer
TOM GORDON
The Herald, 12 July 2002

THE European Commission has launched an investigation into the financing of
the £4bn Glasgow housing stock transfer, The Herald can reveal.

The inquiry, triggered by a complaint from Tommy Sheridan MSP, leader of the
Scottish Socialist party, is expected to last until at least September,
raising fears the project could now miss its November target date.

The Commission yesterday confirmed it formally requested information from
the UK government about the transfer and had this week received a
substantial number of documents in response.

It is now investigating whether the Scottish Executive's offer of a £300m
interest-free loan to the Glasgow Housing Association (GHA) constitutes
state aid and breaches EU competition law.

Announced by the executive in January, the loan is designed to ease cash
flow problems for the GHA after it takes over 82,000 council houses on
November 28.

The money is regarded as "critical" by the private banks, who must lend the
GHA a further £730m if it is to carry out its ambitious repair programme.

However, the executive did not check the legality of the loan with Brussels
in advance, and in May, Mr Sheridan asked the commission's competition
director to investigate if it amounted to state aid that distorted Europe's
housing and finance markets.

The government denies the loan is state aid, arguing the GHA does not engage
in commercial activity so there is "no distortion of competition".

The GHA last night said Mr Sheridan's complaint was "malicious nonsense".
But, Elizabeth Holt, head of the commission in Scotland said the
investigation was not an automatic response to a complaint, but was started
because the matter appeared to warrant deeper examination.

She said because it was one of several ongoing inquiries and the commission
effectively shut down in August, it was unlikely to be resolved until
"September at the earliest". As competition investigations are confidential,
she was unable to say more.

Mr Sheridan said: "The fact no one in the executive spotted this in advance
shows how incompetent and arrogant they have been."

Dr Robert Lane, senior lecturer in European Law at the University of
Edinburgh said: "For this one to get by the executive is either a very
serious lack of attention or they've thought it through and thought it was
not state aid."

A spokeswoman for the Scottish executive said: "Earlier this month, the
Department of Trade and Industry and the executive jointly made clear to the
commission their argument as to why the transfer of certain assets to the
Glasgow Housing Association does not constitute a state aid.

"We are still working towards a transfer by the end of the year."

Maria Fyfe, former Labour MP for Glasgow Maryhill and vice-chair of the GHA,
said: "This is malicious nonsense and will be proven to be so. Mr Sheridan
should accept the democratic decision of Glasgow's tenants."