Croydon Council’s secret decision to borrow £145m to build its new headquarters has been referred to the Secretary of State for Local Government.

The authority was forced to go cap in hand to the Government for the money last week, after it emerged developer John Laing’s attempts to secure a loan would burden the partnership with an extra £94m debt, due to rising interest rates.

The Croydon Council Urban Regeneration Vehicle (CCURV), which was brokered behind closed doors, means John Laing is in line to receive 50 per cent of the profits from the scheme.

Croydon Central MP Andrew Pelling said he was astounded Croydon Council taxpayers were not being trusted with the details of the deal.

He said: “I have now raised this issue of lack of trust with the Secretary of State [for Local Government].

“Council taxpayers need to know what other multi-million pound risks are being taken on by the council on this project when they meet in secret.

“The opportunity should have been taken by the council to walk away from a contract in trouble.”

Croydon North MP Malcolm Wicks has asked the Secretary of State to investigate why Croydon had to borrow millions to prop up the development partnership.

The council has been unable to explain exactly what development partner John Laing is bringing to its £450m redevelopment of the town centre.

A spokesman for Croydon Council would only say John Laing “will be matching the value of our assets with their own equity”, would take on the “construction risk” of the council’s new headquarters and “share the development risks” on other projects in the scheme.

Croydon Council opposition leader Tony Newman has called for the Conservatives to scrap the scheme, which includes a new multi-million pound building to replace the council’s existing headquarters at Taberner House.

The council has claimed its current HQ needs replacing because of health and safety risks, but has been unable to say what those risks are.

Council Leader Mike Fisher said: “The bottom line is the council simply cannot afford to remain in Taberner House.

“It’s an obsolete, expensive and inefficient building on which routine maintenance is escalating.

“It was designed back in the 50s and it shows. No amount of patching up can make up for its inherent faults and age.”

Coun Newman said: “This is the most serious financial issue to engulf Croydon Council for a generation.

“It is clear both councillors and the public have been misled.

“Unprecedented sums of taxpayers’ money are proposed to be spent by the current Tory administration.

“I am today writing personally to the district auditor to ask they begin an investigation”.

Interest payments on the Government loan will begin when the first £30m is borrowed in 2010, with the rest of the loan spread over the following three years.

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