Local Operators make State Aids challenge against Lews Castle Project Funding as Comhairle award private service contract to Natural Assets

Local Operators make State Aids challenge against Lews Castle Project Funding as Comhairle award private service contract to Natural Assets

Readers will be interested to know that on 8th August 2014, the Comhairle formally decided to appoint Natural Assets as the private operator for hospitality operations at Lews Castle, according to a posting made in the Supplement to the Journal of the European Union dated 20th August 2014. Natural Assets is a US headquartered company offering luxury assets, holiday homes and vacation rentals. The Lews Castle project is the largest development ever undertaken by the Comhairle, who have been looking for a commercial partner for a number of years. So why has there been no public announcement of this decision to the people of the Islands whose cash is part funding this project? Perhaps this decision is thought to be on a “Need to know basis?
Interestingly, no word of this newsworthy appointment appears on Natural Asset’s website either. Why the secrecy?

Whilst the museum and archive are very welcome additional facilities for locals and visitors alike, the Comhairle’s proposals for developing the project’s hospitality facilities have caused major concern amongst many existing hospitality operators whose businesses will be adversely affected by the displacement of trade to what would be a massively subsidised hotel and self-catering operation.

Over the past nine months,, a number of local hospitality operators, including Kenneth Mackenzie of Cala Hotels and Graham Maclellan of Hebridean Luxury Holidays, have raised concerns with both members and officers of the Comharle about its various failures to comply with applicable EU funding, state aid and public procurement rules. In addition, Ian Fordham, chair of the Outer Hebrides Tourist Association (OHTIA) has had numerous meetings and lengthy correspondence with the Comhairle, which can be seen on the OHTIA website.

The Comhairle commissioned two separate reports, an Economic Impact Assessment (by Steve Westbrook) and a Review of Existing Accommodation Stock (by TRC.) The OHTIA provided extensive comments and corrections on the Westbrook report, only some of which were adopted in the final version. The TRC report was promised to be carried out in “partnership with the “OHTIA” but instead the OHTIA was only given a copy of the final version after it was presented to council members. Serious factual errors, misrepresentations and other failures in both of these reports have been drawn to the attention of both members and officers of the Comhairle by the OHTIA. Sadly, rather than approaching the disputed issues in these reports with an open minded objectivity, the Comhairle are hiding behind them and using them to justify their ambitions for the Castle regardless of the consequences for existing hospitality operators, most of whom are small businesses who have no prospect of competing against a hugely subsidised international player. Most local authorities work very hard to generate a fair and open commercial environment that encourages the development of business. Sadly, in this instance, the Comhairle is working hard spending capital in its own self-interest, and in the process generating a highly subsidised operation with which no existing local business can compete.

The issues of the procurement impropriety and business displacement were discussed at a public meeting in the Council Chamber on 27th March 2014.
At that meeting Natural Assets’ Chief Financial Officer Anthony Wild and Chief Operating Officer, Ewan Kierney were asked when they first heard of the business opportunity at Lews Castle. Their response was that they first heard of it August 2012 during a casual business discussion at the offices of HIE Caithness, when they were advised that an invitation to tender for the project was to be posted on the public procurement portal in September 2012. In light of this discussion, Natural Assets pursued the opportunity when it appeared on the public procurement portal in September 2012.
Recent Freedom of Information requests to the Comhairle and Highlands and Islands Enterprise have revealed that Natural Assets response to the meeting was a gross misrepresentation of actual events. Perhaps these senior officers of Natural Assets would like to comment on why they chose to mislead those attending the meeting, some of whom were Council members? Perhaps those members and officers of the Comhairle who were in attendance at that meeting and who knew the truth of this matter would wish to explain why they did not seek to immediately clarify such an obviously misleading statement made by Natural Assets?
In a bid to address the serious business displacement issue, meeting chairman, Cllr. Roddie Mackay promised the Comhairle would hold a further meeting when the industry’s concerns would be fully discussed. This promise was never delivered by the Comhairle, despite numerous requests from OHTIA.

At a meeting of the Comhairle on 23rd April 2014, which was quite unusually held at Benbecula, after consideration of the Economic Impact Assessment and the Review of Accommodation Stock report, members of the Comhairle decided to grant the Chief Executive the authority to do the deal with Natural Assets, subject to a number of conditions. We have been advised by Steve Westbrook, the author of the Economic Impact Assessment, that prior to his report being presented to members at that meeting, the wording of his report was altered without his knowledge or approval, presumably by an officer of the Comhairle. The alteration gave the false impression that his report had taken account of OHTIA comments on the Review of Accommodation Stock report, when in fact, at that time, it had not even been passed to OHTIA for comment. Again, this was a gross misrepresentation of fact and a further serious misdirection of Comhairle members who did not have the opportunity of considering OHTIA input before making their decision. Officers at the Comhairle have been asked who effected this misdirection and for what purpose, but as yet no satisfactory response has been provided. Perhaps the Comhairle can, at last, shed some light on this matter?

Ian Fordham had a meeting with Comhairle Chief Executive Malcolm Burr only last week to further discuss the industry’s major reservations regarding the hospitality proposals for Lews Castle. Quite incredibly, Malcolm Burr made no mention that the contract award to Natural Assets had already been made over a month ago and had been publicly announced by the Comhairle weeks ago in the EU Journal Supplement. Why the secrecy?

In light of the Comhairle’s decision to ignore ongoing discussion with the industry and to secretly progress their plans for the Castle, Cala Hotels and Hebridean Luxury Holidays have both decided to bring the various failures of the Comhairle to comply with applicable EU funding, state aid and public procurement rules to the attention of the European Commission and Audit Scotland. We would be happy to hear from any other hospitality operators who are concerned about suffering a loss of trade as a consequence of the Comhairle’s plans and who wish to join us in making our state aids challenge. Making the challenge is a simple process. To find out more about it, or to become a part of our challenge, simply email us at complaints@itsourcastle.co.uk for an information update. You can find out more about the Lews Castle proposals and keep up to date with the comment upon them on the website www.itsourcastle.co.uk


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