Revealed: Business centre scandal costs taxpayers £1m

Despite being full, the way the loans and grants were given to NWES to construct the building has caused controversy and is now being investigated. Picture: Matthew Usher. (Image: © ARCHANT NORFOLK 2016)

But the true cost to the public purse of paying for the King's Lynn Innovation Centre (KLIC) off the A47 is more than triple that.

In total almost £5m of public cash was given to a group called Norfolk and Waveney Enterprise Services (NWES) to build the business hub.

But the building is only worth £1.87m, according to valuation produced by King's Lynn and West Norfolk Council by Savills.

Between 2012 and 2016 the council gave NWES £2.75m in loans for the building.

NWES failed to pay £2.75m of loans back to King's Lynn Council last year, leaving the council with a building worth £1m less than the loan amount. Picture: Matthew Usher (Image: © ARCHANT NORFOLK 2016)

It handed over another £2.1m in grants, funded by it and public money from the New Anglia Local Enterprise Partnership.

But NWES failed to pay back any of the £2.75m loan when it was due last year as it hit financial problems.

The building is now being transferred to the council but it is worth £1m less than the loan amount, meaning the council is negotiating with NWES over the £1m difference.

That cash is likely to be paid back over a number of years, a report going before the council's cabinet next week says.

An investigation earlier this year found the council carried out no checks on NWES.

It also discovered legal agreements between the council and NWES were "inappropriate", heavily favoured NWES and were not signed by the council.

Council staff, meanwhile, raised concerns that NWES used a company of one of its directors to manage the project.

John Balch was a strategic director of NWES while also the managing director and shareholder of Nautilus Associates, the project managers.

And when some of the council money was approved, the council leader, Nick Daubney, was a director of NWES.

Mr Daubney declared his interest and left meetings where the KLIC was discussed.

Despite the problems, the council said the building was a "remarkable success story" which was fully occupied and would provide a six figure financial return.

The problems have also meant the council has missed a legal deadline to publish its accounts.

An investigation is now going to be carried out by an outside body costing up to £40,000.

That investigation will focus on "the award of and administration of the KLIC project and all aspects of their financial relationship" with the council.

It will also look at any conflicts of interest and due diligence done by the council before awarding the loans.