They may still make the pre-condition that we seek to avoid, but it is less likely than if they had had a prior detailed meeting on the topic and divined that agreement between the FCO and BC could still be some way off. If they do not make a pre-condition, well and good. If they do, then we should have to escalate the FCO/BC debate promptly.
4.
I wonder whether you would consider this revised approach with others concerned?
5.
On the substance of the MTO debate, we believe that the BC's current argument is essentially opportunistic. The principles of the FCO case, it seems to us,
are:
BC agreed to co-location well before they glimpsed the possibility that it might be rent-free.
BC first asked for 30 classrooms, then came down to 25: at present they have 20. So they are planning on
success.
Rent would be based on the Treasury formula for economic return on capital expended, i.e. 6% TDR indexed to UK inflation. Since the site came cost free, the rent FCO charge would be less than BC could obtain elsewhere for acceptable accommodation.
Because of the increase in size of BC accommodation, and of the associated risk of not initially using it fully, there is scope for exploring a formula that would reach the economic rent in stages over the first few years.
BC have agreed to meet their running costs in the new building.
6. The gap between the FCO and BC positions is not too wide, and we ought to be able to agree an MTO without excessive difficulty that would just satisfy Treasury. But OED suggests that we should postpone further debate on this with BC (and CRD) until we have Mr Smith's full draft to hand (we are aiming for this to be within the next 10 days).
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Mr Smith, OED