Budget bickering as Eastbourne council looks to balance books
What do the town’s former law courts, a pub, a retail park and a listed pumphouse which supplied water to the town in the 1800s all have in common?
The answer is that they have all in recent years been bought up by Eastbourne Borough Council as investments to generate much-needed cash for the authority’s coffers.
The purchases were made as the council was able to borrow money at preferential interest rates over a long period of time.
Hence the authority bought Hampden Retail Park in Lottbridge Drove, the Buccaneer Pub, Bedfordwell Road Pumphouse, a stretch of Victoria Mansions in Terminus Road and the Law Courts in Old Orchard Road to name just a few investments.
Its current borrowing stands at more than £250 million but the authority says it was necessary to invest so it could start getting an income from the sites and plug a hole in its finances, which were hit by a lack of government funding long before the coronavirus struck.
The law courts have now been demolished to make way for housing, Bedfordwell Road has planning permission for more than 90 new homes, the shops and flats in Victoria Mansions have been given a multi-million pound refurbishment, the Buccaneer is now the successful Stage Door pub and work is to begin soon at Hampden Retail Park with Costa Coffee planning to open a drive-thru.
But the council’s level of borrowing has once again come under the spotlight and its finances scrutinised after an obviously difficult year due to the Covid-19 pandemic.
The council says as a result of coronavirus, its income has taken a 60 per cent hit in the last year and added to that it is facing a £6.8million deficit this year and £6million the following year.
Officials also say they had to spend vast amounts of money dealing with the virus and protecting its most vulnerable residents and despite ‘a promise’ from the government to reimburse, the costs haven’t been covered.
When Covid-19 reached the UK last March, the council rolled out an impressive community hub from the new Welcome Building next to the Congress Theatre delivering food parcels to those in need for several weeks as some shops remained closed and a large elderly population was warned to shield and stay at home to protect themselves.
But Conservative opponents on the council say the authority was already in the financial doldrums long before the pandemic and the loss of net tourism income has been almost fully recompensed by the government in furlough payments, grants and other funding.
Looking at the bigger picture, Eastbourne council isn’t alone as local authorities across the country struggle with balancing their books due to a loss of income and no government funding.
Last month the council – along with other local authorities – was told that despite pleading exceptional financial circumstances it would not be given government money as it had requested.
Instead it was offered a financial bailout by way of borrowing money from the Public Works Loan Board in line with public sector rates – not lower preferential rates – on the condition it looked to sell some of its assets within a specified period of time.
The news came as the council announced its budget.
The council’s Liberal Democrat portfolio holder for finance Stephen Holt, who is also the deputy leader of the authority, said, “The pandemic has hit the council’s income, created increased demand for our services and led to more hardship across the borough requiring a rapid expansion of support for jobs and the economy.
“At the start of the pandemic, we recognised the challenges it would have on the council.
“Eastbourne Borough Council derives around 60 per cent of income from tourism, and we experienced a massive decline in this – including £6 million worth of revenue from the forced closures of our theatres and conference venue.
“As a result of Covid-19 we faced the appalling loss of 60 per cent of our income – almost overnight.
“This would be unsustainable for any council.
“In addition, there were substantial additional costs to the council as we pro-actively responded to the impact of Covid-19 on our town.
“We recognised that early intervention was important and have already made savings of £4.8 million this year.
“We also approached the government in the summer when they asked for councils with exceptional financial circumstances to contact them.
“We were not alone in asking for additional support, and we suspect that others will likely follow.
“The government said that it would cover the cost of Covid-19 to councils. That has not happened.
“With the costs of the pandemic to the national government expected to be in the region of £394 billion – the government is also having to take out loans, consider its spending plans and, I am sure, make cuts.
“With significantly-reduced tourism revenues and higher demand led expenditure, our budget announcement is part of this commitment and a recognition that our financial challenge due to a loss of income was unavoidable as a result of Covid-19 lockdowns.
“The package means we are simply allowed to borrow to cover the lost income and increased Covid-19 costs – not dissimilar to what the government is doing itself to pay for the costs of coronavirus nationally.
“The support package announced is offered after a rigorous assessment of the council’s governance and recovery programme.
“It is a strong vote of confidence in the ability of our town’s economy to recover, and in the ability of Eastbourne Borough Council to guide that strong recovery. Our focus is to do just that.”
Mr Holt said the council’s budget is ‘laying the basis for managing uncertainties within the capitalisation limits set, as well as maintaining our investment in new homes for local families, such as at Victoria Mansions and Bedfordwell Road’.
He said, “In doing so, as well as addressing our housing needs, we are also contributing towards the creation of job and opportunities for residents and Eastbourne’s business community.
“As we come out of the pandemic we will seek new tourism opportunities, investing in items like the world’s busiest bandstand and seafront lighting to ensure that Eastbourne remains a safe, attractive place to visit, live, work and play in.”
The deputy leader said the authority was making significant progress in identifying savings and efficiencies while helping restart the local economy.
“While tough decisions will need to be made, I will always ensure that the needs of our residents come first,” said Mr Holt.
However, the opposition Conservative group leader on Eastbourne council Robert Smart has accused the Lib Dem administration of misleading the public.
He said, “The Lib Dems say ‘the government has not given us not a single penny towards the loss of income’ is an outrageous distortion of the facts, that I criticised at the recent budget meeting.
“Was Councillor Tutt not aware of the £3m plus Income Recovery Grant provided by government, which was in addition to furlough payments and the £1.8m Covid Grant – and tens of millions disbursed to residents and businesses?
“Or was he intentionally distorting the reasons for the additional request for a government bailout of £12.8m?
“The fact is that this Lib Dem administration has created this unsustainable financial position which existed before Covid.
“Bailouts of £6.8m this year and £6m next year are huge in comparison to annual net service expenditure of around £13.5m. They are not justified by any shortfall in recovery for Covid from government.
“The long overdue audited accounts for the last two financial years when eventually published will no doubt show that Eastbourne Borough Council has been teetering on the brink for some time.
“Other local Conservative-run councils such as East Sussex County Council have healthy reserves on which to draw.
“A year ago – before Covid – the council put forward a hopelessly unrealistic budget for this year and so it has proved: a total of £6.5m of projected savings and income improvements on net service expenditure of £13.5m was never credible.
“The government has offered a lifeline of up to £12.8m of loans conditional upon an external assurance review. With borrowings projected to exceed £200m future generations of Eastbourne residents will carry the burden.
“Asset sales will need to take place, fortunately not including the previous misguided proposal by this Lib Dem administration to sell the Downland Farms which we and others helped to stop.
“Eastbourne council needs a root and branch review of its finances and financial processes. Denial and distortion of the facts will not help.”
Council leader David Tutt hit back at critics of how his administration has managed the public finances.
He said, “It is extremely disappointing that our Conservative opposition has used this important budget to play party politics.
“Our capitalisation loan from the government has been offered following considerable scrutiny and analysis by Whitehall appointed assessors and has been offered on the same basis as has been made to Conservative councils which, like Eastbourne, have experienced an unavoidable loss of income due to Covid. Until now I have been proud of the way that all local politicians have put party politics aside and concentrated on doing what needs to be done to support and protect our local community during this pandemic.
“I hope that now the budget meeting is over everyone will return to that way of working.
“Eastbourne has suffered from successive budget cuts in government funding from a position in 2010 where we received a grant of approximately £9m, until now, where there is no recurring revenue support grant.
“We know that there are still some councils who are continuing with their discussions as their requests were submitted later.
“We also know that so far, capitalisation for six councils have been agreed, with four so far accepting the conditions.
“We agree with others and suspect we are the tip of the iceberg with more to follow.
“The opposition should stop playing party politics with our recovery.”
As the road to recovery begins and lockdown restrictions look set to ease in the coming weeks, quite what assets the council will look to sell to repay the £6.8million loan – and the further £6m the following year – remains to be seen.
The last word goes to Stephen Holt, the councillor responsible for the public purse.
He said, “I can’t yet say what exactly will be capitalised as officers need to ensure that best value is maintained for the authority.
“But I can say we are keen to pay back the loan as soon as possible – and ensure that Eastbourne residents continue to receive value for money.”