Eastbourne Borough Council faces ‘tough decisions’ to balance its books

At a cabinet meeting on Wednesday (December 2), council leaders heard how the council is waiting on further information about what form government support will take: providing direct finance to cover the full costs of Covid-19; relaxing rules around borrowing and sale of assets to allow the council to meet some the costs itself; or a combination of both approaches. 

The government’s decision is expected to come in early January, but councillors were warned that if the measures do not come forward as expected the council will have to consider issuing a s.114 notice – essentially a declaration of bankruptcy.

Cllr Steve Holt, the council’s lead member for finances, said: “This isn’t just about money and budgets, this is about the impact on the local community, people, businesses and the town’s economy. 

“Of course I know everybody here will do whatever it takes. Our intentions have been clear from the outset and again I want to truly thank the Ministry [of Housing and Local Government] and others for their support. 

“However we are now reaching a critical time, when in order to plan we need to know what happens next and we need assurances that this year’s and next year’s financial shortfalls can be taken care of, in ways we have perhaps recommended to the government.

“I know I speak for all of us as councillors when I say that nobody wants a s.114 notice and we need to be careful. 

“Do we want to make the situation worse by issuing a 114 or do we want to continue working in partnership as we have done so far to help our community and continue to provide value for money our residents and indeed our council taxpayers?”

Cllr Holt argued the town had been hit particularly hard due to its tourism-based economy, pointing out that 30 per cent of the council’s expenditure is funded through tourism and culture alone.

He said some ‘tough decisions’ would need to be made and called for cross-party support on the recovery work.

This invitation was taken up by Conservative group leader Robert Smart, although he described the council’s pre-Covid finances as “vulnerable” and called for improved financial processes in future.

Cllr Smart said: “I am as sad as anyone about the impact of Covid and the impact on tourism in Eastbourne in particular. The tragic inactivity of our tourism and entertainment venues.

“I agree with all that has been said on that front and will work with you guys to actually try and help that position. 

“But don’t brush the past financial situation under the carpet. I am, like you David [Tutt], an optimist for 2021 and I think we can, hopefully, start to plan post-easter for quite a recovery.”

Cllr Smart said he had particular concerns about the levels of the council’s reserves and criticised the council for not making clear the level of financial support given by the government already, particularly the furlough payments and income recovery grant.

He also criticised the council’s financial transparency and argued that some of the council’s projected deficit – around £2.2m – was present before the effects of Covid began to be felt in the UK.

Council leader David Tutt disputed much of this criticism, however, in particular arguing the drawing down of reserves had been due to investment in the town.

Cllr Tutt said: “We took a conscious decision to reduce them in order to invest in the town and the town’s future, which would deliver benefits not just for ourselves but for our community around the Devonshire Park facilities. 

“That would, by now, be paying back some of our investment had it not been for the lockdown and the Covid situation. That happened at the worse possible time, but then you can’t predict these things in advance.

“But it is our intention to rebuild those reserves to a higher level as we go forward.”

Cllr Tutt also took issue with Cllr Smart’s comments on the level of financial support from the government. 

He said: “Whilst I would acknowledge the government has done much to repay the direct cost of our expenditure on covid, what it hasn’t done  – and it promised to do back in March – was to pay for our loss of income.

“That is this big figure Robert, we have lost income as a result of Covid because institutions such as our theatres have had to close.

“While the government has given money to private theatres, our facilities have not been able to benefit from that.”

To balance its books, the council is expected to need to treat its revenue costs as capital costs – a process known as capitalisation, which requires permission from the government.  

Currently the council does not have enough capital receipts to cover its deficit, but officers  say work is underway to find more. Typically a council receives capital receipts through the sale of shares and fixed assets or through borrowing.