Eastbourne council told to sell assets and be less reliant on tourism and leisure income

Eastbourne Borough Council needs to address a “structural dependency on tourism”, an external financial review has found. 
Eastbourne Bandstand. The town's tourism and hospitality industry has been hit by the pandemicEastbourne Bandstand. The town's tourism and hospitality industry has been hit by the pandemic
Eastbourne Bandstand. The town's tourism and hospitality industry has been hit by the pandemic

On Wednesday (December 8), the government published an external assurance report on the council’s finances carried out by the Chartered Institute of Public Finance Accountants (CIPFA). 

The external review was a condition of the government agreeing that the council could undergo ‘capitalisation’ (i.e to borrow money or use capital funds) to plug a significant hole in its finances as a result of the coronavirus pandemic.

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According to the report, the council lost around £2m of tourism-related income as a result of the pandemic, while also facing additional demand in homelessness amounting to £1m. 

As a result, the report said, the council required the use of £4.6m capitalisation in 2020/21 and at least £4.4m this year.

However, it also concluded the council’s financial recovery plans were ‘heavily dependent’ on a recovery in tourism income.

The report reads: “Between 2014/15 and 2019/20 the Council declared “savings” of over £26.9m. It needs to be clearly stated, however, that this included income generation from tourism and leisure activities of £11m. 

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“The MTFS [Medium Term Financial Strategy] shows a similar approach in 2021/22 with 47 per cent (£1.1m) of the £2.481m identified savings being covered by anticipated recovery in income. 

“The MTFS indicates that the council will still be heavily dependent on tourism in future years, accounting for approximately 50 per cent of income generated per year. Eastbourne will, however, need to make a shift away from its historic reliance on tourism and leisure income to balance its budget. 

“Moreover, Eastbourne will need to move to a more sustainable approach to its financial position overall which should prioritise a more controlled capital programme, responsible asset disposal, and replenishing its depleted reserves.”

The report goes on to note the council’s Recovery and Reset programme — which includes some significant savings — but says will not be sufficient to eliminate the structural dependency on tourism on its own.

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Even with savings and support, the report says the council needed at least £9m in total over 2020/21 and 2021/22.

It also concluded that the council needs to replenish its ‘insufficient’ reserves and generate additional income, including through the sale of its assets which could amount to around £40m over three years. 

While the report set out some stark findings, it did note there was a “strong officer understanding, leadership and grip of the issues” as well as a “relatively early” identification of the financial threat.

Even so, the report says there is a need to improve governance and decision-making to give more support the council’s lead financial officer and that completing a proposed restructure of the finance department would add strength to this.

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It also called on senior councillors and officers to ensure that all members of the council were aware of the ‘seriousness’ of the authority’s financial position and that additional savings may be necessary in future.

The report also said council-owned companies should be kept under review to see whether divestment would be beneficial.

In a statement released after publication of the report, Liberal Democrat council leader David Tutt said: “Covid devastated the council’s multi-million pound leisure business and the shockwaves are still being felt.

“However, we always put our most vulnerable residents first and regardless of the loss of millions in ticket sales, bookings and other merchandising, we had to continue to maintain emergency support, a responsibility that represented a lifeline to so many people.

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“Of course, committing extra resources to helping those most in need came with a cost and coupled with our income streams drying up, we had to take a series of very tough and painful decisions to maintain our frontline services.

“Thanks in large part to our early intervention we navigated a way through this unprecedented period in recent history and are now getting back on course to a sustainable financial footing.  It has sadly not been the case for several other councils, some of which are now run by government appointees.”

However, different view was taken by Cllr Robert Smart, leader of the Conservative opposition, who argued the report vindicated his group’s criticisms of the council’s financial management.

Cllr Smart said: “This is the financial shambles we have been raising over the past several years. It has finally caught up with this inept Lib Dem administration, and have now been brought into the harsh glare of public scrutiny.

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“It will be a busy Christmas for Cllr Tutt and his colleagues since the Minister has demanded to receive within one month, in writing, the steps being taken to respond to this calamity.

“We the opposition councillors feel vindicated in what we have been saying over the years and at last the truth from an independent body will be telling the public the true state of Eastbournes’ finances.”

In response, Cllr Tutt said: “The facts are the finances were very good up until the income taps were turned off as a result of Covid. “

He added: “It was a conscious strategic decision we took to run the reserves down in order to support the Devonshire Quarter Development, which would by now be repaying a lot of that had it not been for the lockdown. 

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“We had literally just opened the conference facilities. We had conferences booked, we had a fantastic line up of theatre shows and that all had to be cancelled. But that will ultimately return good value for the council and without those facilities a lot of businesses will suffer.

“We still had reserves and the reserves we had were still within the Audit Commission’s recommendations. We didn’t go below those.

“Many authorities bounce along around the bottom of the Audit Commission’s recommendations for minimum reserves, but our medium term strategy was always and remains to rebuild them.”