Tories and Lib Dems clash over terms of government loan to cover council losses

Eastbourne councillors have clashed over the town’s finances, as they met to set their annual budget last night. 
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At a meeting on Wednesday (February 24), Eastbourne Borough Council agreed its annual budget for 2021/22, including a 1.99 per cent council tax rise which will see the average band D household pay £256.74 to the authority next year. 

However, the discussion largely centred around the fact that Eastbourne has been authorised by the government to borrow up to £12.8m over the next two years to plug a hole in its finances.

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Conservative councillors described the process as ‘bailout’ and insisted the council express its thanks to the government for the support, much to the chagrin of the Liberal Democrat administration.

Cabinet member for finance Steve Holt (Lib Dem) said: “This is not a bailout, it is a loan amounting to up to £12.8m and will be repaid by us Eastbourne Borough Council.

“I will resist the temptation to criticise the government for their decision to provide us with a loan rather than a grant. I will leave it for members and our residents to decide if this approach is consistent with the ‘doing what it takes’ commitment. 

“However, I would be remiss in my duties as financial portfolio holder if I did not express now to you all my concerns that the loan terms places yet further strains on our finances and inevitably Eastbourne residents. I do question if it offers best value for money for both sides.” 

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Cllr Holt went on say the council had found itself in a difficult position as it had lost around 60 per cent of its income as a result of restrictions arising from the coronavirus pandemic and that government grants (which he put at £1.8m) had not covered the authority’s £3.8m net costs arising from covid. 

He also insisted that the council’s finances had undergone extraordinary scrutiny in the past year, yet the government still had confidence in the authority’s ability to manage its own affairs. He pointed out that it had not been appointed a financial advisor, unlike other authorities receiving the same support.

Cllr Holt said: “This budget is laying the basis by managing the uncertainties within the capitalization limit. We will continue with our investments in new homes for our families and act to support our town as it emerges from covid-19.”

These arguments failed to sway Conservative councillors, however, who insisted the council’s troubles were at least partially due to its pre-covid finances.

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In making this argument, Conservative group leader Cllr Robert Smart pointed to the council’s lack of audited accounts and what his party described as insufficient reserves.

Cllr Smart said: “This administration is very good at proposing wholly unrealistic budgets but are not so good at reporting their lack of achievement. It moves rapidly on to future years without analysing the recent past.

“From my own investigations I have dug out adverse variants against the budget for 19/20 – that is last year which still hasn’t been audited – of over half a million pounds on waste and over £800,000 on tourism and enterprise.

“These are huge variances when compared to the proposed increase in council tax for next year of less than £100,000. 

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“We could have a very short debate it were only about council tax but there is a lack of financial control and monitoring based on past unrealistic budgets.”

Cllr Smart went on to say the council’s financial processes needed “a root and branch review” as it moves out of the pandemic. 

He also insisted that the loss of income as a result of covid (once its other impacts were taken into account) was not enough to explain the shortfall the council faces.

Cllr Smart added: “There is quite a lot of agreement between us, but if you start from a position that the council was not in a bad state before covid then you are misunderstanding the position.”

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Shortly before the meeting, the Conservative group put forward an amendment to the budget proposals. It called on the council to commit to meeting its statutory obligations and to “revise its budget as necessary when the requirements of the capitalization direction are known.”

It also called on the council to state it was “pleased to receive the offer of exceptional financial support from government.

Caroline Ansell, both the town’s MP and a Conservative councillor, said: “I’m sorry that one or two colleagues here haven’t been more positive about the support the government is now giving. I understand that there are some sensitivities about the language and the use of ‘bailout’. 

“But I would ask the question; had the government not stepped in what then? My understanding is bankruptcy.”

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She added: “I am worried there is denial in the mix here, because it is not true to say that all was well before the pandemic. Redundancies were planned and there was the prospect of that sale already mentioned.”

This amendment was not supported by Liberal Democrats, however.

Council leader David Tutt said: “It is good to actually see at least an amendment this year, because we haven’t seen one for many years from the Conservatives.

“But when you actually look at it, it isn’t actually an amendment to the budget is it? An amendment to the budget – and we do this at East Sussex [County Council] – either suggests you put money in or you take money out, or you move money around. 

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“There is nothing of that in this amendment. This tells us to thank the government for their generosity.

“I get what Cllr Ansell said and I thank her for lobbying on our behalf. I recognise some of the monies that have come for investment in some of the infrastructure projects in Eastbourne and I am grateful for that. 

“But as far as covid is concerned, this is not overly generous. They haven’t met all of the cost of covid and they’ve given us not a single penny towards the loss of income, which government said they would at the start of the first lockdown.”

Following further debate the budget was passed on a majority vote. The Conservative amendment was defeated.

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When combined with the rates of other authorities, the average band D household in Eastbourne will face a combined council tax bill of £2,113.12 next year.

Huw Oxburgh , Local Democracy Reporting Service