A controversial plan to close most public toilets and the heritage service is part of the council’s attempts to balance the books: if a local authority’s spending exceeds its income, it must effectively declare itself bankrupt and only run essential services. We look at Eastbourne’s financial position to find out how the council reached this state and what different councillors say is the root cause.
By Rebecca Maer
Eastbourne Borough Council meetings, in a large, high-ceilinged room in the Victorian town hall, are generally sedate affairs.
Elected councillors politely listen to each other and to the paid officers. Occasionally a member of the public will read out a three-minute statement about an agenda item.
But recent meetings have been packed with irate residents, fuming at plans to shut most of the town’s public toilets and the closure of the Beachy Head Story heritage centre at short notice.
One guest house owner apologised for her anger but made clear to councillors how appalled she was by the idea that public loos could shut.
The council must balance the books against a long-term backdrop of reduced funding, rising homelessness costs and debt levels.
That means axing many non-essential services to leave statutory ones such as housing and bin collection.
A Cabinet meeting last month confirmed a series of cuts, including a £100,000 reduction in grant funding for the Towner gallery, the immediate closure of the Beachy Head Story (above) and reductions in events and seafront spending.
The council must also address the issue of its spiralling debt, part of which arose from the cost of the redevelopment of the Devonshire Quarter (DQ) conference and tourism facilities.
Why does Eastbourne need to cut services?
The housing crisis has led to large numbers of people in temporary accommodation, which must be provided by local authorities such as Eastbourne Borough Council (EBC).
The Liberal Democrat-controlled council must save £2.7m in the current financial year, having already cut more than £3m from the 2024/2025 budget. This is partly due to the spiralling costs of temporary accommodation.
Council leader Stephen Holt (above) has long argued that warnings about homelessness were ignored by the last Conservative government and has said “the result of their inaction are these deeply regrettable cuts”.
But the cash-strapped council has also amassed total debts of £194 million: the long-term Treasury debt is £111 million. And short-term debt from borrowing from other local authorities is £83 million as of 30 June and as noted in the treasury management report put before last month’s EBC audit committee.
The total debt has increased by £14 million just in the first six months of this year, it is noted in the treasury report.
EBC spent around £54 million on redeveloping the DQ area (above) with conference centre and cafe, which opened in 2019, and refurbishing the Congress Theatre.
It has also been running the theatres and was running a pub (The Stage Door) and a golf course (Eastbourne Downs Golf Club) until they were taken over by external operators. It is now also looking for operators for the Congress and Devonshire Park Theatres.
How much is down to Covid?
Eastbourne was badly affected by the Covid pandemic due to its reliance on tourism and the conference business, coupled with a lack of reserves to cover income loss.
In 2021, a report by the Chartered Institute of Public Finance and Accounting (Cipfa) stated: “The council needs to rely less on tourism income in the future and radically overhaul its approach to savings to ensure that efficiencies are derived from real change and not substituted from leisure-related income.”
Cipfa noted that, before the pandemic, the council used reserves and borrowing for an ambitious capital programme, assuming reserves would be topped up through increased income from the venues it was developing.
“However, when the pandemic struck the council’s reserves were not sufficiently robust to sustain (the) subsequent loss of income,” it said.
The report stated: “The council acknowledge that they have taken risks in the past to position Eastbourne as a premier tourist destination. It now accepts that this approach left the council very vulnerable when Covid hit.”
Minutes of a council meeting from 9 December 2015 note that two Conservative councillors at the time – Gordon Jenkins and Tony Freebody – supported the DQ project but asked about the impact on total debt.
At a council meeting in March 2018, the current Conservative group leader Robert Smart expressed concern about the rising costs.
How much debt does Eastbourne have?
The long-term debt figure in Eastbourne has risen steadily over the past few years: in 2016, it was £46 million and it now stands at £111 million, according to figures on the balance sheet in EBC’s statement of accounts available for every year here.
Between 2017 and 2019, the long-term borrowing nearly doubled from £55 million to £97 million. The redevelopment of the Devonshire Quarter was finished in 2019, just months before the Covid lockdown, at a cost of around £54 million.
The council anticipates that its debt management will cost the authority more than £6 million this year alone, which compares with a council tax income of £9.9 million.
Councils cannot borrow money for day-to-day spending, such as bin collections. They can only use borrowing to plug deficits and make capital investments.
The main source of long-term borrowing from councils is from the Public Works Loans Board (PWLB), a national government body which lends Treasury money.
However, the amount English town halls lend each other in the short term has nearly trebled since 2013. The table below shows how much EBC has currently borrowed from other councils as listed in its treasury report.
Conservative group leader Robert Smart has told the Eastbourne Reporter that his concern is this is short-term borrowing. “It has no repayment plan other than being continually rolled over at current interest rates,” he said.
How does Eastbourne’s debt compare with other councils?
Eastbourne is in the top 25% of PWLB borrowing levels in England within its category of local authority. This is as a ‘shire district’ council outside of cities.
The following figures have been taken from the Government’s live tables on local authority finance here.
In a list of the shire districts here, it is in position 37 of 164. This information was extracted from this spreadsheet.
Hastings, with a slightly smaller population of around 92,000, is at position 65 with accumulated long-term borrowings of £64.4 million, around half that of Eastbourne.
Funding for local government has fallen steadily over the past decade or so, which has led councils to look for new ways of generating income.
Some have ventured into the property market and commercial investments, a risky approach which has resulted in effective bankruptcy.
Woking in Surrey, for example, tops the list with £2 billion of long-term debt, the highest in the country, amassed from a regeneration scheme.
And Spelthorne, also in Surrey, has £1 billion of debt from property investments.
Woking issued a Section 114 notice in June 2023. This notice means that a council cannot make any new spending commitments, and the Government may intervene in how they are run. A council cannot become ‘bankrupt’ in the same way an individual or business can.
The Institute for Local Government said here central government grants were cut by 40% in real terms between 2009/10 and 2019/20, from £46.5bn to £28.0bn (at 2023/24 prices).
This downward trend was partially reversed between 2020 and 2022 in response to the pressures of the pandemic.
But increases in council funding over the last parliament have not reversed big cuts made during the 2010s, with spending on many services still down 40%, according to the Institute for Fiscal Studies.
What do the Lib Dems say?
Eastbourne Borough Council has been at the forefront of a year-long campaign, with hundreds of other councils joining the call for government intervention in the homelessness crisis.
The Liberal Democrats blame the previous Conservative government for failing to fund temporary accommodation properly.
Coun Holt helped organise a summit on homelessness and temporary accommodation at Westminster in January to lobby government for more help. It was attended by 158 councils comprising a cross-party group of their leaders.
He stated last month in a press release: “I’m calling for an immediate uplift in the housing benefit subsidy we receive each time someone is placed in temporary accommodation, which remains frozen at 2011 rates, an end to no fault evictions and an end to the right to buy policy.
“These changes wouldn’t remove the need for immediate savings, but they would improve the outlook for councils and the social housing sector more widely.”
Coun Holt said at the council’s Cabinet meeting last month (above): “We have made our position very clear in terms of the costs of temporary accommodation and the challenges that presents to our councils and others up and down the country.
“I absolutely accept it is very challenging. Officers work incredibly hard to set a balanced budget.”
We have approached Coun Holt for an interview.
David Tutt was Liberal Democrat leader of EBC from 2007 until last year, during the period of the DQ development. He told the Eastbourne Reporter that the town needed investment when the Lib Dems won control of the council from the Conservatives 17 years ago and he had no regrets.
“What would have happened without that? It would have been a downward spiral and visitors would not have come. Even now in Eastbourne, there is a high level of occupancy of retail space compared with other places,” he said.
He disputed the Cipfa findings, saying that the town has never had a history of having particularly high reserves.
And he added that the council was “very financially sound and stable” in terms of owning its own housing stock and many other assets such as the DQ, the seafront estate, downland farms and parks.
What do opposition Conservatives say?
The Conservatives reject the assertion by the Lib Dems that costs related to homelessness are the cause of financial strain.
They blame “imprudent financial decisions” by the Lib Dems, which they say has left the council with limited options.
They acknowledge that the costs of homelessness are significant but say other councils have faced far larger pressures without resorting to such extensive service cuts.
The Conservatives argue that Eastbourne’s financial predicament is primarily due to years of unsustainable borrowing and questionable investing decisions.
Coun Smart (above) said in a press release last month: “We have been warning of the council’s financial mismanagement for many years now. This Lib Dem administration did not listen and has persisted with their strategy of further borrowing in an attempt to make up for their prior investing mistakes.”
Opposition finance lead Coun David Small stated in the same release: “Why was it ever agreed to borrow tens of millions on projects such as the Welcome Building which has lost money ever since opening?
“Or the decisions to buy up pubs and a golf course that, after losing eye-watering sums on, we now admit we don’t possess the knowledge to run successfully.”
Coun Small (above) told the Eastbourne Reporter that that he believed there are many details in the council’s accounts and forecasting which should be scrutinised. Some, he says, account for the shortfall in the budget.
He points to emergency accommodation being budgeted for at just £1 million but is forecast in reality to be £3.4 million. “They knew emergency accommodation would not cost £1 million,” he added.
He said that bereavement services made a £927,000 profit – then a profit of £1.5 million was forecast for the following year without explanation. But the actual profit was £936,000, leaving a shortfall of £677,000 from the forecast.
Coun Small said the cost of services (below) was listed as £13.4 million in a revised budget; the actual cost was £16.5 million, an overspend of more than £3 million. The figures are contained in the Cabinet report pack here.
Coun Small said that the council in the past took the view that interest rates were low so they borrowed to spend on the Devonshire Quarter redevelopment: “Conferencing has been changed permanently so this will probably never make a profit.”
At the Cabinet meeting last month where the cuts to services were agreed, he addressed the Lib Dem members.
“We endlessly see press releases that the homelessness costs are the primary cause but, in reality, we all know it is debt costs. So many of these figures seem to bear no relation to reality and what things cost in previous years.
“We have overspent in almost every area, some of them by huge amounts.”
Coun Small told the Eastbourne Reporter: “I am very sceptical these savings will deliver what they say, so we could be looking at a Section 114 notice next year.”
If that were to happen, the council would not be allowed to make any new spending commitments beyond financing what it has to provide by law.
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