How a row over beach huts led BCP to seek £76m bailout loan
Just three years after it was set up as a new unitary unit, the cost spiral of Bournemouth, Christchurch & Poole Council’s transformation program has left it looking for £76m capitalization direction. LGC investigation
The historic beach huts that litter the Dorset coast have turned into a site of contention for residents of Bournemouth, Christchurch & Poole Council (BCP) in recent months.
A plan drawn up in February by the BCP administration would have seen the council set up a new company – or special purpose vehicle – to which it would sell around 3,065 of the council’s traditional beach huts. Residents could then rent or buy the huts from the company, rather than from the council as was the case previously.
The council hoped to use the funds raised from the sale to fill a gap in its transformation program budget. It was intended to do so within the framework of the rules relating to the flexible use of capital receipts. The firm was clear with residents and the whole of council the sum it expected to raise from the sale of the beach huts was £56million.
Concerns that this would lead to an increase in the cost of renting beach huts, and existing anxieties over the council’s plans for Bournemouth seafront have intensified among residents. A petition started by resident Daniel Parkin – which has garnered more than 1,000 signatures – called for plans to be put on hold to allow council full disclosure of all documents and “thorough” review by councilors and the public.
But last week, upgrade secretary Greg Clark put an end to the scheme by tightening the rules on using capital inflows to cover transformation costs. In a letter to all councils on Tuesday, it was clarified that this should “only come from disposals where the authority does not yet retain” direct or indirect control of the assets. In what appears to be a thinly veiled critique of BCP’s plans, Mr Clark warned councils against spending “valuable time and resources exploring new practices”.
According to the council, the beach huts proposal was backed by a KPMG report, which has since become the subject of a freedom of information battle between the council and residents. Mr Clark’s letter made it clear that ‘commercial businesses and companies encouraging councils to design programs that ultimately increase risk to local ratepayers should pay particular attention to this amended guidance’.
Mr Clark was resounding in his post, writing he would ‘not hesitate to act’ where the councils were found to be putting ‘local ratepayers at unacceptable risk’.
Under the new regulations, BCP can no longer go ahead with its beach hut plan and has instead sought a funding direction, worth £75.9 million over three years, from the Department levelling, housing and communities. That equates to more than a third of its £241m net revenue budget in 2021-22, when it ended the year with a £6.8m surplus.
In response to questions from LGC, BCP Chief Drew Mellor (Con) said: “Over the past few months, we have explored various ways to get the most out of the assets of the BCP board, including discussions with DLUHC. ” He said that “DLUHC’s June 16 correspondence clarified that our SPV proposal was compliant with the regulations at the time.”
“I think government should encourage and support local authorities to transform and that’s a point I’ve made positively now to a number of Secretaries of State,” Cllr Mellor said, “so as an alternative, we have submitted a request to DLUHC for a capitalization direction of £75.9m to fund our transformation project over a three year period”.
But how did the BCP find itself in the position of asking for a direction of capitalization? And what was the purpose of the beach cabin proposal?
Local government reorganization
The BCP came into existence on 1 April 2019 following the reorganization of local government in Dorset. The new board has established a transformation program, to give the board a steady start. This was initially expected to cost the council £36.4 million and involved investments in technology to increase digitalization of services and carbon neutrality for BCP’s operations and business by 2030, among other things.
The first elections to the new authority saw the Alliance for Unity take control of the council, led by Vikki Slade (Lib Dem). The coalition was made up of the Liberal Democrats, Labour, Christchurch Independents, Poole People, Greens, Alliance and other independents sitting on the council. As Cllr Slade told LGC, the council’s first administration planned to fund half of the program with funds from a “specific earmarked reserve” and the other half through the sale of “surplus assets”.
But in March 2020, the arrival of the pandemic slowed work on the program – and on the sale of surplus assets.
At the end of the year the council had a new administration after Cllr Slade lost a vote of no confidence in October 2020. The council became conservative led with Cllr Mellor at the helm.
The plan to create a special-purpose vehicle to facilitate the sale of beach huts was first unveiled during a budget meeting in February 2022. But alongside the proposal, several measures suggest the increasing cost of the program board transformation.
According to the report, the board planned to capitalize £6.7m a year in staff costs over three years of the transformation programme. In the report, the council said this was intended to cover the cost of staff “working on the program who are therefore not available on a day-to-day basis for statutory improvement duties”. Adding a further £20.1m of expenditure, this brought the total cost of the program from £36.4m to £56.5m.
The council’s budget report also reveals plans for the ‘unwinding’ of the transformation reserve, valued at £12.2million. It is unclear what the council intended to spend this on, but the budget report states that replacement for these funds was to come from “unapplied capital revenue subject to delivery of the beach huts proposal”.
Added to this is the council’s commitment to freeze the housing tax. The BCP only raised the precept of social protection this year and maintained the housing tax at its current level. According to Cllr Mellor, this reflects the current administration’s belief in a “low-tax, small-state approach”.
Cllr Slade says the move cost the council vital funds that would have covered much of the cost of the transformation programme. “The council tax should have gone up,” she told LGC.
Mr Parkin of the Save the Beach huts campaign said LGC residents would rather see council tax rise than the council sell the beach huts. He claimed when asked ‘do you want to keep the beach huts as they are or pay an extra £10 a month in council tax’ most residents expressed a willingness to pay the tax additional housing.
Cllr Mellor told LGC he had asked the council’s chief financial officer to “introduce [BCP’s] quarterly financial update on the board’s financial position as of September 7”.
He said the decision was made so that BCP “can be transparent about how we expect these changes to positively affect our financial situation.”
“We have the ambition to become one of the most efficient local authorities in the country and have already achieved around £50m a year in recurring savings since the formation of the BCP council in 2019,” said Cllr Mellor.
“We now have a plan to save an additional £50m a year in recurring savings through our transformation program and we want to do this while delivering more assets to future generations that we have inherited and providing stability. financial long-term,” he said. added.