Letter from the government to the BCP Council regarding financial support
Thank you for our meeting today.
As discussed I am writing to you regarding Bournemouth, Christchurch and Poole (BCP) council’s proposal to sell beach huts to a wholly owned company and use the proceeds to fund revenue costs as part of the management flexible use of capital receipts (management) and how we will move your capitalization request forward.
My predecessor wrote to you on June 16 regarding this proposal. This letter stated that the Council’s proposal was not consistent with the intended use of the Instruction and that the Government would review both the Instruction and the accompanying Directives to make the necessary changes to make this explicit.
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As a result of this correspondence, and as I explained in our appeal, we will be posting an updated guideline and associated guidelines shortly. We made this change to ensure flexibility is only available when boards have capital inflows from a true asset disposition. The proposal the Council was considering for its beach huts does not comply with the amended directive, and any future proposal of a similar nature should be carefully considered.
My staff have discussed with your staff this issue and the implications that failure to act on your proposals will have on the Council’s budget for 2022/23 and beyond. In this context, on July 15, your Chief Executive Officer wrote and indicated that the Board wished to request a capitalization instruction. Your officers have indicated that the Council will need support totaling £75.9million over the next three years.
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The government examines all requests for assistance from a local authority as part of the exceptional financial assistance procedure. This allows us to assess the need for support against a set of agreed principles, including value for money, in line with the approach taken with other councils. As you know, the use of capital receipts or borrowings for revenue purposes is not consistent with normal local government accounting practices. In view of this, the government only accepts it in exceptional circumstances where it is clear that a council cannot use any other reasonable means to manage its financial pressures. Any decision to provide exceptional financial support must have the agreement of Ministers here and Her Majesty’s Treasury.
As part of the Exceptional Financial Support process, the government can attach conditions to any support provided – for example, that a council undergo an external assurance review of its finances. In certain circumstances, the governance arrangements of a board may also be subject to such a review. This is an important part of the process and helps to ensure that a board seeking exceptional support has a plan for financial sustainability and that policies and procedures are in place for taking strong decision-making and accountability. In addition, and as discussed, the focus will be on the amount and nature of support the Council needs to maintain a balanced budget for the current year. As you will understand, we will probably have to examine the detail of the requests for the coming years after the financial settlement of the local authorities.
I know that my officials have already discussed this process with your officers, and that there is very positive work underway to ensure that we better understand the Council’s financial situation and its transformation ambitions, and to move forward your request quickly. This is a detailed process, and we will need to continue to work with the Council over the coming months. I look forward to working closely with you to help move these discussions forward in a meaningful way.
I hope this letter clarifies the position and next steps in considering BCP’s request for additional support.
PAUL SCULLY MP