According to the Bournemouth Beach Huts Association, there are some 20,000 private beach huts in the UK and, despite their limited size and lack of home facilities, they have become icons of the British seaside resort.
Many beach huts were former fishermen’s huts, boatsheds or converted Georgian or Victorian bathing machines, which looked like beach huts on wheels. Some of the earliest purpose-built municipal beach huts in the UK were erected on either side of Bournemouth Pier in 1909. These beach ‘bungalows’ were designed and built by Frederick Percy Dolamore, the town’s chief assistant borough engineer and surveyor. Displayed on beach bungalow 2359 (which is a fair size: seven feet by seven), is a plaque celebrating Bournemouth as the home of the beach hut.
Beach huts in the Bournemouth, Christchurch and Poole (BCP) area are as popular as ever, with waiting lists for all areas and many fully booked during the summer season. Even though they are loved by all, it seems the Conservative council leadership team want to sell them: and to sell them to themselves.
So, what does this actually mean? How can the council sell an asset to itself?
First, what exactly are they selling? Data supplied by BCP council, in response to a Freedom of Information request in March 2022, shows that there are currently 3,335 beach huts in the area. This figure does not include many of the newer, more upmarket varieties, like pods, super-huts and beach lodges, nor the ones with which BCP council have no involvement (for example, those on private land), across the whole of our coastal region from Christchurch to Poole.
Second, what kind of deal is proposed? Well, it’s making use of the government’s Flexible Use of Capital Receipts (FUCR) legislation. The council leaders don’t like to call it an asset sale or fire sale. Instead, it is referred to as ‘leveraging’ – it’s a form of mortgaging, to the likes of you and me. The aim is to set up a new body – a Special Purchase Vehicle Fund (SPV). This would be a completely separate legal entity from the council, yet wholly owned by it. Initially, the directors of this new company would be the leader and deputy leader of the council: Drew Mellor and Phil Broadhead. The SPV will keep any future rental or lease income for at least 20 years, although to comply with FUCR these funds must be used on projects that either produce long term savings for the council, or reduce the costs of service delivery.
For how much are the beach huts being sold?
Two figures are being suggested – £50m or £54m. You could argue that the different valuations are based on different opinions, like the value of a house, for example. Or perhaps the difference of £4m is accounted for by the fee paid to get the SPV structure set up and fees transferred over. Drew Mellor stated in a Cabinet meeting (9 February 2022, at 1:28) that the sum would be £50m, less fees, and the phrase ‘less fees’ is repeated several times. No one knows for sure what this fee is, although rumours are anything from one to three per cent – a nice little earner for someone.
BCP council has confirmed that the two-year revenue on its stock of beach huts was almost £10.7m in 2019-2021. Even if we deduct half a million pounds per year for service costs, that’s still almost £5m revenue every year, and this amount would be expected to increase over the years. So, over 20 years the expected profit is more than £100m. Yet the Conservative leaders of BCP want to sell the council’s interest in this source of revenue for £50m?
Why do this? Well, it seems the BCP Conservative leadership is facing serious financial problems. The council has already borrowed £487m, with an agreed debt ceiling of £855m, but this month we heard that it plans to increase that debt ceiling to a whopping £1.334bn.
No wonder the council leaders like the idea of an SPV. In the long term, this is a huge financial risk, and could be incredibly damaging to the council and the region; but it offers a short-term boost to the council’s 2022/23 financial report – just in time for BCP’s local elections in May 2023.
Financial wizardry, or political cynicism?
To make the situation even worse, the SPV will (of course!) have to borrow the £50m in order to pay it to BCP council. Who will be liable if things go wrong? BCP council?? Or the separate SPV? How does the ‘loan’ get paid back, and by whom? Will the beach hut owners or renters get pulled into it? Auditors and accounting consultants KPMG were commissioned to carry out a detailed financial proposal for the beach hut sale which might answer some of these questions, but this report has not been made public.
So much for the financial implications. What about the beach hut users themselves?
Surely the local beach hut associations and users should have been fully consulted before this proposal went forward? And, surely, when it directly affects their property and contracts with the council, they should be involved in the council’s deliberations and decisions? The FUCR requires the highest level of openness and scrutiny, but it is far from clear that this stipulation has been met.
So, given this urgent situation, a new ‘save our beach huts’ group has been set up and a petition launched, urging the council to delay any vote on the sale until, as a minimum, we are in receipt of the following information:
- A fully signed and audited copy of the KPMG report which detailed the financial proposal of the beach huts sale;
- two independent valuations of the beach huts proposed for sale;
- a copy of the full business plan for the SPV and financial forecasts;
- a copy of the terms and conditions of the agreement between the council and the SPV;
- a copy of the service agreement between SPV and beach hut holders, to include maintenance responsibilities and who is responsible for the area surrounding each beach hut;
- a copy of the complaints and resolution process between SPV and beach hut holders, to include dispute resolution, rent arrears etc; and
- details of any ongoing relationship between the SPV and BCP council, regarding oversight and compliance requirements.
The beach huts across Bournemouth have different relationships with the council, some being council-owned, some council-maintained and rented annually; whereas others are privately owned, privately maintained and the ground leased from the council on an annual licence. A ‘one size fits all’ proposal will always face difficulties and the hut owners/renters should surely be involved in the council’s deliberations when it directly affects their property and contracts with the council?
There are many more detailed questions that we would put to the council to establish whether the SPV idea has any basis in reality, and if proper diligence has been pursued in making these financial plans within the council’s budget. How will the money be spent, for example, and what will be the impact on the contracts, services and liabilities for beach hut holders?
The argument from the council leaders is that this £50m will be invested to help fund their ‘transformation plans’. That’s also the reason they give for increasing their debt ceiling by nearly half a billion pounds. This is casino economics. The leadership have said they will produce a full report to Cabinet in the middle of this year, but we feel that the full details should be presented to the public to review as well.
This is not the time to risk asset-stripping BCP. The council shouldn’t be betting on the roulette wheel at this critical point. So please sign the petition and help us shine a light on what’s really going on inside BCP Council.