An ongoing debate surrounding the financial situation of Newquay airport and owner Cornwall Council's search for a private equity partner shows no signs of abating. Despite the transport hub being consistently described as a loss-making venture, the council has had another of its owned companies write off debts amounting to millions, presenting the airport as having made a £4.3m profit last year.
This move has sparked political discontent, with Cornish MPs accusing the council of engaging in "smoke and mirrors" tactics and fostering a "cover-up culture", especially considering the accounts indicated a loss of nearly £3m the previous year. The local authority has explained that two exceptional items made the airport seem profitable, but without these, it would have faced a £4.1m loss.
"The underlying trading of CAL (Cornwall Airport Ltd) continues to be at a significant loss," a spokesperson said.
READ MORE: {}
A deal that Cornwall Council's Conservative leadership was pursuing with a US finance firm to manage Newquay airport and its valuable 650-acre estate was postponed in November after failing the council's own due diligence checks shortly before a decision was due.
Over £1.2m of taxpayers' funds have been utilised so far on various elements of the failed 'privatisation' agreement, which included hiring global real estate firm CBRE to locate the necessary financial partner to manage the airport and commercialise its estate. The airport's operation is subsidised by Cornish taxpayers to the tune of approximately £4m annually.
It is understood the consultancy expenditure exceeding £1m was sourced from council reserves, not capital, implying that over £1m has been diverted from services at a time when roughly 100 council employees are facing redundancy. Opposition councillors have expressed increasing concern over the escalating spending on consultants by the Conservative administration, reports .
There is also apprehensions among them when the airport's statement of income and retained earnings for the fiscal year ending March 31, 2024, revealed a £4.3m profit, following a loss of £2.9m the previous year - a sudden shift of £7.2m designed to give the impression of profitability, even though the 'profit' bears no relation to the airport's actual business.
In response to queries concerning the reported profitability of an airport that is often described as operating at a loss, a council spokesperson attributed last year's apparent £4m profit to the actions of Corserv, the council's private company. The spokesperson explained that the March 2024 financial accounts reflect two non-recurring items which effectively enhance Cornwall Airport Ltd's (CAL) revenue, independent of its regular annual trading activities.
Most Read
"In the year, due to the restructuring of the finance for Corserv Group, they wrote off loans to CAL of £1.2m and also wrote off a further £2.695m of other amounts owed to group. This write-off of £3.895m is realised as an income in the profit and loss (PandL) account, but is not reoccurring in nature.
"The Corserv Group also bought the tax credits (generated from the losses incurred at the airport) to the value of £4.257m, which again is reported as income to CAL. Had these one-off items not been included, CAL would have made a £4.1m loss rather than the £4.3m profit. The underlying trading of CAL continues to be at a significant loss."
Ben Maguire, the Lib Dem MP for North Cornwall, which includes part of the airport land, has openly criticised the council for what he views as creative accounting and perpetuating a "cover-up culture".
He said: "It is starting to become clear why the council didn't want me to see any of the figures when I repeatedly asked for them. Creative accounting seems to have masked the overall financial position of the council's subsidiary companies. Meanwhile, enormous amounts of public money has been wasted on consultants in the doomed airport sale process."
He accused the council of deception, adding: "This council clearly hasn't been straight with the public from the start and they have instead gaslighted me and my constituents.
"All this money wasted, combined with a £1bn debt, is unbelievable. The Conservative leader and her Cabinet must be held accountable. There are also very serious questions surrounding their highly paid chief executive Kate Kennally and to what extent she has been complicit in this cover-up culture."
In response, Cllr David Harris, who holds the position of Cornwall Council's Conservative head of resources and its deputy leader, addressed Mr Maguire's allegations. He defended the council's transparency, saying: "The accounts are transparent, they are signed off by independent auditors and even if the reader is unable to properly understand them there is sufficient information to enable the reader to pause and ask a question rather than going off at a tangent."
Don’t miss
Labour MP for Newquay and St Austell, Noah Law, has voiced his disapproval of the management of Newquay airport, criticising the current Conservative leadership. Speaking to CornwallLive, he said: "Newquay airport has been run into the ground under the current Tory administration which has been more concerned with washing its hands of the operating subsidy by entertaining non-starter privatisation deals with American venture capitalists than ensuring its genuine financial sustainability.
"Serious operational improvement is needed, but the Tories have frustrated credible attempts to add value to the site by, for example, hotel developers, in pursuit of their unviable deal.
He added: "We must start to recognise the value of the site which brings an estimated £72m into the Cornish economy every year, but also see the loss-making aviation operations in the context of the wider income the site generates, including to the council.
"So, we need to recognise the full picture of the airport's value as a public good, but also the associated revenue it generates - but that doesn't excuse the fact that hard work is needed from the council to bring that direct cost to the taxpayer down, without these smoke and mirrors accounting exercises."
There is growing anger among those involved in a previously agreed deal to bring an exclusive Marriott hotel and conference centre to the grounds of the airport that Cornwall Council has gone silent on the £28m project.
Like this story? Why not sign up to get all the latest business news straight to your inbox