Local authorities supporting Welcome to Yorkshire would only be liable for £1 each of costs should the troubled tourism agency go bust - despite council leaders who recently agreed further taxpayer funding for the organisation being told shutting the company would cost £3m, The Yorkshire Post can reveal.
The company was today accused by a Yorkshire peer of using “scare tactics” to secure additional funding after the estimated £3m closedown figure was included in a report to North and West Yorkshire council leaders last month at a meeting which resulted in them granting £1m to Welcome to Yorkshire.
The privately-run company has been in recent financial difficulties as it has struggled to deal with the fallout from ex-chief executive Sir Gary Verity’s scandal-hit resignation earlier this year.
At the October meeting, Kirklees Council chief executive Jacqui Gedman, who is currently providing ‘strategic support’ to WTY, told council leaders it would be “more cost-effective to release the £1m and try to size the organisation appropriately going forward than it would be to close it down”.
But WTY has now confirmed that the company’s limited liability status means local authorities which are members of the tourism agency through paying annual sponsorship fees would only be liable for a maximum of £1 each should the organisation go out of business.
The matter was spotted by Liberal Democrat peer and former Sheffield Council leader Lord Scriven, who saw the agency’s Companies House filings includes a provision that should the business be wound up, members are only liable for any repayment of debts and liabilities for amounts “not exceeding £1”. The same status applies for the approximately 2,000 private sector members of WTY who are involved with the regional tourism industry.
A report to council members on the Business Rates Pool board by then-interim chairman Keith Stewart, who has now been replaced by Wakefield Council leader Peter Box in the role, said a “managed closedown” of the business which would have resulted from funding not being granted would carry “major risks”.
It said: “The team estimates it would cost £3.18m to close the organisation down by the end of the financial year in March.”
The report added that the true figure would be even higher once an estimate for the negative impact of North Yorkshire County Council’s pension fund, which WTY had been part of, was finalised.
Lord Scriven said today: “The liability was £1 per member - the £3.18m figure has been made up to scare councillors to dip into taxpayers’ money to bail out what ultimately is a bankrupt company. It was a scare tactic to try and keep the company going.
"It would appear the whole focus has been on saving Welcome to Yorkshire, not having the best organisation for the future and getting value for money both for taxpayers and the small and medium-sized businesses which are members.”
He said the matter raises questions as to whether council leaders had done due diligence before agreeing to hand over £1m of support last month.
“What I learnt as a council leader is you don’t take things at face value that council officers put in front of you, you have to be an advocate of the taxpayer.
“I just looked at the memorandum and articles of association of the company - it took me 30 seconds to realise that taxpayers’ liability was £1 per council. There are serious questions about why people in that meeting apparently didn’t do the same.”
A spokesperson for WTY said the £3.18m estimate “was based on a solvent wind-down of the company’s operations” and that “council leaders are aware of the legal status of Welcome to Yorkshire”.
Lord Scriven said that rather than the company continuing as a result of receiving the additional financial support, it would have been better for it to have been closed and for a new tourism agency to have been set up immediately afterwards which could employ the same frontline staff but not be affected by the current financial issues.
“If Welcome to Yorkshire had been closed down and re-established as a new organisation to promote our great county, taxpayers would have been limited to £1 loss for each council.
“It appears the vast majority of money is basically bad debt, not to spend on future projects. A new organisation could have been reestablished the day after WTY had closed and hard-working staff at the coalface could have been re-employed without this money going down a black hole.”
In response to that claim, a WTY spokesperson said: “Lord Scriven is entitled to his views. We disagree with his characterisation of the report.”