The controversy over Newquay airport’s finances and a bid by its owner Cornwall Council to find a private equity partner to fund it shows no signs of abating.

Despite constantly being labelled as a loss-making entity, on paper the airport actually made a £4.3m profit last year. This had led to political grumblings, with Cornish MPs accusing the council of “smoke and mirrors” accounting and a “cover-up culture”, while the accounts show a loss of nearly £3m just the year before.

The local authority has said that two one-off items meant the airport appeared to be trading in profit – if it wasn’t for those items, says the council, it would have made a £4.1m loss. “The underlying trading of CAL (Cornwall Airport Ltd) continues to be at a significant loss,” said a spokesperson.

A deal sought by Cornwall Council’s Conservative administration to get into bed with an American financial company to run Newquay airport and its lucrative 650-acre estate was put off in November. The proposed deal is said to have failed Cornwall Council’s own due diligence tests just days before it was due to be decided.

Over £1.2m of taxpayers’ money has so far been spent on various aspects of the thwarted ‘privatisation’ agreement, including appointing global real estate company CBRE to find the required financial partner to run the airport and commercialise its estate. The running of the airport is subsidised by Cornish taxpayers to the tune of around £4m each year.

We understand that the £1m-plus consultancy spend came from council, reserves not capital, which means over £1m has been taken away from services at a time when around 100 council staff are being made redundant. We have heard from opposition councillors that there is growing concern over rising spending on consultants by the Conservative administration.

There were also concerns among them this week when the airport’s statement of income and retained earnings for the financial year ending March 31, 2024, showed a £4.3m profit, compared to a loss of £2.9m the previous year.

When asked how an airport which we are constantly being told operates at a loss made over £4m profit last year, a council spokesperson said the new profit was down to the council’s wholly-owned private company, Corserv, effectively taking on the debts: “The March 2024 accounts include two items that effectively boost the income of Cornwall Airport Ltd (CAL), but are not related to their direct annual trading activity.

“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 (P&L) 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 whose constituency includes part of the airport estate, has accused the council of creative accounting and 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.

“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 £1-billion 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.”

Cllr David Harris, Cornwall Council’s Conservative head of resources and its deputy leader, responded to Mr Maguire’s comments. “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.”

Noah Law, the Labour MP for Newquay and St Austell, also criticised the way things have been handled concerning the airport.

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.