The Leader of Cornwall Council has called on second home owners to “go back to their moral fibre” before applying for grants designed to support businesses affected by Covid.

Linda Taylor has confirmed that the authority is holding back Covid grants for accommodation businesses in a bid to ensure they go to “genuine businesses”.

Cornwall Council has been provided with money from the Government to distribute two different grants – discretionary grants and those intended for businesses in the hospitality, leisure and accommodation industries.

The money has been made available to help businesses which have been particularly impacted by the Omicron variant of Covid-19. Businesses that are eligible – such as pubs and restaurants who saw Christmas events and gatherings cancelled at late notice – can claim grants of up to £6,000, based on their rateable value.

However council leader Linda Taylor said that whilst the council is processing the discretionary grant scheme it is restricting those for the accommodation sector whilst awaiting guidance from Westminster.

She said that this was because the council wanted to avoid paying out Covid grants to second homeowners who have registered their properties as businesses to avoid paying council tax and business rates and are not used as genuine holiday lets.

There has been criticism of previous Covid grants schemes from the government, which did not allow for councils to set strict rules on who could apply and millions of pounds provided to Cornwall went to holiday let owners, many of whom do not live in Cornwall.

Cllr Taylor said at full council this morning: “We have now agreed the criteria that will be applied to discretionary grants. The amount available here is not large.

“Apart from the discretionary grants there are hospitality, leisure and accommodation grants with which there appears to be no discretion. Cabinet have no desire to pay those who have registered their homes for business rates in what might be called a backhand way.”

The Conservative council leader said that legal advice had indicated that the guidance for the grants “is very clear” and does not allow for the council to differentiate between which properties “may or may not be genuine businesses”.

She said that this had been confirmed by the lawyers who advised “that if the Cabinet went the way they proposed and did not seek to pay the apparently undeserving such an action would be unlawful”.

And she added that the Cabinet would face personal liability for any lawsuit against the council which might result from such a decision.

Cllr Taylor said that the Cabinet had asked Cornwall’s six MPs to help get further clarity and guidance from the Government on the issue and said she was hoping for a further update later this week.

She added: “In the meantime we have asked officers to start the process of writing to those businesses in the leisure and hospitality sectors but to hold off writing to those in the accommodation sector until the updated guidance is received.”

The Conservative administration had come under criticism from independent councillor Tim Dwelly this week who claimed that they were “dragging their heels” in getting money out to businesses.

Later in the council meeting former council leader Julian German said that the strict constraints on grants had led to money being claimed by those who might not have needed it. He said that it highlighted why Conservative councillors had been wrong to criticise the previous administration for paying out the money when they were only following the Government rules.

Cllr Taylor said that she hoped that any second home owners who might be considering applying for Covid grants would ask themselves whether it would be morally right to do so.

She said that it was important that the money went to businesses in Cornwall which need it and which have suffered due to Covid.

And she said she did not believe that all holiday home owners should be able to claim the grants saying that “in my opinion they had one of the biggest bumper years ever since the term holiday homes came into existence”.

The council leader added that she hoped her comments would be heard far and wide and that: “Those people who may be thinking to claim for second homes absolutely go back to their moral fibre and think ‘I should not be applying for this, I need to make sure that the money goes to those businesses that have absolutely suffered’.”

West Cornwall MP Derek Thomas has also asked the question in parliament, to confirm that Cornwall Council has discretion in how it pays out grants to the leisure and hospitality industry.

In reply, the Economic Secretary to the Treasury, John Glen MP, told Mr Thomas: “I can certainly confirm that the intention behind the range of interventions was to find the most appropriate delivery mechanism for the different support payments, and obviously we have worked with local authorities to give them that discretion. Every authority will need to be held to account for how it has decided to deliver the grants.

“My hon. Friend has made a clear case for where those priorities need to lie, and we are clear about the intention behind the grants, but it will be for local authorities throughout the country to make their decisions in the right way.”