Croydon Council has said it will not be able to balance its books next year without extra help from Government because the ongoing impact of historic financial mismanagement has left the authority financially and operationally unsustainable.
The borough’s new Executive Mayor Jason Perry has written to Secretary of State Michael Gove setting out the need for further support to resolve the ongoing impact of the financial issues he inherited. Mayor Perry has said that the sheer scale of these issues means that the council cannot recover without a new government solution for long-term financial sustainability.
Following his election in May, Mayor Perry declared his immediate priority was to sort out the council’s finances in the wake of serious financial mismanagement and governance issues he had inherited.
One of his first major decisions was to launch a deep dive of the council’s finances. His ‘Opening the Books’ exercise, a forensic review of the council’s situation and financial processes, has uncovered more unresolved historic accounting risks, adding new costs of almost £48m to next year’s budget.
Inherited debt levels totaling £1.6 billion (of which £1.3 billion is General Fund debt) have also become critical to the sustainability of the council’s revenue budgets with current interest rate levels. Currently the council must pay £47m from its budget to service this debt before it can spend money on services for residents. The ongoing national economic crisis has also meant council services are more expensive to deliver.
Croydon is doing all it can to support its own recovery through its savings and transformation programmes, which have already delivered over £90m in savings and £50m in asset sales over the past two years, with further proposals for £44m in savings in 2023/24 and around £100m in proposed asset disposals in the coming years.
But it will not be enough to meet the council’s costs and ongoing toxic debt burden, which are just too big to manage in a sustainable way without further support from the government over a longer period.
The council is estimating that it would need to reduce spending by £130m in the next financial year which would leave the organisation financially and operationally unsustainable.
Although the council is on track to balance its in-year budget, chief finance and S151 officer Jane West has today issued a Section 114 notice which acknowledges that the council will not be able to balance its budget in the next financial year.
The council has also published its Medium Term Financial Strategy update, which will be discussed at Cabinet on 30 November. It sets out a series of budget savings, asset sales and transformation proposals drawn up to support the council’s recovery.
These savings plans will form the basis of a public engagement starting in December.
“The previous administration has left a legacy of unprecedented financial mismanagement, toxic bad debt and a lack of governance and transparency that shames Croydon and continues to have a long-lasting impact on the sustainability of our council.
“Despite the hard work of staff to support the council’s recovery, the toxic level of historic debt means that Croydon is trapped in a vicious cycle. Even with Government support, the coming years will be incredibly financially challenging for Croydon Council. Ultimately, this will mean the council needs to do and spend less, with significant spending reductions.
“I am determined to fix what the previous administration has broken and to protect our residents, our staff, and the borough as much as possible, but getting the council back on track to recovery and long-term financial and operational sustainability will take a long time and need radical solutions.
“We must balance our books and become a much smaller organisation, which is more efficient and delivers priority services that support our residents, our communities and the borough.”
Jason Perry, Executive Mayor of Croydon