The government is “minded to” provide Thurrock, Croydon and Slough Council with exceptional financial support worth over £880m combined to help balance the authorities’ budgets.
Thurrock Council is set to receive the largest amount of capitalisation directions totalling £632.7m over the period between 2022/23 to 2023/24, with Croydon and Slough set to receive £224.6m between 2019/20 to 2023/24 and £31.6m for 2023/24 respectively.
Lee Rowley, local government minister, outlined the government’s intentions of exceptional financial support for the councils in three letters.
He said: “This letter sets out the department’s current position but does not constitute a capitalisation direction” as the levelling up secretary, Michael Gove, has not yet approved them.
The proposed capitalisation direction is in addition to the government granting all three councils additional flexibility to raise councils tax, by applying higher referendum principles.
‘Unprecedented scale’ of government support
In Rowley’s letter to Thurrock, he detailed that the council’s request for exceptional financial support is of “an unprecedented scale”.
He wrote: “This is deeply concerning and clearly demonstrates the gravity of the challenges facing the council.”
In January, Thurrock Council faced a projected funding gap of £460m for 2022/23 and a budget deficit of £184m for 2023/24. At the time, its borrowing levels also stood at £1.3bn.
This prompted the authority to request exceptional financial support from the government as there was “no clear path to financial sustainability” without it.
The authority also issued a section 114 notice in December 2022 as a result of the magnitude of its financial situation.
This is deeply concerning and clearly demonstrates the gravity of the challenges facing the council.
Croydon’s second capitalisation direction
In his letter to Croydon, Rowley detailed that this is the second time the council has requested capitalisation from the government, which was previously sought and granted in December 2020 of £150m.
“I understand that at the time of your previous request the magnitude of the challenges faced was not yet fully understood, as such the need for further support has resulted from a crystallisation of the errors made in the past prior to you [Croydon’s Mayor Jason Perry] taking office,” Rowley wrote.
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In February, following the council’s issuance of its third s114, Croydon asked the government to write off £540m of the authority’s debt as well as provide capitalisation directions of £63m and up to £161.6m to deal with its remaining budget gap in 2023/24.
This news also comes as a newly published report found that Croydon’s lack of “sufficient scrutiny” and “risk management” regarding the £200m it loaned to a subsidiary company contributed to the council’s financial crisis.
Both Thurrock and Slough Council are currently under statutory intervention, whilst the government is currently working with Croydon Council in regard to its financial situation.
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