The London Borough of Croydon has asked the government to write off £540m of the council’s debt and provide further capitalisation direction as the authority’s financial position becomes “completely unsustainable”.
In a budget report, Jane West, corporate director of resources and section 151 officer, outlined that the council faces a fixed annual budget gap of £60m, which is “impossible” to resolve without a level of savings that would hollow out council services and put vulnerable people at risk. She wrote: “The council’s financial position is completely unsustainable without new action being taken.”
The report detailed that the council has asked the government to write off £540m of its debt during 2023/24 “to restore financial sustainability”. It also stated that Croydon has requested capitalisation directions of £63m and up to £161.6m to deal with the remaining budget gap in 2023/24 and to deal with “outstanding legacy issues facing the council”.
This comes as the government granted Croydon permission to increase council tax by up to 15% in 2023/24, which will provide the authority with £22m of additional income.
West added: “The council will continue to speak with government about alternative forms of government support that reduce the huge and ongoing financial cost of the council’s debt burden such as the write off or the award of an annual exceptional grant equivalent to the ongoing debt charges generated by the toxic negative equity.”
In November 2022, West issued a section 114 notice, acknowledging that Croydon will not be able to balance its budget in the next financial year. This was the third section 114 notice that the council had issued over two years.
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