Jane West, corporate director of resources and section 151 officer at the London Borough of Croydon, has issued a section 114 notice, acknowledging that the council will not be able to balance its budget in the next financial year.
This is the third section 114 notice that Croydon has issued in two years as part of an ongoing financial crisis, partly caused by a failing housing company and unsuccessful commercial property investments.
The latest notice follows an “Opening the Books” exercise, which uncovered a £48m black hole in the accounts. Croydon is estimating that it will need to reduce spending by £130m in the next financial year, which would leave the organisation financially and operationally unsustainable.
This is despite a £120m bailout loan from central government in March 2021.
Budget savings
The council has published its Medium Term Financial Strategy (MTFS) update, which will be discussed at Cabinet on 30 November. This breaks down the extra £48m costs identified – including £13.8m on an over-estimate on parking and transport income, and a £9.5m alignment correction to the Housing Revenue Account.
The MTFS update sets out a series of budget savings, asset sales and “transformational proposals” drawn up to support the council’s recovery.
Executive mayor Jason Perry said that the “sheer scale of these issues means that the council cannot recover without a new government solution for long-term financial sustainability”. He has written to levelling up secretary Michael Gove requesting further support.
Unsustainable position
In the letter, Perry states: “Without a substantial reduction in its debt Croydon Council is in an unsustainable position, which is only likely to worsen as interest rates rise. Until this debt burden is resolved, Croydon is unable to offer sustainable local government services.
In a separate council statement, Perry added: “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.”
He said that Croydon would need to become a much smaller organisation, with significant spending reductions.
“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.”
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