Croydon Council has set out plans to dispose of more than £50m of its assets to help deal with its large debt burden of £1.3bn.
In a report presented to the council’s Scrutiny & Overview Committee earlier this week (22 May), Jane West, corporate director of resources and s151 officer, outlined plans for the authority to sell off 28 properties in 2023/24 to bring in a “minimum” of £50m.
This represents part of Croydon Council’s wider asset disposal scheme, which is set out in its medium-term financial strategy. The authority is aiming to sell off £200m of its assets to “get a grip” of Croydon’s finances.
The report outlined that due to historical decisions regarding its capital programme, Croydon’s outstanding general fund debt is “disproportionately high compared to most councils”, with it standing at £1.3bn in April 2022.
“With interest rates rising when debt is scheduled for refinancing, the development of a disposal and lettings strategy and the subsequent sale of assets is essential to mitigate rising cost pressures and reduce the overall cost to the council,” the report said.
At the meeting, West said: “It’s important to look at this [£50m of asset sales] as part of the overall £200m target, which was posed in the medium-term financial strategy.
“This is the second year of the strategy, as we have already made £50m worth of asset sales in 2022/23.
“That £50m target is very much a minimum because it’s important for us to actually be striving to get to the overall £200m in order to support the financial strategy into the future.”
West’s sentiment was also shared by Jason Cummings, Croydon’s cabinet member for finance, who stated that the council is not “holding back” on adding any assets to the list of those to be disposed of. He also stated that all assets currently put forward to be sold off are “excess to requirements”.
The assets listed for disposal include The Colonnades, Orchard Garden Centre and the former New Addington Leisure Centre.
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‘Adequate’ reserve level
In the same Scrutiny & Overview Committee meeting, West also highlighted that Croydon Council’s reserves level is “perfectly adequate” to deal with unseen financial pressures that emerge throughout the year.
A separate report presented at the meeting outlined that the council currently has a General Fund Reserve of £27.5m, which serves as “a cushion” should any overspend materialise.
West said: “You don’t want to be building up your reserves because we’re taking money away from council taxpayers in order to build up reserves and actually there is an adequate amount of money in there.
“So, there was no need for the council to make a contribution [to reserves] in 2022/23, and I haven’t recommended a contribution to be made in 2023/24.”
West stated at the meeting that Croydon Council has allowed for pressures such as the non-delivery of savings and inflation in the base budget for the current financial year. So, if these financial pressures do arise there would be no need to touch the General Fund Reserve.
However, the same report highlighted that the council’s overall financial position is still subject to “a number of unresolved historic legacy issues”. Hence, Croydon has requested that the government provide the authority with a capitalisation direction of £161.6m.
June sign-off for 2019/20 accounts
The report also detailed that Croydon needs to correct a range of misstatements in its legacy accounts from 2019/20, which are currently still not fully closed.
The misstatements include that the council’s provision for bad debt was found to be understated by £46m rather than the £20m which was previously assumed, and a prudent decision was made to include the potential £70m gap in the accounts caused by incorrect accounting for Croydon Affordable Homes and Tenures, instead of the £9m previously assumed.
At the meeting, West stated that she expects to sign-off the council’s 2019/20 accounts at the end of June 2023.
This comes as a report by Grant Thornton, published in April, outlined that the auditors expect to give a qualified, adverse conclusion on Croydon Council’s audit accounts for 2019/20.
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