Croydon’s £1bn debt: the cracks are appearing, say PwC

Tonight’s Evening Boris has raised another question about how close Croydon is to financial collapse under the weight of its £1 billion debt: is Mike Fisher, the Tory council leader, or its “interim” chief executive, Nathan Elvery, among the 90 per cent of leaders who expect a local authority to go bankrupt?

Interim Croydon CEO Nathan Elvery: more cuts to come

Interim Croydon CEO Nathan Elvery: more cuts to come

The newspaper was reporting a survey conducted by Price Waterhouse Coopers which backs up the comments last week by Margaret Hodge MP to the Public Accounts Committee at Westminster.

The study warned that “cracks are appearing” as councils adjust to reduced levels of funding as a result of the Tory-led government’s austerity agenda.

As Inside Croydon reported, our council is budgeting to have a debt of £1.005 billion by 2017 – an increase in the borough’s liabilities of more than five-fold by this shambles of a council under Fisher. And that’s even with this year’s increase in Council Tax.

The PwC report says, “Below the surface, there are signs that cracks are appearing as councils adjust to the reality of continued and significant financial pressures, and anxiety that these will become even more pronounced after this month’s spending review.

“Those cracks are apparent through a growing concern that the savings secured to date, and to be secured in the near future, are beginning to impact upon the quality of services and outcomes.

“Nine out of 10 chief executives and leaders now believe that, within the next three years, some local authorities will get into serious financial crisis or fail to deliver the essential services that residents require.”

Andy Ford, PwC’s head of local government, said: “Having successfully delivered unprecedented savings over the last three years, councils have trimmed all they can, and there’s little left to achieve with more efficiencies alone. Local authorities are increasingly confronting fundamental questions about ‘what they do’ as much as ‘how they work’.

“The harsh reality is that public concern about service reductions is high, and understanding of the need for savings is low. The public are becoming increasingly opposed to reductions in local public services, particularly in visible services like road repairs and leisure services.

“The scale of concern about the impact of sustained austerity should not be underestimated. With the cracks already beginning to show, and difficult decisions ahead, councils need to act urgently in changing the way services are delivered or provided.”

Meanwhile, the department for communities and local government, which is imposing the cuts on councils up and down the country, appears to be in denial, claiming that residents are quite happy with the level of services provided.

They even reckon that there is more that councils can do in terms of cutting spending and raising money from reserves. This is a particular problem for Croydon, which already has a notably poor record on collecting Council Tax and appears to have staked everything – and lost – on the roulette wheel of the property market.

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About insidecroydon

News, views and analysis about the people of Croydon, their lives and political times in the diverse and most-populated borough in London. Based in Croydon and edited by Steven Downes. To contact us, please email inside.croydon@btinternet.com
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10 Responses to Croydon’s £1bn debt: the cracks are appearing, say PwC

  1. djfisher81 says:

    Could you explain what might happen if the council did end up in a “serious financial crisis”?

    Presumably they’d appeal to Central Government, but if that failed, would Fairfield Halls, Riesco, Taberner etc end up being sold off? The Clocktower even?

    • You ought to ask Mike Fisher and his chums Dudley Mead and Tim Pollard.

      Until they are open and transparent about the details of contracts with Laings, mere tax-payers are unlikely to know what they are really doing with our money and public assets.

      • djfisher81 says:

        Well, I meant more in a general sense. A number of experienced political commentators contribute to this site, including yourself, and I am a concerned but relatively ignorant resident. I’ve since noticed that David Callam has commented on “Priceless: Nailing the Council’s lies over Riesco sale” (6th June) suggesting the same sort of things.

        I just wondered if someone could comment on what powers or procedures are available to both the Council themselves and to central government to sort this kind of thing out. For instance, a radical thought occurred to me on my way in this morning — could the Borough actually be broken up? Say, Croydon North to Lambeth, Croydon Central split between Sutton and Bromley, and Croydon South to Surrey? There’s already talk of councils sharing services to cut costs, why not go the whole hog?

  2. davidcallam says:

    In theory, Parliament could introduce legislation to change borough boundaries at any time.

    In practice, it is a cumbersome and time-consuming business that is likely to dismay as many people as it pleases.

    The changes in London local government that created the London Borough of Croydon took place almost 50 years ago (1965) and are still not fully accepted in certain quarters.

    Even well-informed BBC journalists can’t decide whether Croydon and Kingston are in south London or Surrey.

    If the borough is insolvent, I assume government can appoint a commissioner to run it for a time and hopefully order the surcharging of spendthrift councillors.

    But ultimately the people of Croydon are responsible for the borough’s debts and will need to find a way of honouring them – probably through large increases in Council Tax.

    • djfisher81 says:

      Thanks David; an interesting read.

      So, as I suspected, anyone wittering on about “not increasing Council Tax” is almost certainly not worth listening to.

      • Eric Pickles talks about “not increasing Council Tax” all the time. That’s why he’s capped the amount by which local authorities may increase Council Tax, effectively emasculating councils altogether from deciding how to set their budget.

        • mraemiller says:

          Rate capping? That reminds me of something.

          As to authorities going insolvent and being abolished this is not actually impossible. The first authority to institute the new flyering ban zone powers was Restormel. I had a lot of problems researching this as Restormel Borough Council was abolised in 2009. They had invested all their assets in icelandic banks days before they went bust in October 2008. The disaster was so massive it was thought best to wipe the slate clean and start again completely from scratch http://news.bbc.co.uk/1/hi/uk_politics/7963986.stm

          Anyone who thinks the government always bails out local authorities under any circumstances should think again.

  3. I would think that on current economic thinking the council will be trimmed to its absolute core statutory services and that anything that can be contracted out will be.

    Outside Croydon, behavioural economists are realising that far greater value for money and better quality services are achieved where the community control services themselves, hence the rise of social enterprises.

  4. davidcallam says:

    Charlotte: how would that work in practice?

    If my family and I were unfortunate enough to be homeless in Croydon how would community controlled housing provision improve my situation?

    Would we spend less time in bed and breakfast? And if so, why?

    What would community control do to the fortunes of Fairfield? Isn’t the art complex already run by a community – the Mead clan – who want to flog a ceramics collection to bolster the white elephant’s shaky finances?

  5. David, the housing market has never ever worked in the free market. I do not think that it should be in the free market. Even Hong Kong, that bastion of capitalist enterprise and inequality, has always had huge public housing programmes.

    I am not even convinced that housing associations work very well. Historically all housing data shows that the only way you can efficiently provide housing at the lowest cost is to build it through government, but that government must be truly committed to high quality and value for money…

    Where residents can be useful is playing a role on housing committees scrutinising for best value for money, minimum times in bedsits etc., and ensuring transparent open government.

    But that is the role councillors are supposed to be playing.

    Unfortunately our current system does not encourage our councillors to scrutinise the actions of the officers thoroughly and ensure transparency for the taxpayer.

    Into any system needs to be built checks and balances, ie no one individual/group ought to be able to sit on or dominate more than one key committee or organisation at a time. Unfortunately, Croydon, like many local authorities, is dominated by one relatively small group who do not police their own actions properly.

    The Middlesborough election was well documented by John Walsh in his video Tory Boy that highlighted exactly the same problems in a Labour safe seat.

    We have to empower our communities throughout the UK so that they challenge established power structures more in order to create better value for money for the whole community.

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