STEVEN DOWNES on a crucial couple of days for the borough
At some point today, Ian O’Donnell will deliver his report on the state of the borough’s finances and what he recommends that needs to be done to get the council out of the £1.5billion black hole of debt it has dug for itself.
After a decade of Croydon Council enduring swingeing austerity cuts imposed by Tory-led governments, some of the more pessimistic observers on the staff at Fisher’s Folly believe O’Donnell could even go as far as to recommend spending and staff cuts as deep as 25 per cent to a borough budget for 2020-2021 which was approved only weeks ago.
O’Donnell is the local authority finances troubleshooter who this month was hired at considerable expense to fix something which many have known for months is beyond broken.
It is suggested that Simpson felt he had to leave Croydon because he could no longer tolerate some of the measures that he was being asked to implement, particularly in respect of the financial wheeling and dealing required by the council’s loss-making house-builders, Brick by Brick, and the multi-million-pound over-run on the mismanged refurbishment of Fairfield Halls.
Other, serious allegations have also been made that Simpson has not been alone among staff at the council and Brick by Brick, who have either been sidelined or forced out of their jobs after they have raised their own, grave concerns about the management of the house-building company and its “managing director”, former council staffer Colm Lacey.
O’Donnell was first seen on the executive floors of the council offices at Fisher’s Folly a couple of weeks ago after he’d been hired on a short-term contract to cast an objective eye over the council’s books.
The harsh financial realities of the second month of the coronavirus lockdown had prompted the emergency action, when with no money coming in from Council Tax and other usual sources, money was pouring out of the council coffers like water down a plug hole.
O’Donnell has worked across London in a series of senior finance posts at local councils. Until February 2019, he’d spent almost a decade at Ealing as their “Executive Director of Corporate Resources”. He had also worked at Waltham Forest and Camden.
It may only be coincidental that O’Donnell has also spent time at Lambeth and at Newham, two councils where Jo Negrini, now the £220,000 per year chief executive at Croydon, had worked previously.
As assistant director of finance at Brixton Town Hall for three years, O’Donnell deputised for Lambeth’s Section 151 officer – the person responsible for ensuring that the council keeps a balanced budget.
In Croydon today, the S151 officer is Lisa Taylor. Taylor was previously deputy to Simpson, and now she is the person who will have to make a decision in the next couple of days – based on O’Donnell’s analysis – whether to issue a Section 114 notice, under the Local Government Finance Act 1988, imposing immediate spending restrictions, just as Northampton county council needed to do in 2018.
On his own LinkedIn profile, O’Donnell states that he “achieved first clean opinion on Lambeth’s statement of accounts in at least 17 years for 2003-2004 accounts. In three years Lambeth moved from a general fund deficit of £28million to holding balances of £24million.”
To put that achievement and the challenges in Croydon into some kind of context, such is the scale which O’Donnell, Taylor and the council’s auditors have been facing in the past few days, currently the council’s debt here is £1,5oo millions…
Council auditors were not due to go over the borough’s books until next month. But when the covid-19 lockdown turned off most of the taps for Croydon’s income streams, a heavily indebted budget which had been precariously balanced looked like it would tip over at any moment.
Negrini is due to meet council leader Tony Newman tomorrow to discuss the course of action, based on the report that O’Donnell delivers today.
Both know that Section 114 action, as well as halting all council spending, will sound the death knell for their own careers in local government. They would become the first leaders of a London borough for three decades to be forced to take such drastic action, an admission that they had failed to do their jobs.
Which is why Newman and his clique of Labour councillor colleagues who set the financial course for the borough have been busy these past few days seeking to spread the blame, on the nasty Tory government that won’t give them more cash, or the dreadful coronavirus.
Senior figures at the council have expressed the hope that O’Donnell, with options limited, might actively support doing the obvious: recommend winding up Brick by Brick.
Having been in receipt of £260million-worth of loans from the council, as well as many tens of millions more in secret subsidies through property deals, Lacey and his team of rookie private developers have managed to sell just eight houses and to deliver three purpose-built council homes.
When Grant Thornton, the council’s auditors, delivered their latest report on the borough finances as recently as February, it contained a risk warning over Brick by Brick.
“The Authority’s Alternative Delivery Vehicle, Brick by Brick Croydon Ltd, is moving into the phase where dividends are expected to be received by the Authority,” the auditors noted. “As the Alternative Delivery Vehicle develops, the Authority needs to ensure the governance processes in place remain appropriate.
“To gain assurance over this risk we are planning to: review the arrangements in place around Brick by Brick Croydon Ltd and the other existing Vehicles in which the Authority has an interest; consider the governance arrangements in place for the Authority to gain the intended benefits from its subsidiary.”
Clearly, the auditors were not satisfied with Brick by Brick’s commercial performance.
By liquidating its assets, the land and unfinished buildings on BxB’s books could be unloaded in a vast fire sale, to housing associations and even private property developers. It might not realise anything like the full value of the loans and other public money squandered on Negrini’s vanity project so far, but – so the special pleadings go – admitting defeat now and cutting the losses would be a better outcome for the people of Croydon and council staff than yet another round of job cuts.
Even before O’Donnell arrived, the staff at Fisher’s Folly had become used to having troubleshooters on the premises, to sort out messes of Croydon’s own making. In councilspeak, this is known as an “external intervention”, to offer “support”. In plain English, it is an admission that the people in post are simply not up to the job.
It is only relatively recently that a team from Camden that had been deployed to get the borough’s children’s services out of special measures was stood down after more than two years of showing their Croydon counterparts how to run their department.
The children’s services department had been declared “inadequate” by Ofsted following years of cuts having eroded the staff numbers to such a point where social workers were overburdened with casework. Children in the council’s care had died as a consequence.
Part of the solution to that difficulty has been the Labour-run council throwing millions of pounds at the department, reversing years of cut-backs, to buy their way out of the mire.
The fear now is that another round of cuts, with hundreds of jobs lost across the council prompted by the financial emergency, could see children’s services and other departments offering similarly vital front-line services spiral downwards to the point where they can barely function. A vicious cycle would be set in motion.
There is already a total recruitment freeze at the council and a ban on all non-essential spending. O’Donnell’s report is therefore awaited keenly by more than just Negrini and Newman.
Will he recommend a routine round of cuts, or does he have a Plan B, for the dismantling of Brick by Brick?
Over the weekend, a council insider contacted Inside Croydon.
“Everyone knows that at the core of the difficulties is the money being squandered on Brick by Brick,” they said. “Colm Lacey is protected by Negrini – anyone who tries to warn against what has been going on there has been moved on or forced out.”
As well as Simpson, two development directors have left Brick by Brick in rapid order, one of whom had had 14 years’ service with the council (therefore probably leaving with a significant “golden goodbye”). A director-level member of council staff working on housing was given a year’s leave of absence, and since their return has been shunted sideways into a different department.
But if a S114 order could prove career-ending for the council’s leadership, liquidating Brick by Brick looks equally unattractive for the likes of Negrini, Newman and their cheerleaders such as Alison Butler and Paul Scott.
As the source said, “Everyone knows that Negrini, and Tony Newman and the councillors, won’t want to admit defeat over their pet project, however disastrous it is for the council, its staff or the people of Croydon.
“They won’t admit they’ve been wrong, and they won’t want to take responsibility.”
Which is a style of behaviour among those in public office with which ordinary, hard-working people are becoming all too familiar.
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