Croydon in crisis: BBC says at least five councils could go bust

WALTER CRONXITE reports on how local authorities across the country have been left high and dry by the government over meeting the ‘unsustainable’ costs of the coronavirus emergency

An emergency finance review report is expected at Croydon Town Hall next week

Coronavirus has seen Croydon Council incur more costs than all but eight of the country’s biggest local authorities, according to figures published today by the BBC.

And the BBC is reporting that some of the largest councils across Britain say they may have to declare themselves bankrupt unless the government agrees to further support.

According to the council’s chief exec Jo Negrini, Croydon spent £83million on special measures during the first two months of the covid-19 pandemic. Yet despite the government having encouraged councils to “spend what it takes”, Croydon has so far received just £20million in emergency funding from Whitehall.

That leaves a £62.7million black hole in the council’s finances, with no prospect of it being made good any time soon.

Croydon went into the covid-19 emergency having already accumulated a mountain of debt – £1.5billion – which makes its situation even more precarious than many other councils. As was first reported by Inside Croydon, even halfway through May, Negrini was forced to call in external auditors as the council was running out of money.

Negrini and the Labour council leader, Tony Newman, have both denied that Croydon will need to go into special measures – issuing what’s known as a Section 114 notice. Instead, they have applied a set of measures which appear remarkably similar to what would happen if they had issued a S114 – a spending freeze, a ban on all recruitment, and calling in outside council finance experts to pick through the books. A report on the state of the council’s finances from the review board is expected next week.

Council leader Tony Newman: blames someone else

Since 1990, only one council has been forced to admit it has gone bust and issue the dreaded S114 notice – Tory-run Northamptonshire County Council two years ago.

But the BBC is reporting that, without urgent additional government support, as many as five councils in England – Leeds, Wiltshire, Trafford, Tameside and Barnet – are considering taking such action as a result of the burden of coronavirus, “declaring themselves effectively bankrupt”.

Nearly 150 authorities have forecast a combined budget shortfall of at least £3.2billion, the BBC found.

This week, Manchester City Council announced that it is close to having to issue a S114. Manchester has run up £133million in covid costs.

Liverpool’s Mayor Joe Anderson has also warned the city may decide to issue a S114 notice, though the authority stepped back from the brink on Wednesday, saying it was now planning to set a revised budget in September to address a £58.6million shortfall.

Birmingham City Council – the largest authority in Europe – said “given the size” of its forecast shortfall of £212million across 2020-2021 and 2021-2022 after £70million government funding already received, a S114 notice “would not rectify this situation”.

That appears to be similar to the judgement call made at Fisher’s Folly over Croydon’s budget.

Bedford’s James Jamieson: wants urgent government action

The Conservative government says it is “working on a plan” to dig councils out of the coronavirus-shaped hole, but even council leaders in the Tory shires are demanding to see action now.

“We urge the government to bring forward details as soon as possible,” James Jamieson, the chair of the Local Government Association, said today.

Jamieson is the Conservative leader of Central Bedfordshire council, so has seen at close hand at nearby Northants what the impact of a council going bust can have.

The BBC research, which gathered responses from nearly 200 councils, shows that Birmingham has the biggest budget gap. But their graphic does not include Croydon, which with £62million would figure ninth on the table, with only Hackney and Camden among London councils with a worse situation to manage.

“Councils have led local communities across the country through the coronavirus crisis,” Jamieson said, speaking on behalf of the Local Government Association.

“They are working all day and night to protect the most vulnerable, support local businesses and try and keep normal services running.

“As a result, they continue to face increased cost and demand pressures as a result of covid-19 at the same time as seeing a significant drop in income that they rely on to fund services. This is unsustainable.

“Vital emergency funding from government has helped meet extra cost pressures and lost income in recent months but councils will need further funding and financial flexibilities in the weeks and months ahead to meet ongoing covid-19 pressures and to keep services running normally.

Cost of covid: the BBC’s table, which omits Croydon Council and its £62m coronavirus-shaped hole in its budget

“We are pleased the government has indicated it is working on a comprehensive plan to address the ongoing financial challenges councils face this financial year. We urge the government to bring forward details as soon as possible and ensure it address three key elements of the pressures facing councils.

“The loss of business rates and Council Tax income combined in the past three months accounts for more than half of all income losses for councils over the same period. Any future package of funding measures from government will need to take this into account and provide a solution to cover councils for these losses.

“The government must also meet all additional costs councils are incurring as a result of the pandemic and provide a guarantee that it will compensate them for all lost income from fees and charges and other sources.

“Councils have a legal duty to balance their budgets each year and these measures are vital if councils are to avoid taking steps, such as in-year cuts to local services, to cope with funding shortfalls.”


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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2 Responses to Croydon in crisis: BBC says at least five councils could go bust

  1. Colin Cooper says:

    If this shambolic mob had NOT wasted all the previous funds maintained by the previous Conservative Councils, they would have had spare funding and would not need to keep begging the government for money. Croydon have wasted all those funds to little or no effect and have already borrowed £1.5 billion to fund their many, varied but often useless programmes simply to buy votes.

    • So you missed the bit where Croydon Tories left a mountain of £1billion debt in 2014, and which was slowly reduced over the next three years then Colin? “All the previous funds maintained by the previous Conservative Councils”? You’re having a laugh. Or have you forgotten how the shambolic Tories managed to spend £150million on a council office building that might normally cost just one-third of that amount?

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