Consultant gives 75 reasons for council’s financial mess

CROYDON IN CRISIS: Tony Newman goes into tonight’s council meeting without the cabinet member for finance who has been at his side for a decade, and confronted with a report that shows his administration failed to listen to the warnings of financial disaster going back three years.
Report by WALTER CRONXITE, political editor

Tony Newman: 75 things his council got wrong

Tony Newman is running out of other people to blame for the failures of his council administration.

After having survived a no-confidence motion at an emergency meeting a fortnight ago, the council leader goes into tonight’s full council without one of his most-trusted allies at his side and confronted with a lengthy consultant’s report which lays out 75 recommendations to improve the way in which Croydon Council is run.

The report appeared barely an hour before last week’s General Purposes and Audit Committee.

Most of the report’s 122 pages are laid out in three columns, the first of which lists “best practice”, how things are supposed to be done, with the third column giving the recommendations of Ian O’Donnell, the finance consultant who was hired in May to pore over Croydon’s books and seek solutions to its budget crisis which arose once coronavirus hit London.

But it is in the middle column of the three where some of the hardest-hitting critiques of the way the council has been run are contained. It is here where O’Donnell and his small team have summarised the way that Croydon has been doing things under Newman, his appointee as chief executive Jo Negrini and the cabinet member for finance, Simon Hall.

The unpicking of the sub-standard operation of the council in this document is thorough-going and devastating in its impact, as one-by-one the shortcomings of Newman’s council are highlighted.

Callton Young: handed the poisoned chalice of the council finances

As the depth of the problems they helped to create became apparent, Negrini scarpered from Fisher’s Folly in August, encouraged to leave the cash-strapped council with a “reward for failure” of £440,000 – a pay-off that Newman has subsequently defended.

Hall resigned his cabinet post on Friday night, his position rendered untenable by O’Donnell’s report.

The remarks made at last week’s GPAC by Sarah Ironmonger, the auditor from Grant Thornton who has so far refused to sign-off on the council’s 2019-2020 accounts, will not have helped Hall’s position. O’Donnell’s report shows that much of the council’s problems stem from a systemic failure to follow best practice, and on occasions even to ignore the council’s own policies.

Taken all together, O’Donnell’s 75 recommendations add up to a corruscating criticism of the leadership of Newman, Negrini and Hall.

Croydon has an estimated £70million of additional spending this year due to coronavirus. But this borough is not alone among local authorities in facing additional challenges caused by covid-19. That Croydon has failed to cope with the problems is, to a large extent, because it has run-down its reserves to a level which left the council without adequate savings for such an emergency.

The auditors had warned of this “lack of resilience” in reports prepared at the end of last year. O’Donnell’s report says that the council’s politicians – probably with the agreement of the chief executive – ignored earler warnings from the Town Hall’s own finance experts going back to 2018.

Under the heading “BP46”, O’Donnell lays out that Croydon’s cash crisis was the creation of the political decisions of Newman and Hall, and not because of lack of funding from government or the coronavirus.

Simon Hall: had failed to heed warnings over reserves going back to 2018

In its “best practice” column, O’Donnell’s report states, “The target level of reserves should be set by the Section 151 officer [usually, the council’s finance director] based on their professional judgement about the risks the council is facing, and the budget plan must prioritise maintaining the reserves at the target level above any operational considerations.

“The minimum level of reserves cannot be set on the basis of affordability in comparison with other priorities, but must be set on the basis of risk assessment as a fundamental requirement that underpins the stability of the organisation.”

Compare that summary with what O’Donnell found when he examined how Croydon has been run.

“The budget report of 2nd March 2020 contains a section entitled 14.0 Statement of the Section 151 Officer on reserves and balances and the robustness of estimates for purposes of the Local Government Act 2003.

“In the ensuing paragraphs the report describes risks to the financial plan such as the level of government funding, service need, and cost pressures. There is a section on The Level of Reserves and Balances (para. 14.9 –14.18), in which the Director of Finance, Investment and Risk and S151 Officer states that ‘in the context of the financial climate and the financial risks which the Council faces my formal advice to all Members is that an appropriate level of General Fund Balances is between 3% and 5% [of the net revenue budget] for the medium term which in cash terms is between £8m and £13.8m. The current level of General Fund Balances is £10.4m. This budget makes provision to increase reserves by £5m’.”

Those good intentions to improve the council’s reserves were blown off course by coronavirus, of course.

But it is in the next sentence that O’Donnell skewers the flawed judgement of Newman, Negrini and Hall: “A similar section appears in the report of 4th March 2019 at paragraphs 19.0 to 19.17, and in the report of 27th February 2018.”

Jacqueline Harris-Baker: trained as a lawyer, given director of resources job

The council’s leadership had been ignoring warnings about the low level of reserves for more than two years. This may go some way to explain why the finance director, Richard Simpson, quit the job abruptly at the end of 2018.

The job of S151 has to be given to an official with suitable accountancy qualifications, and Simpson was replaced as S151 officer by his qualified deputy, Lisa Taylor.

But when it came to appointing an exec director for finance and resources, Negrini chose to replace Simpson by promoting a close colleague, Jacqueline Harris-Baker, the borough solicitor and someone without any formal experience or qualifications in local authority finance.

O’Donnell was equally devastating about Hall and Newman’s poor practices in “BP23”, which looked at the procedures under which large-scale capital spending decisions are made.

It was here that O’Donnell discovered that decisions to spend tens of millions of pounds of Council Tax on speculative property investments, such as the Colonnades and the Croydon Park Hotel, were neither properly managed nor was the decision to spend this money taken through the correct process.

It was this where O’Donnell said last week the council had been breaking financial regulations.

Inheriting this poisoned chalice is Callton Young, the councillor for Thornton Heath ward, who Newman announced on Saturday was being promoted into the cabinet to take over the borough;s finances from Hall.

It is an appointment which in many ways typifies Blairite Newman’s poor judgement and self-interest, which have led Croydon to this point.

Young has been a councillor since 2016, following a highly successful and lauded career as a senior civil servant, someone who has shown themselves very capable. Yet it has taken Newman four years to recognise those abilities and promote Young into the cabinet – which is usually an area only populated by “Tony’s Cronies”, or some promoted beyond their capabilities and who pose no threat to his leadership.

It is 15 years now since Newman was first elected as leader of the Labour group at the Town Hall, a period which included one year as council leader more than a decade ago, a year which came after a 27 per cent hike in Council Tax, a move which was followed by Labour losing control of the council.

For years, any mention of “Mr 27 per cent” was guaranteed to throw Newman into a rage. Now, it appears likely that mention of the number 75 will elicit a similarly fuming response.

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10 Responses to Consultant gives 75 reasons for council’s financial mess

  1. jackgriffin1933 says:

    Great piece and sorry to be a pedant, yet must take exception to the use of “corruscating”. It means glittering, sparkling or scintillating. The criticism of Newman may be all of those things, yet I’m pretty sure that’s not what you meant.

  2. Sandra Monks says:

    At last, questions are being asked. Let’s hope this is the beginning of an end to the incompetence that has been going on with Croydon Council.

  3. Josie Lamb says:

    The government must be sick to its back teeth with Croydon’s mess by now. Council tried to blame Covid19 to justify cuts.A lie.

  4. Kris Maddox says:

    Labour cash management….utter shambles. Typical Labour.

    • You might want to note that the council’s debt in 2014, after eight years of Tory administration, was already at £1billion. The Tories, too, had dabbled in property speculation – Fisher’s Folly cost £150million, three times what it should have cost – and we all ended up paying for it.
      And of course let’s not forget how Mike Fisher, the Tory leader, fiddled the process so that he could award himself more in allowances.

      Typical Conservatives.

  5. Marcus Rigby says:

    So Newman has finally resigned, not before time, lets hope he will not be looking for a golden handshake like the Negreedy!

  6. Anthony Mills says:

    In the context of golden handshakes and impending mass redundancies, legislation is already passed and awaiting only the regularatory framework to bring in a cap of £95,000 on local government exit agreements [and redundancies, and including pension compensations]. This would have reduced Negrini’s payment to less than a quarter. Still a lot. But just to show who’s side they are on, exit agreements will now be limited to those with a salary of over £80k. There are few such, most employees needing such agreements are at the lower end of the pay scales:-

    • That’s not quite correct, Anthony.
      Negrini’s pay-off comprised three parts.
      Eight years’ worth of pension contributions.
      Six months’ pay in lieu of notice. Neither of these would be affected by the new cap.
      And she was paid close to £100,000 for “loss of office”. It is this part of the pay-off that would be subject to the cap, and it appears the council anticipated the in-coming legislation in this respect.

      • Anthony Mills says:

        Thanks for your attention to accurate detail in this matter and the corrections resulting. However, it may be, when the regulations are finalised thatthe pension contribution would also be subject to the cap. Though I am not quite sure what ”pensions strain payments” are and what this means:- ”£95k cap includes pensions strain payments – money paid by the employer to the pension fund if someone aged 55 or over is made redundant and hence takes an unreduced early pension.This is money that the individual never sees – but they will be penalised anyway.” it would appear on the surface to be that ”making up” pension contributions to the full age amount for those exiting early will be included in the cap.

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