Croydon In Crisis: Council forced to declare itself bankrupt

EXCLUSIVE: ‘Devastating blow’ for the borough as it has issued a Section 114 notice, making it the first local authority in London for two decades to admit it has gone bust. By STEVEN DOWNES

Croydon is the first council in London to go bust in 20 years

Croydon Council’s finance director, Lisa Taylor, today succumbed to mounting pressure to issue a Section 114 notice, an admission by the local authority that it has gone bust.

The move will see day-to-day control of the council handed over to government-appointed commissioners. Croydon will become only the second council in England in 20 years to issue a S114 notice, and the first in London since Hackney in 2000.

The Section 114 notice bans all new expenditure at the council with the exception of statutory services for protecting vulnerable people.

Lisa Taylor: forced to act now

The move comes after six months of the council staff working with accountants, auditors and consultants inside Fisher’s Folly, and even with officials from the Ministry of Housing, Communities and Local Government, to avoid resorting to such an extreme measure.

But it also comes just two weeks after Robert Jenrick, the local government secretary, sent in a “rapid review” squad to look at Croydon’s “overall governance, culture and risk management”, to assess whether the government should give the council further help.

In her formal notice issued today, Taylor wrote, “Since the 23 October 2020, mindful of my statutory duty under Section 114, I have kept the need to issue a S114 notice under constant review.

“It is now my professional judgement as the [chief finance officer] for Croydon Council that in the current financial year (2020-2021), despite the ongoing conversations with MHCLG and the presentation of amendments to the General Fund budget at Cabinet on the 21 September 2020, that the forecast expenditure continues to significantly exceed resources, and plans to rectify this financial position are insufficient, leaving the council with a significant unfunded financial deficit this year.

“Therefore I have a duty to issue all members of the council with this S114 notice.”

Taylor gave a series of reasons for taking this action now, the principal one being a clarification last week from CIPFA, the local authorities finance professionals body, that the “free pass” waiver that the MHCLG had given councils because of the covid-19 pandemic would not apply to Croydon because, “Croydon’s financial pressures are not all related to the pandemic.”

Katherine Kerswell: even her Whitehall connections could not save Croydon

Katherine Kerswell, the council’s interim CEO, had also received a letter from the MHCLG yesterday. The letter states that Jenrick’s rapid review report may not be ready until the end of the calendar year – a month later than had been expected.

“In my view,” Taylor wrote, “this confirmation will arrive too late for Croydon to be in a position where it is able to deliver a balance[d] budget this financial year and therefore we will be required to issue this S114 notice.”

The council had applied to the MHCLG for a capitalisation direction – effectively a loan from the government in order to balance this year’s budget. Without Jenrick’s less-than-rapid review report, that money won’t be received soon enough.

The decision will be a huge blow for Hamida Ali, who was recently appointed council leader following the resignation of Tony Newman, and for Steve Reed OBE, the MP for Croydon North and Labour parliamentary spokesman on local government, who was a firm supporter of Newman during his six years in control of the Town Hall.

Since taking on the task of sorting out the mess created by Newman and his numpties, Ali – who was herself part of Newman’s cabinet – has repeatedly stressed the importance that Croydon continues to be run by the people from Croydon.

“There are painful decisions that lie ahead – decisions that we did not want to take, because we know the impact they will have on the most vulnerable people in our communities, who rely on the council and its services,” Ali said last month when her appointment was confirmed.

“But if we don’t make these decisions now, then we, as a town, will no longer be in control of our own destiny. The alternative is that the keys are taken away and that we, as local people, are shut out. It’s clear that is not what most local people want, nor is it in their interests.”

But that is now what looks most likely to happen.

Tony Newman: much to answer for over council’s financial collapse

“This will be devastating for our borough,” a Katharine Street source said today.

“I’m completely shocked. Since she arrived, the interim chief exec Katherine Kerswell has been at pains to point out to us councillors that there was no guarantee that the council’s capitalisation direction bid would be successful.

“But I think everyone thought that the bid would, at least, get as far as Robert Jenrick’s in-tray.

“Now it looks as if everything is about to be taken out of Croydon’s hands.”

Since February 2018, when Tory-controlled Northamptonshire County Council issued its S114 notice, that authority has effectively been under the control of a pair of government-appointed commissioners, who set about reorganising the authority’s finances and also breaking up the council into new bodies.

Northants was the first local authority in England to declare itself bust for 20 years when it was faced with a budget shortfall of nearly £70million. Croydon’s precarious finances have been tipped over the edge by covid-19, which has cost the council around £70million this year, leaving Ali, Taylor and Kerswell trying to find a package of savings of at least £42million.

Moves have been underway for three months to erase more than 400 jobs at the council, part of 15 per cent budget cuts, including through some compulsory redundancies.

But the shortcomings of Croydon’s Labour administration under Newman and his choice of chief exec, Jo Negrini, were laid bare in a damning Report in the Public Interest published by auditors Grant Thornton two weeks ago.

In their report, the auditors revealed that in September, Taylor, as the Section 151 officer, “drafted, but did not formally issue, a Section 114 report which was discussed with the then leader [Newman], the deputy leader [Alison Butler], the then interim chief executive [possibly Shifa Mustafa] and monitoring officer [Jacqueline Harris-Baker]…”

Grant Thornton’s report goes on to lay out a sequence of events, and was strongly critical of the borough’s councillors as they sleepwalked their way through the crisis. In one instance, the report states, “The scrutiny and overview committee on 25 August 2020 called in the cabinet reports ‘Responding to the Local Government Funding Challenge’ and ‘July Financial Review’ and raised a number of pertinent questions. In response to member questions, the Section 151 Officer confirmed that she could not guarantee that a Section 114 report would be avoided.

“Members of the scrutiny and overview committee accepted the responses received and did not refer the matter to full council.

“In our view this did not demonstrate an understanding of the urgency of the financial position.”

They might realise the urgency of the position now.

Read more: What is a S114 notice? What will it mean for the council?
Read more: Jenrick orders urgent inquiry into ‘unacceptable’ council
Read more: Brick by Brick has paid nothing to council
Read more: Council ignored five warnings on reserves
Read more: Council staff ‘are angry, upset and want answers’


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
This entry was posted in Croydon Council, Hamida Ali, Katherine Kerswell, Lisa Taylor, Report in the Public Interest, Section 114 notice, Tony Newman and tagged , , , , , , , , , . Bookmark the permalink.

38 Responses to Croydon In Crisis: Council forced to declare itself bankrupt

  1. For a long time I felt some pangs of guilt about how critical I was being of Negrini, Tony and band of hangers on. I am now bathing in a glow of self-righteousness. What a band of oafs!

    • Think you’re being a tad kind to them

    • Tony Newman’s ineptitude as a leader has always been clear. The damage to Croydon’s finances is a matter of record and now we have the ignominy of being the borough in London that went bankrupt.

      Another nail in the coffin of Croydon’s reputation. It turns the clock back on years of efforts to raise the reputation of this borough.

      Jo Negrini – you know you only had the CEO job because Tony Newman’s ill-advised decision to hand you the job. I hope you now have the temerity to hand back to the council the half million pounds you squeezed out of the borough, via Newman, before being forced to leave your job.

  2. Maverick says:

    NO shit Sherlock ! I think we all knew that already…when you have a local authority run by complete idiots who have no idea how a local authority runs. Directors who don’t know their arse from their elbow and who were only appointed because they danced to others tunes. I feel sorry for the REAL workers at the council, I’ve always said “ They are lions led by Donkeys”. I would love the council to come clean and show what qualifications these so call “ Directors” have which is relevant to their role.

  3. Chris says:

    This is about as humiliating as it gets.

    I assume the borough will now be run by a bunch of unelected accountants and faceless bureaucrats paid astonishing amounts per day?

  4. Cazza says:

    If the people of Croydon was running the show, we would not be in this predicament in the first place!
    No Brick by Brick
    No Golden Handshake for Negrini
    And it would not be the staff that would be made redundant, it would be all the Crooks involved in this shambles!

  5. It was inevitable that all the bricks would fall but unfortunately not on the heads of numpty Newman, swaggering Scott, bumptious Butler, greedy Negrini or any other of that cabal. It will fall on the staff as their jobs get further reduced and the council tax payers who will get cuts in services in times of high need. There is little justice in this.

  6. Paul Brooker says:

    Surely this will fall under “misappropriation of public funds” and Negrini, Newman, Hall and everybody else should be held accountable.
    The Council Tax will now be going up and penalising the residents of Croydon for their neglect.
    I hope that those poor workers that are made redundant get the proper pay out that they deserve. Here is an idea….. get the £400,000+ back from Negrini for starters

  7. Chris says:

    Just as an aside, it seems this story isn’t as newsworthy as I first thought. No mention of it all in the headlines of BBC ‘London’ News which leads with a loony councillor in Havering demanding an end to lockdown in the borough.

    Pudsey Bear is also in the headlines it seems, but not Croydon.

    Fantastic news judgement!

  8. It’s on BBC as we speak! Including Chris Philp being sickingly self righteous.

  9. Hanley Driscoll says:

    The Directors of Croydon Council are a disgrace. Self serving, greedy and seemingly unaccountable. Look at the shambles of the town centre plans. I feel embarrassed to live in the borough £1.5 billion debt and nothing in Croydon to show for it!

  10. Chris Flynn says:

    Congratulations Inside Croydon on your reporting over the years. You must feel a tremendous sense of vindication that you were right to pursue what others chose to ignored (although of course very sad at the consequences for Croydon that this news brings). Whilst I don’t think IC always get everything spot on, I wonder how Newman and Negrini feel now about their rebuttals of IC over the years. We’re not stupid, indeed…

  11. MatthewP says:

    Two main reasons why they went bankrupt were the disastrous public-private housing partnership, Brick By Brick and acquiring land & shops to build a Westfield that never happened (and never will!). Remember when they bought St John’s Walk and the leases for the shops leaving them in limbo? Claiming to develop “Park Place” which fell through? Nestle, a big employer got fed up and left, and the others let the leases run out and left.

    The council then announced a Westfield was coming to town, so the council “bought out” Katherine Street, St. John’s Walk, some George Street stores and the Allders. The businesses were moved or shut down. This giant mall was in “development” for nearly EIGHT years. As the economy tanked and big stores shut down, Whitgift Centre mall was falling apart with leaks and vacant stores and our other mall Centrale, had two floors of EMPTY space and a gigantic House Of Fraser that nobody can afford to shop in.

    Now in 2020, Croydon town centre is a mess, it’s dirty, empty shops, graffiti, no entertainment for young people like bars and nightclubs, areas paved over that block traffic, stupid street art, more homeless people than ever, more tiny flats being built with high rents… Croydon taxpayers saw this coming…

    • Glad to see you’ve been reading Inside Croydon’s coverage of the mismanagement at the council since 2011 or so, Matthew, though you’re a little off-target with the assumption that the costs of buying property around the Westfield site are being carried by the council. They are not.

      (PS. Where’s St John’s Walk? Do you mean St George’s?)

      • MatthewP says:

        I did mean St George’s Walk, but I was ranting 🙂 Let’s hope the new councillors can bring business and entertainment back to Croydon but we’re facing tough times, thanks Covid-19….

  12. I don’t want to live in a borough that still has Tony Newman in his role as a councillor.

    The damage caused as a result of going bankrupt will take years to recover from. What does that say to outside investors?

    Tony Newman, Paul Scott and the rest of his inner cabinet should stand down and open their seats to election. Until then, their council paid expenses should be stopped.

  13. David Simons says:

    As if Croydon residents weren’t already unfairly ridiculed for living in the Borough – this is humiliating for our hard working residents and businesses. Every single Director must go, they can say they knew nothing but they were all complicit by the very fact they were Directors. They all took their salaries and no one blew the whistle on the staggering misappropriation of public funds. Let’s have some national intervention from Steer Calmer, he needs to let Croydon know that Labour messed up big time and show support to the local party members who are having to hang their heads in shame just because they share the same politics with Newman and his gang.

    • Maverick says:

      David I totally agree with you that EVERY Director should go, they have dodged the bullet too many times with their incompetence. They can’t claim they never knew anything about it as they are ALL responsible for their own departments budget and what it’s spent on ! So the buck stops with them.

  14. Then they’d all take their severance payments a la Negreedy. New, inexperienced (as far as knowing Croydon) Directors would be shipped in, all with more expense and chaos. Just look at what we got when Negreedy’s predecessor went! The prevailing ethos with many of them is that even if it’s not broke, fix it, to justify their appointment – and ‘fix it’ here means pruning out more of their staff who are often hardworking and blameless, so they can boast about ‘savings’. So I think a ‘night of the long knives” would not work and a selective approach to sacking the worst performing Directors would be better, much as our anger and disappointment might take our minds elsewhere.

  15. Michael Lee says:

    Clearly the gov has now little to be confident in Croydon’s administration and who would blame them with the uncontrollable debts higher than the two aforementioned councils who went through S114.
    There are too many directors of irrelevance in Croydon council and they need to go.

  16. Dug Conn says:

    Does this mean that we can save the closing of purley swimming pool and gym which are ideally sited for all purley and south croydon residents, so that it can be sold off for another block of flats. It appears that there will be more than 200 flats for sale in purley centre in 2021. All of them within 3 mins walk of purley leisure centre, ideally allowing the possible 200 families (600 or possible residents) escape from their confined accommodation. Exercise and acitivities is good for all the locals especially the active elderly and young (who should all be taught to swim). Closing this pool also stops local schools from giving their kids this training. 4 other croydon leisure centres have been allowed to re-open none of which are as convenient as purley’s. NOW LET PURLEY DO THE SAME WHEN COVID RESTRICTIONS ALLOW. New croydon management team please note.

    • Marie Jones says:

      Wishful thinking Dug! The site has been earmarked for redevelopment for many years & I bet it won’t be long until there is another block of hundreds of flats there too. Sadly the council are allowing the destruction of Purley to happen before their eyes & they really couldn’t give a toss.

      The current council directors have got a lot to answer for and have allowed this dire financial situation to go on for too long. Feel sorry for any staff left behind to clear up this mess!

  17. Cazza says:

    All the services will now be reduced by a great deal, Council Tax will go up, Parking is going up, no doubt collecting our rubbish will now be an additional item on top of what we pay in our Council Tax!
    Any which way we look at it, we will be the ones reducing the £1.5 Billion DEBT and the staff who are made redundant will suffer a great deal!

    • Council Tax can only be increased by 4 per cent per year (plus the Mayor of London’s precept).
      Revenue from parking and permits is ring-fenced, and can only be used for road maintenance, improvements and infrastructure.
      Refuse collection is a statutory service – it has to be provided by law.
      But you are correct to suggest that staff being made redundant will suffer.

  18. Hazel swain says:

    perhaps if less had been spent on stupid painting of pavements . roads and murals .. or on Brick by Brick projects that residents ( and council tax payers !)objected to, there would be some money left. totally incompetent bunch from the start ,

  19. Neither is it a good time for Croydon to be counting its assets. Working from home will probably become entrenched for many, post-COVID-19, so which companies will need more office space? Similarly, how likely is Croydon Park Hotel to be viable in the near future. Neither will Fairfield Halls – after all the cost of refurbishment, be up and running any time soon. I can’t bring to mind any sensible investment they have made in recent years. As has been pointed out, even cuts in services are (perhaps mercifully in some cases) hard to implement, yet the axe will fall in numbers of Council staff employed, once more. Town Halls have been decimated for a decade and they increasingly rely on voluntarism or the public buying privately. There is very little fat to be trimmed. Perhaps Mr Philp can be a Philpanthropist and start leaning on his party for some central government help. He needs to do more than stand on the sidelines and score political points. We could offer to wheel out the guilty Town Burghers – we all know who they are – as a civic sacrifice!

  20. Barbara Rudd says:

    I’ve said it before and I’ll say it again… Elvery. And where is he now? Keeping his head down in shame after the West Sussex debacle? Not a bit of it sir!

    • Yes, Barbara, we know you’ve “said it before”. But repeating one man’s surname over and again does not make a whole lot of sense.

      Elvery was the council finance director, deputy CEO and then CEO. When he left Croydon in 2016, the council debts were less than £1bn (the amount it had reached under the Tories and their CCURV disaster property scheme by 2014).

      He went to West Sussex, where he was quickly found out. The council leader who appointed him has since lost her position and been deselected by local Tories.

      Elvery is now interim chief exec of two local authorities on the east coast.

      So what’s your point, Barbara?

      • BARudd says:

        My point is that this dreadful mismanagement of tax payers money and leaders that doesn’t seem to care about it goes back years and years and is the responsibility of many different people who seem to pop up again unscathed and taking tax payers money somewhere else. There’s something really rotten about local government all over

  21. Lewis White says:

    To be fair to the Council , Covid was not of their making.

    Had Covid not broken out, the restored Fairfield halls would by now be open for business, and audiences would be coming back , to enjoy a range of performances from comedy to classical , tribute to tap and tango dancing, rock to rap, and maybe drag wrestling.

    The Croydon Court Hotel depended– to a large extent on providing accommodation for people needing to stay close to central London, but without paying central London prices for equivalent quality rooms.

    Inside Croydon reported some time ago that the council had paid millions MORE than the asking price. How that is possible is hard to fathom, but I trust Inside Croydon to be reporting facts.

    Shortly after the onset of Covid, Inside Croydon reported that the council had refused to reduce the rent to the hotel operators, who had pleaded for this in order to survive the Covid lockdown.

    If that is true, that is a great pity, and reflects very badly on the council. The hotel then went out of business, and many people were made jobless.

    Neither factors alter the fact that there has been a ready market for hotel beds in Croydon, and that had covid not ocurred, the hotel would probably still be open and paying rent to the Council.

    I am not sure how the occupancy of the units, and rental income of the Colonnades were befiore Covid, and how they are now, but my impression was that they were “washing their face” and were a long term investment.

    Covid clear;ly has impacted the Council’s commercial income.

    Turning to the human impacts of Covid and with particular regard to the sums that the Council has incurred due to Covid in its operation of public services, it would be useful to see a chart showing a breakdown of the figures for the London Boroughs and a breakdown of the costs and the population of each Borough.

    Has Croydon paid out more than other boroughs due to special circumstances outside the Council’s control?

    I haven’t got the time to plough through reports, so could Inside Croydon illuminate the facts please?

    • The fact remains that the proper role of Councils is to run local services for the population they serve, not to set themselves up as ‘wannabe’ entrepeneurs. Experience shows us that business can run the private sector and councils can run the state sector. Once either steps into the other’s territory, there is always a disaster.

      The arrival of Covid19 has been a body blow to all Councils but in Croydon’s case it has been a fatal blow and this difference is accounted for largely by the financial mess that existed, even before the virus struck.

      Covid and unequal support from central government are exacerbating rather than causal factors! There are no excuses here and the Council need to offer an abject apology to their staff and to the Council Tax payers.

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