S114 notice will make cost-cutting ‘more stringent and tough’

CROYDON IN CRISIS: Chief finance officer Lisa Taylor sent out her report on the Section 114 notice at just after 3pm today, as her new boss, Katherine Kerswell, the interim council CEO, sent this email to all council staff

Katherine Kerswell: council staff have continued to seek growth and increased spending

Dear Colleagues,

As you know, our council is in a very difficult financial situation and at present is forecasting a significant overspend of many millions by the end of this financial year.

As one of the solutions to our financial difficulties; we have been in talks with government about them helping us to balance our budget through something called a Capitalisation Direction – a loan. To date, these have been supportive and positive. We are currently working with colleagues in their Rapid Review team who are meeting council staff and reviewing us. They will report back to [Ministry of Housing, Communities and Local Government] on our finances and other aspects of how we are facing up to our problems as part of their decision process on whether we get the loan agreed.

Despite these positive talks and a lot of work going on across the council on savings ideas both for this year and future years, we remain unable to balance our budget this year as we are required to do by law.

Colleagues across the council are still putting forward requests to spend money and for growth next year that we simply cannot afford. Too many of us are still operating like business as usual and are not facing up to our new reality that we are actually in a financial crisis. We have not been able to identify enough savings proposals for this year and next that will help us balance the budget.

The consequences of that behaviour are that we haven’t found the savings we need and therefore Lisa Taylor, our finance director, is issuing what is called a Section 114 notice with the support of the whole of the executive leadership team.

Issuing this notice is a rarely used and very serious measure that bans all new spending across the organisation with the exception of essential statutory services. It’s something that Lisa is legally required to do in her role as Section 151 officer if she knows that we are unable to balance the budget by the end of the financial year. It is an urgent signal of the seriousness of our financial situation, which I know affects all of us.

In terms of immediate next steps I’ve set those out below, but I know many of you will have questions about what exactly this means for the council and for you – right now and in the future.

We do have a staff briefing already booked for Thursday at 2.30pm so I’d like to use that session to talk about all of this in more detail and hear your thoughts and concerns…

What happens next?

When the notice is issued we have 21 days to produce an alternative emergency budget and discuss the implications at a full council meeting.

We must look at every measure we can to balance our budget and save money and stop spending.

What will immediately change under a Section 114 notice?

Many of the measures typically associated with a Section 114 notice are things we have already put in place, such as appointing a spending control panel and putting a freeze on recruitment. This Section 114 notice will make all those activities even more stringent and tough.

From today, the only spending allowed under the new emergency measures will be:

  • on goods and services which have already been received
  • expenditure required to deliver the council’s provision of essential statutory services at a minimum possible level
  • urgent expenditure required to safeguard the vulnerable citizens
  • expenditure required through existing legal agreements and contracts
  • expenditure funded through ring-fenced grants
  • expenditure necessary to achieve value for money or mitigate additional in-year costs

I made a commitment to you all when I joined that I would keep you fully informed.

So I want to be really clear that issuing a Section 114 will not affect staff pay or pensions.

However, it does reinforce the message I have already given that everything that costs the council money, including our terms and conditions, will need to be considered in the search for savings. We will, of course, work closely with the recognised trade unions over any proposal for change to these and consult on them with you and keep you fully informed.

I remain, as does the management team, determined to develop the Croydon Renewal Plan and with your ideas and help, change our council into a fully efficient and effective organisation delivering great services to the people of our borough.

The Section 114 activity will be incorporated into the Croydon Renewal Plan along with our work on the Report in the Public Interest.

We will need to work much harder than before on finding these savings and giving the government the confidence they need to be able to agree the Capitalisation Direction (the loan).

The exact detail of what the budget will involve, and the savings we must make, will be discussed and agreed during the next few weeks but as a first step I hope you can join the leader [Hamiida Ali], Lisa and I tomorrow afternoon to talk about this together.

Read more: Council forced to declare itself bankrupt
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: Council staff ‘are angry, upset and want answers’

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6 Responses to S114 notice will make cost-cutting ‘more stringent and tough’

  1. Amanda Friend says:

    How the FCUK did the auditor allow it to get so bad?

    Why didn’t they issue a public interest report a few years back, it may well have prevented all this mess.

    Sack the auditors and fire the s151 officer responsible for this mess.

  2. What a mess we have allowed our leaders to get us into. The council will reel from this for years to come; there will be no growth, no advancement, no improvement of primary services and the council employees who really matter on the front line (permanent and contract staff) are being lost.

    And Jo Negrini, Tony Newman, Alison Butler, Paul Scott and Simon Hall have effectively loaned £.25 billion of council resource to a made-it-up development company with a failed business plan.

    An utter lapse of leadership and individual responsibility. Unforgivable.

  3. About 20 years ago I attended a meeting of senior Council staff in the Council Chamber. It was a briefing on the forthcoming pressures on Local Government finances and Croydon in particular. At that time the Chief Executive, David Wechsler, who was a man that knew the Council inside out having served his “apprenticeship” at the Council, explained that Croydon had the advantage of a very low level of borrowing/debt. I think the figure was about £200 million. This meant that the revenue budget was not then hampered by interest payments top slicing the forecast reduction in available funding.

    We can now see that, with catastrophic consequences, successive administrations, advised by senior officers, have increased that level of debt to over £1.5 billion which probably means annual interest exceeding £30 million even a the very low borrowing rates that the Council used to be able to secure.

    This splurge of capital spending really took off under the Conservatives when they spent £140 million on Fishers Folly. Two sports centres, an hotel, a shopping centre, a botched refurb of Fairfield Halls and offices (ie Davis House and others) later, together with the “car crash” that is BxB, one finds the finances in meltdown.

    The Labour administration and current senior staff are carrying much of the blame but many of those who contributed to the mess have moved on over the past 10 years or more. They will avoid any accountability.

  4. Kevin Croucher says:

    Why the surprise? They only had to follow this esteemed organ and they would have seen this coming long ago.

  5. Pingback: The Failure of Brick by Brick – and Croydon | Decisions, Decisions, Decisions

  6. Billy James says:

    I really don’t blame the conservatives for not coming to the rescue of Croydon Council , would anyone give funds to a regime who elected a member of Tony’s circle as the new leader they would have been better to sack the lot of them.

    What exactly has Lisa Taylor been doing in her work role all these years has she been sleeping in the cupboard…

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