CROYDON IN CRISIS: When in a hole, stop digging? Not Croydon’s bankrupt council, which is ‘damned if it does, damned if it doesn’t’ according to a senior Tory councillor over plans to throw more cash at its loss-making house-builder. KEN LEE reports
Good money after bad… The “London Borough of Croydon is likely to lend more money to its cash-strapped housing company Brick by Brick,” according to a report on the website of CIPFA, the association of civic accountancy professionals.
The council’s loss-making house-builder is nearly six months late in publishing its annual accounts for 2019-2020, and senior sources working at Fisher’s Folly suggest that this continued delay may be because auditors cannot sign off on the accounts to say that Brick by Brick is a “going concern”, unless there is some kind of financial guarantee in writing from the council.
Such letters of assurance have been made repeatedly for Brick by Brick since it was formed in 2015, before the council was forced to declare itself broke, issuing a Section 114 notice in November.
Then, the council had a £66million hole in its budget for this year, of which £36million was money “at risk” of not being paid by Brick by Brick, according to the council’s senior finance officer, Lisa Taylor.
Now, it appears, the only way the council can retrieve any value out of the badly mismanaged housing company is to provide it with enough money to complete existing builds and flog-off some of its other sites as it is wound-down over the next couple of years.
Croydon has already lent £214million to Brick by Brick, which has failed to make a single loan repayment, repay any interest or pay over any profits from its ventures. According to auditors Grant Thornton, the council is owed around £110million. Since 2015, Brick by Brick has managed to deliver just three purpose-built council flats.
A report going to Monday’s cabinet meeting is recommending lending more money to the company, or otherwise risk never recovering any of the outstanding cash.
The council report to cabinet says, “Further borrowing is likely to be required and this will be in line with value for money criteria and will be detailed and approved in future cabinet reports.”
PublicFinance.co.uk quotes opposition Conservative councillor Jason Cummings as saying, “What the council is trying to do is turn around the performance of Brick by Brick in the short-term.
“If they cease to lend to it, then they are at risk of losing all of the money that they have put into it, so it is a kind of it is a ‘damned if you do, damned if you don’t’ situation.”
Croydon Tories’ shadow cabinet member for finance said, “They are planning to put more money in, but they have given us no details of what that looks like, and frankly, the fact that it is not in this paper suggests they do not want to.
“It is an indication of just how bad the internal reporting and controls are within Brick by Brick that they cannot give us any figure on the short-term borrowing requirements for the company.”
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