CROYDON IN CRISIS: Council reports rewritten, lack of commercial experience in key positions and a ‘very controlling’ former leader and his inner circle. The rapid review of Croydon Council paints a picture that will be very familiar to readers of Inside Croydon. By STEVEN DOWNES
There was huge relief for senior figures at the council this afternoon, when Robert Jenrick’s rapid review team recommended that the Tory government minister should approve the multi-million-pound bail-out that would allow Croydon to balance its budget for this financial year.
“We believe there is no credible alternative to the option of capitalisation, that will restore the council to financial health,” said the report, drafted by Chris Wood and published by the Ministry of Housing, Communities and Local Government.
The recommendation to allow the capitalisation directive – a crucial part of the recovery plan prepared by Katherine Kerswell, the interim chief exec, and council leader Hamida Ali, where the council is permitted to use around an initial £25million of its capital (over four years, to 2024, the bail-out will amount to £150million) for its day-to-day revenue costs – comes with some very tight strings attached, however.
These include the need for an improvement board, which will be peering over the shoulders of Kerswell and Councillor Ali for the next three years.
“The councillors and officers do appear to have understood and accepted the perilousness of their position and the need to take difficult and drastic decisions,” Wood’s report states.
Elsewhere in the report, Wood is hugely critical of the previous council leader, Tony Newman and his ruling clique, the failings of the council’s scrutiny and audit committees, and of the slack management over Brick by Brick, the council’s loss-making house-builder.
Wood highlights how council officials were instructed by members of Newman’s cabinet to rewrite some of their reports, in effect to disguise the council’s mounting financial problems.
Wood does not accept the suggestion that Croydon’s financial collapse can be explained away by blaming the demands of the covid-19 emergency. “Many local authorities have felt the added burden on services brought about by the covid-19 health crisis, but few have crumbled financially in the way that Croydon has,” wrote Wood, a former council CEO in Newham.
“It is clear that in recent history Croydon Council has failed to manage its finances adequately in many… areas. It is a council that is said to be unfamiliar with taking and implementing difficult financial decisions and as a consequence it has engendered a culture of poor budget management and poor financial control,” the report states.
“There seems to be a unanimity of view that these failings are attributable to the poor leadership and poor management of the council over a number of years. It is said that the strong leader and cabinet model allowed the former leader to create an inner circle of a small number of cabinet members who have been very controlling in their management of the council and its finances.
“There was a clear desire to pursue an ambitious growth agenda for Croydon and when elements of this growth could not be realised, rather than increased caution, it seems there was a continued desire to accentuate the positive.
“We heard many accounts of officers being asked to re-word cabinet reports to present the most favourable picture. It is evident that the tone of many financial reports to cabinet do not accurately reflect the seriousness of the council’s financial position.”
And when it came to Newman’s team’s dabbling in commercial property investment and their flagship project, “It is our view that the council has managed some of these initiatives (most particularly Brick by Brick) extremely poorly.”
Wood’s report states that “checks and balances appear not to have worked”. The council’s scrutiny committee, chaired by Sean Fitzsimons – who was placed on allowances of £42,000 per year by Newman – was “not forceful in their challenge and did not refer key decisions back for the consideration of full council.”
Wood adds, “The audit committee appears to have been similarly unchallenging.” Wood even recommends that a councillor from the Conservative opposition group should be appointed as chair of the audit committee, replacing Labour’s Karen Jewitt.
And Wood notes, “There is a good deal of anger and frustration amongst many staff and [councillors] that the council has been led into such a position.”
In recommending the bail-out for the bankrupt borough, Wood’s report to Jenrick states, “We can give you assurance that Croydon Council recognises the perilousness of its position and we saw lots of evidence of officers and members [councillors] working energetically to mount an effective recovery.”
But possibly the most important paragraph in the 18-page report is para 3.4.
“With regard to the Capitalisation Directive, we recommend that you should agree to this. We recognise that owing to the council’s poor track record in financial management, that this decision carries with it some risks, ie the council may fail to solve its financial crisis. Therefore, our recommendations seek to mitigate this risk through proposing continued oversight and scrutiny of the council’s progress with regular updates to your department.
“It is our view that there is no credible alternative option to capitalisation… In order to set its budget in February for 2021-2022 it will need to have knowledge of the availability of capitalisation going forward. Given the scale of the capitalisation sought we recognise that this is going to be exceptionally difficult for the Treasury, at a time when demands on Government spending and borrowing are so high.”
And the report also contains a warning for Croydon should the new(ish) management fails to meet its targets. “If it fails significantly in meeting these milestones, (particularly managing within budget) then we would recommend that you intervene by installing a commissioner or team of commissioners as appropriate, to take over decision-making in key areas.”
Wood and his team also make a series of other recommendations, including a reorganisation of the council’s structure and “that the executive leadership of the council is strengthened and has sufficient capability, capacity and experience to lead the recovery” – something which could lead to a wholesale clear-out among some of the directors and execs that were recruited to Croydon when Jo Negrini was the council’s CEO.
Wood wants to see, “officers at senior level with sufficient commercial experience and expertise to properly oversee the council’s commercial investment portfolio”.
Some of the recommendations have already been implemented, such as the appointment of new directors at Brick by Brick.
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