While Croydon Council waits on anxiously for the deliberations of Whitehall civil servants over whether it will be allowed its multi-million-pound bail-out, the Ministry of Housing, Communities and Local Government last night announced that it would be granting permission to four other local authorities for their capitalisation directions.
Tory-controlled Bexley, LibDem-run Eastbourne, Peterborough City Council, where there’s a Conservative majority, and Labour-run Luton, which is cash-strapped because its airport has been all but out of action due to coronavirus, have all had their applications granted.
The four authorities are thought to be among more than 20 councils across the country which have sought emergency financial assistance from the government, largely because of the extra spending and loss of income during the coronavirus lockdowns.
Despite covid-19 and a decade of austerity ravaging civic budgets across Britain, Croydon remains the only council in the country to have been forced into the ultimate measure of issuing a Section 114 notice because it is unable to deliver a balanced budget.
There was some justifiable cynicism expressed in some quarters last night after the MHCLG announcement, particularly around Bexley’s bail-out, that the Conservative-run government had come to the aid of a south London borough that is under Tory control, before confirming its decision on Labour-run Croydon.
The terms of Bexley’s bail-out are substantially different to Croydon’s, though.
Bexley submitted its application in October (as Inside Croydon reported, here). Croydon only handed in their recovery plan just before Christmas. That the MHCLG, and the Treasury, have taken more than three months to process Bexley’s bid won’t do anything to lift the spirits at Fisher’s Folly, as efforts are made to prepare a budget for 2021-2022. Without a government decision on the aid package before the end of this month, Lisa Taylor, the council’s (currently suspended) finance director has warned that it would likely be impossible to set a budget for the next financial year.
Last night, MHCLG announced that Bexley could have a capitalisation direction of £3.87million for the current financial year.
When Croydon submitted its recovery plan to MHCLG, they sought £150million of borrowing through to 2024.
The emergency settlements for the three other councils which had their applications agreed last night were of similar scale: Eastbourne £6.8million, Peterborough £4.8million and Luton, with an international airport to operate, £35million. All had submitted their applications by the beginning of October.
Katherine Kerswell, the government-approved interim chief exec in Croydon, has told councillors that any delay in deciding this borough’s financial settlement may be because the sheer volume of similar applications being considered by MHCLG at present.
She suggested Croydon was one of more than 20 boroughs rattling their civic begging bowls, and given that Kerswell submitted the recovery plan less than two months ago, it may be at the back of the queue.
At least last week an MHCLG rapid review of the council’s finances and governance, ordered by Secretary of State Robert Jenrick, recommended granting Croydon’s application on the grounds that “there is no credible alternative”.
This week, Rob Whiteman, the CEO of CIPFA, the Chartered Institute of Public Finance and Accountancy, told a parliamentary select committee that he was aware of 12 local authorities that are “in or around a Section 114 position”. All are in discussions with MHCLG and six had agreed terms.
“I think personally there are more than 12,” Whiteman said. “I think 12 is probably the tip of the iceberg.”
Whiteman, in his testimony to MPs, said that “significant cutbacks” due to public spending cuts over the past decade had contributed to the councils’ financial difficulties. Councils have had £15billion cut from their grants from government since 2010. Coronavirus exposed how threadbare some borough’s coffers had become.
Government has provided £3.6billion of extra funding in the past year because of covid-19, but the committee was told that this will still leave councils across the country £2billion short of the £7.2billion hit to their finances in 2020-2021 because of the pandemic.
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