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Council Tax-payers pay for politicians’ game of cat-and-mouse

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CROYDON IN CRISIS: The bankrupt borough is kept waiting for its bail-out, as cabinet reports reveal that council overspending has continued to soar. By WALTER CRONXITE, political editor

Just when you thought things could not get any worse, Croydon Council’s old-new regime’s financial crisis is getting ever deeper.

The end of February was the latest date suggested by the bankrupt borough for it to receive news of its £150million bail-out from the government, which was requested to plug the £65million covid-shaped hole in this year’s budgets. At least, that was the view put forward by Lisa Taylor, the council’s finance director. And since then, she has quit.

Whichever way you cut it, with just days left before the Labour-run council is required by law to set its budget for 2021-2022, there’s been no news from the Conservative-run government. And there’s more than a suspicion that the Tories are dangling Croydon Labour by the tail, like a hungry cat might toy with a mouse.

Reports to the next cabinet meeting, to be held on Monday night, reveal that the new-old regime under council leader Hamida Ali is failing to get any kind of grip on the council’s overspending.

The papers reveal that the rate of overspending is getting worse. Worse, even, than the old-old regime under Ali’s mentor, the spendthrift (with other people’s money) Tony Newman.

The budget is running away from Ali’s cabinet with no sign of effective financial controls. Katharine Street sources blame sclerotic financial data systems and an uncooperative culture from what remains of the council’s middle management, who appear to have scant regard for financial control.

Hamida Ali: her council has been kept waiting for a decision

Such a blame game seems doomed to cause further troubles in getting Croydon’s finances anywhere back near or on the road to balancing the budget.

Chris Buss is now referred to as the borough’s “interim director of finance, investment and risk”, Taylor’s replacement. He has been imposed on Croydon by the government.

Buss, the former finance chief of Tory-controlled Wandsworth Council, was originally parachuted in as a fixer of Croydon’s shattered finances. He writes in his report that the council is set to spend a further £31.8million beyond its means in just the first three months of 2021.

That’s an annual rate of spend beyond income of £127.2million, the equivalent of a two-thirds overspend, compared to Croydon’s Council Tax receipts of £193.1million in the current financial year.

Croydon’s core spending power is £323.9million. Even before the £100million disaster that is the expected loss from Brick by Brick, the council’s finances are a basket case, with  a near-40 per cent per year overspend as measured against core spending power.

Councils are required to live within their means and post a balanced budget. Croydon will now need the government to bail it out for an immediate £96.5million, instead of the £64.7million shortfall that was submitted with their begging bowl at Christmas.

In December, when it submitted its carefully worked-out request to the Ministry of Housing, Communities and Local Government, Croydon spoke of needing £70million by March this year, leaving some wiggle room for unexpected costs above the expected shortfall of £64.7million.

Even under the new-broom leadership of council leader Ali and the interim CEO Katherine Kerswell, the splashes of red ink across the council’s ledger book have been caused by those poor financial controls, rampant need in adult care and children’s services, continuing covid-19 costs and collapsing income from parking fees.

It all suggests that £105million is needed urgently. The council is still seeking permission for “just” £150million in extra borrowing to cover day-to-day expenditure this financial year and next.

As one troubled Katharine Street source told Inside Croydon, “It is beyond belief that the council was able to hide £150million of overspend and a £100million loss at Brick by Brick – £250million hidden in total. And now that figure seems to be going even higher.”

The delay in the government’s response reflects how dire, or perhaps insoluble, Croydon’s financial case is. The council has identified only £85million of the savings it needs to make, out of the £150million short-term government fix.

Concerns are mounting among some at the Town Hall that the government is going to let Labour-run Croydon be hung out to dry, callously ignoring the impact that might have on services for some of the poor and most vulnerable in south London.

Backbench councillors are expressing their worries about delays in the government’s announcement

Yesterday, Labour back-bench councillor Andrew Pelling, after six years of being gagged under Newman’s leadership, posted a pointed question on social media: “Where’s the government’s response to Croydon Council’s plea for financial rescue?” he tweeted.

“Whatever the culpability for financial failure, are the government just going to let the council drown?”

Croydon’s cabinet budget meeting had already been postponed by a week. Now that meeting is shown on the council website as having been postponed yet again, to an unprecedented 2pm (virtual) gathering a further week later, on March 8.

This is crisis-management, council style. That cabinet meeting starts just four and a half hours before the full council is set to sit to finalise the budget and Council Tax for 2021-2022. The clock is ticking on the survival of Croydon Council.

Significantly, the cabinet’s budget get-together has been delayed until after the Chancellor’s Budget speech this coming Wednesday, March 3. It is not only MHCLG which is pondering Croydon Council’s fate, but also the Treasury.

“We’ve been given a strong indication we’ll find out on Thursday, after the Chancellor’s Budget,” another Katharine Street source said. A meeting with the government-appointed “improvement board” with senior Labour councillors has been arranged for March 4.

Waiting game: Croydon has been told that there may be an answer in Chancellor Rishi Sunak’s red box

Other councils, also affected by covid-19 spending demands, and who have sought much smaller bailouts that Croydon’s have been given less than they have asked for.

Croydon’s councillors have been effectively sidelined in the process, with little influence, as the real powerbrokers are Tony McArdle and the improvement board, who together with Buss are government commissioners in all but name.

The bailout comes at a time of heightened party politicking, with the Conservatives looking to retake the marginal Croydon Central parliamentary seat lost to Labour’s Sarah Jones in 2017, and with London’s May elections on the immediate horizon.

Labour are vulnerable locally, with their London Assembly candidate Patsy Cummings having been cabinet deputy for finance under Simon Hall at the time of Croydon’s financial meltdown. It is a cabinet position Cummings continues to hold.

That London elections have already shown that the government is tempted to play party politics with authorities reliant on government grants. London Mayor Sadiq Khan and his covid-19 poleaxed public transport system is already an obvious victim.

The dose of bitter medicine that was handed out to Transport for London seems likely to be prescribed as treatment for Croydon, too. If the government gives Croydon less than the minimum money needed, the council will face just 23 days to close any gap in its own budget with emergency closures of services and a referendum on increasing Council Tax by even more than 4.99 per cent, or special permission to increase CTax without a referendum.

You hear bold comments from Labour politicians about government slashing support for local government, with a 70 per cent cut in funding since 2010 often quoted. The real truth is found in Buss’ paper, a 57-page report which is much more thorough than budget reports Croydon councillors have been used to receiving in the past couple of years.

Wealthy Westminster receives almost twice as much per head in government grant as Croydon

Government grant to Croydon is down by £12.5million a year in the period since 2016-2017. That certainly adds up over time, but it is not as dramatic a shortfall as some might claim.

But the burden of paying for local public services has been shifted on to the Croydon Council Tax-payer at the direction of the Tory-run government. Council Tax collected in Croydon has gone up from £143.5million in 2016-2017 to an expected £208.49million in 2021-2022. That’s a whopping 45 per cent increase in receipts.

A modest amount of that increase comes from a growth in households underpinned by population growth. Extra income from household and government incentives for commercial growth has been disappointing. Despite Labour planning chief Paul Scott’s best efforts to concrete over most of the borough, there have been 2,789 fewer Council Tax-paying homes have been delivered than in previous budget assumptions, according to Buss. A significant factor in this slower growth is the absence of the Westfield redevelopment in blighted Croydon town centre.

Croydon has also missed out, through no fault even of its omnishambles of a council, from the mismatch in the amount the borough receives from government for Croydon being a key entry port for unaccompanied asylum-seeking children at Lunar House. And there can be no justification for government grant per person varying so much in London, as detailed in Buss’ paper.

Croydon gets £226.97 per head, while Buss’s old haunt of Wandsworth gets £290.26 per person. Neighbouring Lambeth gets £433.14 per head and Westminster – the borough of Mayfair and Westminster – gets just short of twice Croydon’s grant per head, at £446.98.

Croydon Labour’s hiding the full extent of its financial mess and a Tory government playing party political games will not get addressed in the immediate furore over the council’s crisis. And meanwhile, as the political duopoly play their games, the residents of the borough are left footing the cost of increased Council Tax bills in return for much-reduced services.

Read more: Jenrick orders urgent inquiry into ‘unacceptable’ council
Read more: Council forced to declare itself bankrupt
Read more: Officials to investigate possible wrong-doing at council


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