CROYDON IN CRISIS: ‘There is much that the council needs to do to become a properly functioning local authority’ says panel’s report to government, as it recommends more cuts to Croydon’s Adult Social Care and Children’s Services. By STEVEN DOWNES
The council leadership has been summoned to Westminster next week to provide evidence to a Parliamentary select committee inquiry on “local authority financial sustainability and the Section 114 regime”.
Council leader Hamida Ali will be joined by Katherine Kerswell, the interim chief exec, Chris Buss, recently appointed as the council’s chief finance officer, together with Sarah Ironmonger from external auditors Grant Thornton, appearing before the local government committee chaired by veteran Sheffield Labour MP Clive Betts on March 25.
You can imagine the sort of questions from the committee’s MPs… “So, Councillor Ali, you say you had no idea what was going on with the financing of Brick by Brick or the 4-star hotel while you were a member of the council cabinet for five years?”
Or, “Ms Kerswell, is there not a touch of envy that the pay-off you received on leaving Kent County Council was less than what Croydon has since established as a ‘Full Negrini’?”
The Croydon contingent will arrive for the committee session with the experience of the council issuing two Section 114 notices at the end of last year fresh in their memories, and with the formal approval from the government for a record £120million bail-out having been delivered to Fisher’s Folly just this week.
The council had been given a heads-up that the government would agree to the bail-out just in time for its budget-setting meetings last week, but the formal documentation was only released by the Ministry for Housing, Communities and Local Government on Wednesday night, together with the first report from the government-appointed improvement and assurance panel.
The panel’s report, which is dated February 5, has been accepted by Robert Jenrick, the Secretary of State, and was used to help approve the capitalisation direction.
But the report from the panel of Tony McArdle, the chair, Margaret Lee and Philip Brookes, will fill Croydon residents and council employees with a sense of dread.
“It is clear…” is a form of words of which McArdle appears particularly fond.
“It is clear that the residents of Croydon will have to exercise considerable patience,” his report states at one point.
And, “It is clear… that there is much that the council needs to do to become a properly functioning local authority.”
The improvement panel says that the bail-out will be used by the council “to disentangle itself from ill-conceived property ventures and reconfigure its operational services on the basis of providing competent delivery within an affordable budget”, two endeavours which it describes as being of “considerable magnitude”.
McArdle’s report describes the efforts made so far by the council as “a creditable start”.
The report identifies a number of areas where improvements must be made, “such as a full-scale review of senior management positions and appointments”, something which since the start of last month is now well underway following the suspension of five members of the executive leadership team, three of whom have already left Fisher’s Folly for a final time.
But it is clear that the improvement panel regard the Labour-run council’s disastrous adventures into the commercial property market and failed house-building company as serious issues to tackle in order to sort out the borough’s finances.
Events have moved on since McArdle and his team wrote their report for Jenrick six weeks ago, such as with the approval of a plan to flog off Brick by Brick in its entirety or sell those sites that cannot be finished by the end of this year.
As Inside Croydon first revealed, secret report from Buss estimates that, of £200million in loans made to Brick by Brick by the council since the company was formed in 2015, perhaps as much as £100million will never be recovered. According to McArdle, Buss’s disposals options are “in the circumstances… the only realistic options available”.
McArdle states that the position needs “to be resolved as soon as possible to provide additional certainty for financial planning purposes”. Even if Buss and the council do manage to find a loaded buyer prepared to spend £100million-plus for the wreckage of Brick by Brick, “it is not clear yet if this is sufficient”.
The panel provides its approval of another decision, also agreed last month, to cut the council’s losses with the Croydon Park Hotel site and seek a buyer for that property, too.
The hotel is not the only example of the council having acquired an asset at a price considerably higher than its latest valuation. In what McArdle’s report describes as “a highly unusual arrangement” over the refurbishment of the Fairfield Halls, the neighbouring development site, College Green, was recently revalued at £20million – representing a £5million drop in value.
Then there’s the small issue of a £30million refurbishment of the Halls by Brick by Brick that ended up costing £60million.
“Given this overspend,” McArdle’s report states, “we will need to undertake further discussions with the council to fully understand the impact of this on the financial position of the authority, and thus what may need to be done in respect of this.”
An auditors’ investigation, conducted by Ironmonger and Grant Thornton, is expected to report on the Fairfield Halls fiasco imminently.
McArdle describes the council’s overall financial position as “fragile”. It “requires all of the savings identified to be delivered, as well as continuing tight control of expenditure”. And the immediate prospects are tough, with what McArdle calls “a very difficult backdrop”, the latest covid lockdown.
With the winning entry in this week’s statement of the bleedin’ obvious awards, McArdle’s report says, “The Council does not have a good record of savings delivery, nor a culture of tight financial control.” Signing off the 2019-2020 accounts “is still some way off”.
“This,” McArdle says, “is a very serious position.”
And they note, ominously, “It must be considered possible, given the above, that the financial position of the council has not yet been fully exposed. We would expect a forensic examination of the financial position to be carried out as an absolute priority.”
It seems that Adult Social Care and Children’s Services are being targeted for some of the biggest cuts in spending – or “rebasing the budgets” – to balance the books in the next two financial years.
“The council has stated its ambition of returning the operations of its two largest services – Children’s and Adults – to the London borough average at the earliest possible point. At some point, a more precise measure of what these services should cost may properly be made, but for now, this objective should suffice.”
Croydon’s Children’s Services is barely a year out of a three-year spell in special measures, after failing an Ofsted inspection. It took at least £30million of additional spending for Croydon to dig itself out of that hole.
McArdle, clearly, is unimpressed with the Children’s Services or Adult Social Care performance in Croydon.
“Presently, both services are the most expensive, on a per capita basis, of any borough in London,” he notes. “Both also deliver, in the round, average or above average performance, but since equally good performance can be found at levels of cost that are below the London average, there is no reason why cost reduction cannot be made while service quality is maintained.
“Children’s Services has an outline plan which focuses on reducing the number of children in care, and on the cost of care packages for children with disabilities. In both areas, opportunities to maintain or improve service are consistent with greater spending efficiency, and the governance and management arrangements to drive these changes are being put in place. These plans are purposeful, but are in an early stage of development.”
Significantly, for government-appointed inspectors, the improvement panel recognises that Croydon has been short-changed by government over the amount it receives for UASCs – unaccompanied asylum-seeking children, who arrive in the borough to attend the Home Office department at Lunar House and are often then placed into the borough’s care, at considerable cost.
“The number of unaccompanied asylum-seeking children (UASC) in the borough has long been recognised as an extraordinary pressure on service delivery and a significant budget pressure in its own right. Work is in hand to seek support from the Department for Education and the Home Office in addressing these pressures in order to make the burden more proportionate,” the report states.
The report comes dripping with undisguised implication that Croydon Council has been very badly run.
“Both areas of service will require careful management through the necessary change. They deliver services to the most vulnerable of people, and failure to deliver will have a significant impact on individuals and the authority.
“To be cost effective, they both require excellent social work practice, good partnerships with both the health service and the commercial sector, and a clear strategic direction which delivers preventative and early intervention options.
“Above all, they require the very best leadership.”
McArdle and his colleagues’ next report to Jenrick is expected in April.
Read more: Council set to take £100m hit as it winds down Brick by Brick
Read more: Brick by Brick has paid nothing to council
Read more: ‘An accountant could have foreseen this more than a year ago’
Read more: Officials to investigate possible wrong-doing at council
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