CROYDON IN CRISIS: All but one of the borough’s Labour councillors voted that they had ‘confidence’ in Tony Newman and Simon Hall last year – just weeks after they had received a briefing note that told of an £85m budget deficit and 400 council job cuts being made under the duo’s leadership. EXCLUSIVE by STEVEN DOWNES
Croydon’s Labour councillors received a full warning of the dire state of the borough’s finances in July 2020 – two months before auditors delivered a devastating Report in The Public Interest and four months before the council was forced to effectively declare itself bankrupt by issuing a Section 114 notice.
Inside Croydon has obtained a copy of the warning, which came in the form of a two-page briefing document that, after the first three months of the covid crisis, outlined an overspend in the year’s budget of £85million and measures that were already being taken to claw back some money, including the axing 400 council jobs.
The briefing note was written by Simon Hall, who had been the council cabinet member for finance for the previous six years.
Today, a Katharine Street source who has been shown the document, told Inside Croydon, “There’s no way any of Labour’s councillors, having read this briefing note, could possibly claim that they were not warned about the council’s financial crisis.”
In his note, Hall advised his Labour colleagues, “There is no easy way to close a gap that is 8 per cent of our gross expenditure and 20 per cent of our net expenditure.
“We must remember our reserves are £10million for General Fund alone and £32million for general and earmarked reserves combined.
“In order to avoid Section 114 and its consequences and in order to keep control of our destiny and make sure our actions, whilst tough, are consistent with our ethos and our manifesto, we have started taking action for over two months,” Hall wrote.
It was barely a month later when the council chief exec quit her job, taking a £440,000 pay-off with her (many believe the payment may have been authorised by Hall). In November, the council finally issued its dreaded S114 notice.
Newman and Hall had already resigned their leadership positions by then, and they were soon after suspended by the Labour Party, leading to their resignations as councillors earlier this year. Newman had been the leader of the Labour group at Croydon Town Hall for 15 years.
But even as late as the end of September 2020, with their positions clearly untenable, and Newman and Hall were still fighting to hold on to power, ordering their councillor colleagues to vote down an opposition Conservative motion of no confidence against them at an extraordinary meeting of the council.
Councillors Sean Fitzsimons (the chair of the scrutiny committee which failed to scrutinise Brick by Brick, the Fairfield Halls or the council’s parlously low financial reserves), Chris “Thirsty” Clark (recently promoted to be chair of planning) and Alisa Flemming (who had presided over the borough’s children’s services’ failed Ofsted inspection, requiring an extra £30million to be spent over the two years to 2020) were all wheeled out to make the sort of gushingly loyal speeches in defence of Newman and Hall that would have made Kim Jong Un blush.
In the end, the Tory motion lost because 40 out of Croydon’s 41 Labour councillors voted against it. The majority of those Labour councillors who voted to support Newman and Hall in September 2020 are now hoping to be re-elected as councillors in local elections in May 2022…
Yet they had all known most of the grim details about the financial disaster they were presiding over. Hall had shared the details with them in his note, sent “with fraternal regards”, on July 13.
Hall’s briefing note is reproduced in full here:
LABOUR GROUP BRIEFING NOTE ON FINANCES
Croydon Context – Pre covid-19
Croydon has long been underfunded by central government. The funding formulae used by government has never been accurate for Croydon. This has got massively worse over the last decade, as the formulae have been frozen, whilst we have seen a rapid growth in population, as well as a very rapid and substantial demographic change.
Croydon is a borough with the needs of a traditional inner London borough but the funding of an outer London borough.
To put this in context, if our core funding were at the London average, we would have received over £30million more and we [sic] were funded like neighbouring Lambeth we would have
over £80million more!
Local government has suffered from a decade of austerity. In Croydon’s case, that has seen a 75 per cent reduction in funding, equivalent to over £105million.
To make that worse, we have had additional responsibilities passed to us (like other authorities) and a huge increase in demand for services and the cost of those services, from national government decisions, such as the benefits cap, the freezing of working age benefits and the mismatch between actual council rents and the Local Housing Allowance (highest mismatch of any local authority).
Finally, there is the shortfall in [Unaccompanied Asylum-Sekking Children] funding, which has amounted to over £20million over the last three years and which, even with the recent Home Office announcement, is likely to be over £5million this year.
Covid-19 Local Government Impact
At the outset of the covid-19 virus, government ministers repeatedly urged councils to “spend whatever it takes” to help combat the virus and shield the most vulnerable.
Every few days during the pandemic, local authorities have been given more and more tasks by central government. And local authorities have had to step in, even before being officially asked, so as to protect residents.
Examples of just a few of the tasks are PPE for care homes, care homes training and oversight, support for those shielding (including culturally sensitive food as government does not recognise diversity), track and trace, enforcement of social distancing.
Government has paid two tranches of £1.6billion and announced a further tranche of £0.5billion with some possible additional money for income loss but with no details nearly two weeks after the announcement.
When it talks about funding, it includes money that just transits through our accounts, like business grants, Council Tax hardship, infection control money.
Nationally, the funding gap is estimated at over £7billion. In London alone, the gap is £1.9billion.
And this in the context of local authorities being the only part of the public sector that is not allowed to have a deficit budget.
80 per cent of local authorities have said they are looking at making drastic cuts and may have to issue a S114 notice (official notice from the director of finance saying that the budget cannot be balanced for the year, effectively a bankruptcy notice).
Croydon’s Position and Actions
Based on our June return to [the Ministry of Housing, Communities and Local Government], in Croydon, our shortfall in money owed to the people of Croydon by government is £65million (London average £45million, Leeds £200million).
We have extra costs of £26million, lost income of £27million (Council Tax, business rates, parking etc) and unachieved savings of £32million. Covid has prevented us and will stop us implementing many of the initiatives contacted [sic] in the budget approved in March.
Against this £85million, the council has so far received just under £20million, hence the £65million gap. We have yet to know what we will get from the £500million and income help announced last week, but this is unlikely to be more than £5million.
Croydon has been lobbying hard, both directly with letters to ministers, officers discussing with MHCLG etc. and collectively through London Councils[and] LGA. We have also been briefing the three MPs urging them to do what they can on this.
There is no easy way to close a gap that is 8 per cent of our gross expenditure and 20 per cent of our net expenditure. In addition, we must remember our reserves are £10million for General Fund alone and £32million for general and earmarked reserves combined.
In order to avoid S114 and its consequences and in order to keep control of our destiny and make sure our actions, whilst tough, are consistent with our ethos and our manifesto, we have started taking action for over two months [sic]. A financial review panel has been set up, with an independent chair and a number of external members, to help give a wider perspective and challenge in drawing up our plans.
The auditors attend those meetings so that they know what we are doing and can comment.
Immediate actions were taken, such as recruitment freeze including agency, stop discretionary spend, pause on all new projects.
A series of urgent workstreams are being developed around, including:
- Discretionary spend
- Capital programme
- Funding streams
- New savings/income initiatives
- Discussions with government, notably MHCLG
Like other authorities, we are having to look at all our services, including making cuts to vital services and reducing staff numbers (we spend some £170million on staff annually).
A staff review has taken place and a formal 45-day consultation started on 6 July. This proposes a reduction in our establishment by just over 400, with staff at all levels in scope.
However, because much of the reduction will be from deleting vacant post [sic] and reducing agency staff, it is anticipated that less than [sic] 175 permanent staff would be affected. Indeed,
by looking at part-time working, early retirement and targeted voluntary redundancy, we are minimising compulsory redundancies.
To be clear, if central government had not reneged on its commitments, these tough choices would not be necessary. And, longer term, Croydon residents will continue to be penalised unless the fundamental unfair funding of this council is corrected.
Labour has not issued any statement on the “administrative suspension” from the party of the two former councillors for six months. Labour’s General Secretary is David Evans, who has previously worked very closely with Newman and Hall on local campaigns in Croydon,
Read more: Council forced to declare itself bankrupt
Read more: Officials to investigate possible wrong-doing at council
Read more: Conflicts of interest, incomplete contracts, unlawful payments
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Much of Hall’s analysis is perfectly accurate.
Certainly some of the Borough’s problems arise from chronic underfunding by the Government but that was exacerbated by a range of careless and unwise investments in hotels (unsuccessful ones), shopping centres (unsuccessful ones), Brick by Brick and scads of others.
Briefly, some of our problems arise from underfunding but equally many have their genesis in unwise financial investments and arrangements. There is no human situation in which one person is wholly to blame.
In this case it is probably 50/50 at best, if we are being charitable, but in reality more like 25% of the culpability is due to the Government’s parsimony and austerity and the other 75% is due to our unwise and useless leading Councillors.
Hall’s financial crisis briefing note runs to almost one thousand words. Yet it is missing three: Brick by Brick.
We know, from the S114 notice in November that said as much, that £32million of the council’s budget shortfall in 2020-2021 was entirely attributable to Brick by Brick’s failure to make a profit, make any loan repayments or pay down the interest of £200million-worth of borrowing – all borrowing that the council is having to service itself, still.
That’s an almightily large hole in Hall’s budget, yet he failed to mention it at all.
Yes, there has been a decade of needless austerity cut-backs in local authority funding. But there are 31 other boroughs in London, every one of them having to cope with funding cuts and covid.
This financial disaster was one of Croydon’s own making. And at the centre of this has been the nasty little clique run by Newman and his mates.
“Labour’s General Secretary is David Evans, who has previously worked very closely with Newman and Hall on local campaigns in Croydon,”
David also ‘worked very closely’ with former Deputy Leader Alison Butler, and the union was blessed.
That’s one of the reasons why the Labour Party has done nothing about the colossal fuck-up that is Croydon council.
The other reason is Steve Reed, Labour’s shadow spokesperson on local government, who Hall says was aware of the crisis in his constituency long before the RIPI and other signals. He also knew about the Regina Road flats, but took no effective action.
Fitzsimons Is the fart odour that never seems to completely dissipate.
Basically Hall’s note is saying “nuffink do do with me Guv. It’s all someone else’s fault”. It just goes to highlight the arrogance of the man. And I believe he claimed to be a qualified accountant. Let’s hope his Institute kicks him out.
I don’t live in Croydon. And have nothing useful to say about the personalities involved whether local or national. But my own borough has in the recent past suffered under the dysfunctional “Strong Leader” & cabinet model,
It’s not like we don’t know the moral of the stories and fables we hear as kids. Like emperors with no clothes and fawning courtiers and senior officials afraid to say. Or the tricksters who buy Daisy the cow for a handful of beans and then scarper.
Is the lesson only about Jack’s character flaws? Ready to forgive him when he commits gianticide? Do we blame the naive Councilorella who’s charmed by civic flim-flam flummery? Robes, gold chains, tricorn hats, maces and the like?
How come we have a local government system where too often, people seem scared to speak out freely about stuff that’s going badly wrong? Or ashamed to speak up and take responsibility for mistakes they make and well intentioned experiments that didn’t work?
At least you have Inside Croydon to tell anxious citizens when a Duke and his Last Duchess have split. And when she’s getting paid-off with public cash.
CEOs duty is to positively manage creative tension as they strive to protect, maintain and drive business. The council supports balancing those of those things. Your 1st duty is to understand the implications of decisions to protect the rights of the stakeholders, risks are carefully managed by combining skills, knowledge and coupled with technology, advice from Legals who must have a clear understanding of short and long term implications of decisions and to be more involved in the business – not just looking up what the law says. So what went wrong?
In reality staff are the ones who are left managing what is being created and built, therefore staff and stake holders who are directly affected should be involved in the decision making process. Which in my opinion needs to be reviewed to allow debate and discussion to avoid people too scared to challenge to remain in leadership positions, because of the huge impact this has on the borough. It is my observation that if money from your political role to keeps you afloat, there is no way if you let fear in, will you do better because, you know better.
Solution let the people have a voice; how, well let’s at least have a open, honest discussion, if there is nothing to hide.
…..and I don’t believe the new CEO, Katherine Kerswell is going to be any better. She’s done nothing of note since arriving, other than make other people redundant while securing her own position with a juicy salary.
Both she and her husband are local authority career CEOs chasing the big salaries – does anyone on this forum believe Kerswell gives a stuff about Croydon?
You say “This financial disaster was one of Croydon’s own making. And at the centre of this has been the nasty little clique run by Newman and his mates.”
I couldn’t agree more and you need to run that, slightly modified, as your masthead: perhaps as
“The disaster of a wrecked Borough, entirely of its own making and caused by a nasty little clique run by Newman and his mates”
” A BBC data unit investigation has found [in June 2020] across the UK:
At least six councils say it is possible they will have to issue an S114 notice if further government support is not forthcoming, effectively declaring themselves bankrupt
Local authorities in this situation include some of the UK’s largest unitary authorities – Liverpool, Leeds, Wiltshire, Trafford, Tameside and Barnet
Birmingham City Council – the largest authority in Europe – said ‘given the size’ of its forecasted shortfall of £212m across 2020-21 and 2021-22 after £70m government funding it had already received, a section 114 notice ‘would not rectify this situation’
The total budget shortfall forecasted by local authorities across the UK is at least £3.2bn
Of 173 local authorities who responded, 148 (86%) predicted a budget shortfall …
At least 20 local authorities are holding an emergency or in-year budget to address the impact of coronavirus ”
Clearly, it is not just mismanagement in Croydon, however much of that there has been. The effects of chronic, deliberate, malicious underfunding of local authorities by central government in order to both diminish their power, and reduce central taxation, are destructive of so many of our essential services, yet are apparently supported by the tiny but decisive [under our current deeply undemocratic FPP system] middle ground of voters deluded by the illusion of self-interest.
Up to a point, Lord Copper.
Of all those local authorities that struggled through financial problems because of the additional stresses of covid, only one other (Slough) has had to issue a Section 114 notice. Croydon’s was a particularly special kind of mismanagement.
Ah, well done! You’ve unearthed something to be really proud of in Croydon.
We do have a particularly special kind of management.
Not many other Boroughs can boast such a singular quality.
We should not be modest about this but should broadcast it far and wide.
Croydon Council is just one fiasco,and labour’s councillors are Pathetic.