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Cash-strapped council still going over-budget, report finds

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CROYDON IN CRISIS: Government commissioners say that there’s been ‘an opportunity missed’ because of the slow pace of change under council CEO. By STEVEN DOWNES

Katherine Kerswell, the chief executive of the cash-strapped council, has been subjected to overt criticism for the slow pace of change at Fisher’s Folly in the latest report from the government-appointed improvement panel.

Slow change: council leader Hamida Ali (left) and chief exec Kathrine Kerswell remain under close scrutiny

The first anniversary of the council issuing a Section 114 Notice, effectively declaring the borough bankrupt, is next week.

A clear-out of the executive floor of the council headquarters was conducted by Kerswell in February, resulting in four directors leaving Croydon.

Yet today, Kerswell is one of only two members of the eight-strong “executive leadership team” that is not described as “interim” or “acting”.

“Some priority actions are taking longer than we believe they should,” the report states. They criticise “excessive churn” among middle-ranking and senior management at the crisis-hit council. They describe the situation as “disappointing” and “an opportunity missed”.

The panel say that they “are of the view that this is a priority exercise that has not been prioritised”.

The improvement panel’s latest report was released this morning by the Department for Levelling Down. It is the third update from panel chair Tony McArdle and his colleagues since they were installed to oversee the work of Kerswell at the start of this year.

“The recruitment of an executive leadership team could… have been affected to a faster timescale, notwithstanding the need to follow a proper process in respect of staff suspensions and of the desire to undertake a comprehensive restructure.

Tony McArdle: overseeing council work

“This would have enabled clear and consistent direction to be applied to service changes and for cultural change to be set under long-term leadership.”

It is notable that McArdle’s report was submitted to the ministry (then still called the Ministry for Housing, Communities and Local Government) on August 27. Yesterday, some nine weeks later, the council published its latest version of its organisational structure. And in all that time, nothing at the council had changed.

It is worth noting that, too, that under Kerswell, with the council in strickened circumstances and having axed around 400 front-line jobs in the past year, there now appears to be two more members of the council’s executive than there were even under her spendthrift predecessor, Jo “Negreedy” Negrini. Most of these appointees – including Kerswell’s newly created post of assistant chief executive – will be on salaries of around £150,000 per year.

Also worthy of note is that, since her own position as chief executive was confirmed in July, £192,474 per year Kerswell has been off work for perhaps half of that three-month period. Her new life as Croydon CEO began with a fortnight doing jury service. That was swiftly followed by another two weeks of no-doubt much-needed annual leave. Since then, Kerswell has had an unspecified period of compassionate leave to help care for an elderly relative.

And then there’s the HR issue. Sue Moorman, the long-time director of Human Resources at the council, left her job in September. “Taking a career break,” is Moorman’s somewhat unusual explanation, for someone working in personnel.

Moorman has been replaced by Vicki Richardson, who has been given the additional responsibilities of “Head of HR and Finance Service Centre”. So sorting out all those redundancy notices and monitoring the revolving doors for the comings and goings of high-pay execs – Croydon is on its third finance director in less than a year, for example – might be a bit of a stretch.

Interim measures: Croydon Council’s executive leadership team – bigger than before the borough went bankrupt in November 2020

The improvement panel say that the lack of permanent replacements in key positions has left middle and junior managers without “constant leadership engagement and clarity of direction”.

The report says, “The Council is hampered in this respect by the fact that a series of suspensions of the former leadership team needed to be managed. Except for the Chief Executive (confirmed at the council meeting on 5 July 2021), the entire Executive Leadership Team is comprised of interim appointments.

“Whilst these individuals may be highly experienced and entirely capable, it is natural for their immediate reports and the staff who work for them to want the certainty of service leadership that comes from having an appointee who has a long-term invested interest in the effective operation of the service and for the changes that must take place to be ‘owned’ by that leadership accordingly.

“It is disappointing to the Panel that in respect of securing this position, it appears that it will only be in the New Year that there is realistic possibility of this being brought about. It will have been over a year since the ‘Rapid Review Report’ was produced and which identified the critical need for change. For the central agents of that change to not be appointed in that time is an opportunity missed.

“We have repeatedly pressed the council to expedite this process, and whilst appreciative of the need for a restructuring exercise to have been carefully carried out, are of the view that this is a priority exercise that has not been prioritised.”

They say that this has led to “excessive ‘churn’ in management”.

“Achieving stability of role and capability is an important factor in providing a platform for cultural change.”

Multi-million-pound overspends

Overall, McArdle’s latest report, as with the two previous updates, makes some encouraging remarks. “The council is continuing to say and do all of the right things. It is making pragmatic, evidence-based decisions… It is making sound operational arrangements at a senior level and is working hard to put these in place for the delivery by its staff,” the report states.

“It is making credible plans for a difficult financial future. Given the point from which these changes started, these are notable improvements.”

But McArdle and his team also make a number of more critical assessments, including sounding the alarm bells because of multi-million-pound budget overspends in the first quarter of this financial year, and the possibility that a £25million bail-out from government might not be granted final approval.

Croydon was already allowed a £70million loan to cover last year’s overspend, and £25million for this financial year, all part of the biggest bail-out in the history of local government in this country.

Richard Ennis: third finance director in less than a year

Increasingly, even that doesn’t seem to be enough.

The council is already implementing budget cuts of £38.3million for 2022-2023. “This assumes a further capitalisation direction of £25million in 2022-2023,” the panel notes.

“In the absence of this, the council will need to increase the savings requirement further to £63.3million.”

And this on top of a decade of austerity cuts and “efficiencies” that had been implemented at the council before last year’s meltdown.

While Kerswell had been briefing the trade press that it had managed to balance its budgets in the first quarter of 2021-2022, McArdle’s report gives a different version of events. “Month 1 report indicated a forecast service overspend of £3.451million, although a balanced position was presented by drawing down some of the covid-19 grant funding for the year.

“The Panel were disappointed to see this approach as they felt it downplayed the seriousness of the position and sent out a signal that overspends will be funded by ‘the centre.’ In addition, the Panel felt that the majority of the areas of overspend were permanent in nature, and funding these from one-off grants could be building up problems for the future.

“In the light of these concerns, the Panel sent Advice Note 1 on 6 June 2021 to the Chief Executive and the interim S151 officer. The council responded well to this note and the reports for months 2 and 3 were more transparent.

“In month 2, the position worsened to an overspend of £4.034million. The majority of the overspend related to Place services (mainly parking income shortfall, special educational needs (SEN) transport costs and the Selective Landlord Licensing Scheme). In addition, the Housing Revenue Account (HRA) was showing an overspend of £1.595million.

“By month 3, the position had improved slightly by £563,000 to £3.471million on the General Fund before drawdown of £3.451million from the 2021-2022 covid-19 grant, as approved at month 1, and £802,000 on the HRA (to be funded from the HRA balances if no other savings can be found).”

In conclusion, the panel requires change to be made at a much faster pace.

“We are of the view that the council is set on the right track… and with an increase in pace can continue to address the considerable challenges that confront it.”

Read more: ‘Dysfunctional’ council had ‘lost its way’, says CEO Kerswell
Read more: Former health director suing council for constructive dismissal
Read more: The Kerswell cull begins: five senior council execs go ‘off-grid’


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