150 more councils close to financial brink, government admits

Other local authorities, including Tory-run councils, are also finding themselves  in a slough of despond

Croydon is just one of 150 local authorities that have been in urgent talks with Whitehall over their precarious financial situation following 18 months of covid lockdowns on top of a decade of Tory austerity.

Widespread problems: a parliamentary committee heard last week of the struggles of local government

That’s according to testimony to a committee of MPs at Westminster last week.

Croydon is one of 10 councils that have received bail-outs from the government in the past year.  These also include Nottingham, Tory-run south London neighbours Bexley, Conservative-controlled Peterborough City Council and airport-owning Luton.

Slough, which in July this year issued a Section 114 notice, admitting it had run out of money, last week had its council functions handed over to a pair of government-appointed inspectors, so bad had its financial and governance position become.

Slough has amassed debts of £750million, but with an annual budget of £134million the council found itself short by £111million. Slough is seeking an emergency bail-out of £200million – nearly double the record bail-out negotiated for Croydon earlier this year.

An emergency report by auditors found a “dysfunctional culture” at the Labour-controlled council, which will now be run by Whitehall appointees Max Caller and Margaret Lee.

Come, friendly bombs…: there are some councils in a worse state even than Croydon

Lee should be familiar to Inside Croydon’s loyal reader: she’s the retired Essex County Council finance chief who since the start of this year has been working around two days per month as part of the “improvement panel” appointed to oversee this borough’s council’s recovery.

By working with the improvement panel, Croydon has escaped the Doomsday scenario suffered by Slough and Northamptonshire, of them of yielding day-to-day control of the council to the government-appointed commissioners.

According to one source familiar with the inner workings of local government, “Commissioners are brought in where there are questions over whether a council has actually broken the law in terms of elements of its governance, which I am told is the case in Slough and there were questions in Northamptonshire over money going missing.

“Croydon’s financial management has been really poor, but not illegal.” At least, as far as what has been discovered or disclosed so far…

But while the plights of Slough and Croydon might be widely known, there’s dozens more local authorities that are clinging on to the financial precipice.

Speaking at a meeting of the Public Accounts Committee last week, Alex Skinner, the director of local government finance at the Department of Levelling Up, Housing and Communities, told MPs that in addition to the 10 councils that have agreed exceptional financial support, “we do keep monitoring and closely engaging a range of other local authorities”.

He said that the department had engaged with more than 150 councils over the course of the pandemic and that there was a “relatively small” number within this with whom the department is “engaging more intensely”.

Skinner said that DLUHC had been working with the authorities as part of their “proactive programme” to assess council finances. “From the 150 authorities that we have been engaging with over the course of the pandemic, particularly those who we have more concerns about, we’ve had very frank discussions,” he said.

“On that basis, I am confident that we understand the risks that are in the sector and we’re managing them.”

‘Thematic concerns’: DLUHC chief Catherine Frances

Apart from the 10 who had already negotiated loans, Skinner suggested that there were no other councils “currently in discussion… about exceptional financial support”.

Catherine Frances, director general local government and public services at DLUHC, said that her department’s “thematic concerns” over struggling local authorities included changes to the regulations on minimum revenue provision and Public Works Loans Board borrowing.

Another Whitehall mandarin echoed the department’s position, first aired in the middle of 2020,is that they really want to avoid having many more covid-crisis Section 114 notices.

Jeremy Pocklington, the permanent secretary at DLUHC, said: “Our advice to councils about to issue a Section 114 notice, if they think that that is something they are considering, [is that] they should come and speak to the department first.”

Read more: Labour councillor’s 20-point plan to reduce service cuts
Read more: Mind the gap: finance director warns of £13m cuts shortfall
Read more: Kerswell culls 58 more jobs as council wrestles with budget
Read more: Further £38.4m to be sliced from next year’s council budget

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News, views and analysis about the people of Croydon, their lives and political times in the diverse and most-populated borough in London. Based in Croydon and edited by Steven Downes. To contact us, please email inside.croydon@btinternet.com
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