CROYDON IN CRISIS: The council’s £192,000 CEO has told a local government magazine that she has a solution to fix the latest financial crisis: more borrowing. By STEVEN DOWNES
An 11th-hour decision on a loan from the Department of Levelling Down will allow Croydon Council to go ahead with its budget-setting meeting on Monday night after all.
But while Katherine Kerswell, the £192,000 per year chief executive, has co-authored a report going to councillors ahead of tomorrow night’s key meeting which clearly states that her council is at real risk of having to issue a second Section 114 notice in just 18 months because it cannot balance its budget, she has been giving media interviews in which she tries to deny that any such risk exists.
“We are not teetering on the edge of bankruptcy,” Kerswell claimed, apparently in all seriousness, in an interview with the Local Government Chronicle published this week.
“We issued a Section 114 notice before because we didn’t have any alternative – there were not the arrangements in place at the time with the government for capitalisation directions.”
Kerswell told the LGC that “as a last resort we could apply for capitalisation loan” – meaning even more borrowing from government, this time to mask over the £73million hole in the budget that could appear if auditors play hard-ball and insist that money from the ring-fenced Housing Revenue Account cannot be used – as Croydon has done – on adult social care, children’s services or its IT department.
In the brief interview with the trade magazine, Kerswell still managed to contradict herself. “She acknowledged that although ‘the risk of a Section 114 is true’,” the LGC reported, “it would ‘not materialise because we have solutions available on the table’.” That is, even more borrowing.
It is just 12 months since the government agreed a £120million bail-out for Croydon, the biggest rescue package in the history of local government.
But that “capitalisation direction” came in two chunks: £70million for 2020-2021, when the borough was first hit by the impact of covid, and £50million for 2021-2022. A further £30million of funding was also requested by Croydon for 2022-2023 and 2023-2024.
It is this coming year’s multi-million-pound tranche of public cash that has caused some degree of panic in Fisher’s Folly, because Michael Gove’s Department for Leveling Up, Housing and Communities had not formally signed off on the loan. That meant that Croydon Council could not balance its budget, as it is required to do by law, with the March 11 deadline fast approaching.
It was not until Friday that a minister from the Tory government got round finally to providing that sign-off.
What Kerswell described as “the wait for final approval” was caused because, 12 months after her government had approved the finance package, Kemi Badenoch was “away”.
Kerswell said, “We have been told informally that Kemi Badenoch was away, which is why there is a delay getting it to us.
“We expect the government to say yes to the £50million and that they are ‘minded to’ agree to the £25m for next year. We can then set a legal budget on that basis.”
In correspondence with the borough’s 70 councillors earlier in the week, Kerswell had advised, “As you may be aware, Croydon Council needs to receive written confirmation from the government on the capitalisation direction for 2022-2023 before Full Council is able to vote on the budget and Council Tax levels for next year.”
The cabinet meeting scheduled for Monday, March 7, could still go ahead with or without the government sign-off, Kerswell said. But what Kerswell described as “government colleagues” had left her and the council waiting, “unable to give any firm assurance that it will be in time for the Full Council meeting scheduled for the evening of March 7.
“This situation is not within our ability to influence any further.”
It was for this reason that contingency dates on March 10 and March 11 were set, “to be used only if the government confirmation is not received by Monday March 7.”
The government’s dither and delay and the resulting postponements mean that the finance executive who helped set the budget and drafted the budget reports, Richard Ennis, is not expected to be available to answer any questions: an interim appointee, Croydon’s third Section 151 officer in just 12 months, Ennis left his job last Monday.
Other council business, like a planning committee meeting scheduled for March 10, has also had to be cancelled as a consequence.
“I do apologise to all those members affected by this,” Kerswell wrote.
“However, by law we must set our budget and Council Tax by Friday March 11, so we only have next week to be able to hold this council meeting…
“I do appreciate how unusual these arrangements are and please be assured that your officers, the Improvement and Assurance Panel and senior civil servants in DLUHC are working very closely together to navigate the decision-making processes in government.”
It was mid-afternoon on Friday that Stephen Rowan, the council’s head of democratic services, was finally able to issue an emailed “all-clear”: “Further to previous emails I write to confirm that the council has now received formal confirmation from the government in regard to the council’s capitalisation direction for 2022-2023.
“On that basis, the budget council meeting will go ahead as scheduled on Monday March 7 at 6.30pm and the two contingency dates will be removed from the council diary.”
The Department for Levelling Down has meanwhile failed to explain why their improvement panel, chaired by Tony McArdle, is more than a month late in publishing its latest quarterly update report on the state of Croydon’s finances and governance.
- Click here for the council finance report to the cabinet
- Click here for the council’s explanatory notes on its latest financial disaster
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