Merton’s £50m education shortfall raises finance alarms

A south London council on the brink of financial collapse, getting a multi-million-pound bail-out from government, while being run by a new chief exec and with a rudderless Labour group where the leader isn’t standing for re-election in their old ward on May 5.

Sound familiar?

Not, this time, Croydon, but the neighbouring Labour-controlled council in Merton, where the government has stepped in to help with a forecasted £50million schools funding shortfall over three years which, according to an official council report, threatens the financial stability of the authority overall.

“The scale of the deficit as reported to cabinet has a significant impact on the council’s resources and potentially the financial resilience of the authority,” the Merton report states. The report also made clear that the financial issues pre-date any covid pressures on the council’s budgets.

The Department for Education’s £28.8million, over five years, announced this week, might help, but savage cuts to the education budget in Merton seem inevitable.

The DfE stepped in after Merton was identified as having a “very high deficit” in its “DSG”, the dedicated schools grant – £37.6million to the end of the last financial year, rising to  £44.5million by 2022-2023 and forecast to reach £49.8million by 2023-2024.

The DfE has provided £11.6million at the end of the 2021-2022 financial year. The rest of the money will be paid in tranches of around £3.5million per year over the next five years.

Tough times: Merton’s new-ish CEO, Hannah Doody

Merton is reported as having the third-largest DSG deficits in the country – only Tory-controlled Surrey and Devon county councils are worse.

At the centre of Merton’s financial struggles is soaring demand for EHCPs – education health care plans – for children with Special Educational Needs and Disabilities. According to the council’s five-year business plan, special needs school placements have more than doubled since 2016, from 1,075 to 2,252 in 2020.

The council is creating 80 new SEND school places this year, which ought to reduce its reliance on private schools.

Merton’s recovery agreement with the DfE includes phrasing that will be familiar to those who have followed Croydon’s troubles in recent times, with the ministry’s requirement that the council “manage demand” for SEND support.

None of which looks particularly good for Hannah Doody, who was appointed as council CEO last July, replacing Ged Curran, who retired after 17 years as Merton’s most senior official. He probably saw what was coming down the tracks.

Going?: Labour council leader Mark Allison might struggle to get re-elected

Doody had been Merton’s director of housing for almost four years, but in 2020 she also took on the task of interim director of schools. So she definitely must have known what was coming down the tracks.

Councillor Mark Allison, as the leader of the Labour-controlled council and ultimately the person who approved Doody’s promotion, may struggle to get re-elected. Allison took over as council leader in November 2020, when Stephen Alambritis, one of London’s most high profile local politicians, stood down.

Allison got de-selected by Labour members in his old Lavender Fields ward, in Mitcham town centre, and is instead running in a new ward, Wandle, where Labour’s prospects are not so good.

Merton Council – which was last under Tory control in 1989 – goes into the elections with 33 council seats held by Labour, 17 Conservative and six Liberal Democrats.

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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
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