CROYDON IN CRISIS: A report to be discussed at the Town Hall tonight confirms the deepening financial problems facing the borough’s new Mayor. EXCLUSIVE by WALTER CRONXITE
Part-time Mayor Jason Perry has been forced to admit that his Conservative administration is in deep financial trouble, with a possible £19.3million overspend that has been built up in just his first 100 days in office, as was revealed by Inside Croydon last month.
And Perry and the brains behind his Town Hall operation, Councillor Jason Cummings, his cabinet member in charge of finance, have been forced into a sharp U-turn, releasing detailed figures on the state of the council’s budgets for three months, after trying to keep the numbers under wraps until next year.
The revelation of the £19million budget deficit – the Mayor having taken over the cash-strapped council with a £2million budget surplus – comes in a 79-page report published last night, less than 24 hours before a scrutiny meeting is due to be held in the Town Hall Chamber.
Part-time Perry is not listed among the expected attendees at the scrutiny meeting. Sources at the Town Hall suggest that Perry has been indicating that he does not feel it essential that he ought to attend all scrutiny meetings. As Mayor, Perry receives £81,000 per year in pay from the council.
The scrutiny committee, chaired by newbie Labour councillor Rowenna Davis, should, though, have the council’s new finance exec, Jane West, to question about how the bankrupt borough’s management of its money has started to slip so quickly on her watch.
Croydon Council issued a Section 114 Notice in November 2020, effectively an admission that the borough was unable to pay its bills and meet its financial obligations. Croydon thus became only the second council in the country this century to go bankrupt, with a budget deficit of more than £60million in 2020-2021, and debts accrued over many years of £1.5billion.
After receiving what was then a record government bail-out of £120million in early 2021, the then Labour council administration limped on with the close supervision of an improvement panel appointed by the Tory government. The improvement panel approved the Labour-run council’s budgets for both 2021-2022 and the current financial year, 2022-2023. The budgets were “balanced” largely thanks to the bail-out cash.
There will clearly be concerns that after making massive cuts to the council’s budget – with £38million of cuts this financial year, on top of £44million in the previous year – council executives are already failing to meet their demanding targets.
The report to be considered by the scrutiny committee tonight identifies a post-pandemic drop in parking revenues and less income from traffic fines.
There’s also an additional £3.15million budget overspend by the ring-fenced Housing Revenue Account attributed “mainly to inflation in energy costs” – and that’s before the next hike in fuel prices is due to hit in October.
Until Mayor Perry took charge in May, the previous administration, under the watchful eyes of the improvement panel, had published detailed financial figures every month. Perry and Cummings swiftly stopped that practice, claiming they would instead “open up the books”. Just not until next year…
Tonight’s report rows back on that decision, and after weeks of financial reticence, duly publishes figures for three months. The release of the monthly financial figures follows a letter of complaint from Stuart King, the leader of the Labour opposition on the council, to Dr Olu Olasode, the Tory-approved independent chair of the council’s audit committee.
It is not known whether Dr Olasode intervened directly to reinstate the monthly financial reports.
There is certainly a firm indication of a return to the more frequent, more open reporting format. “The Financial Performance Report (FPR) is presented to each cabinet meeting and provides a detailed breakdown of the council’s financial position and the in-year challenges it faces,” tonight’s report states.
“It covers the [General Fund], [Housing Revenue Account] and Capital Programme. The FPR ensures there is transparency in our financial position, and enables scrutiny by the Executive Mayor, cabinet, scrutiny and the public.” Which is nice.
“It offers reassurance regarding the commitment by chief officers [council executive staff] to more effective financial management and discipline.”
The report, prepared by West, states, “The end of year projection is currently indicating a net overspend of £9.483million against budget.
“There are a further set of risks and opportunities, which indicate a net opportunity of £3.29million (risks £9.807million and opportunities of £13.097million), but they are not yet sufficiently developed to be included in the outturn forecast.
“Should all these risks materialise, and none of the mitigations be effective, the council is forecast to overspend by £19.29million. However, if none of the risks materialise and all the opportunities are delivered, the council will underspend by £3.614million.”
That could be a big “if”.
“Note the further actions being taken, through development of the Deficit Recovery plan, to mitigate the projected overspend with a view to eliminating it by the end of the financial year.” That means even more cuts.
“I’ll be fascinated to see where they are going to make these additional savings,” a Katharine Street source said today.
“What do you cut when there’s nothing left to cut?
“Labour had a look at all the possible areas to make cuts – and they took some very unpopular decisions, too. Over two years, budgets were signed off by not one, not two but by three finance execs, starting with the government-appointed Chris Buss, then Richard Ennis, and this year’s budget by Jane West as well.
“Are the Tories now saying that all three of those senior finance directors have got their sums wrong?”
The source said that the key information will be the cuts that Perry and Cummings are prepared to make which Labour decided were a step too far.
That is detail not yet included in the public report, and seems unlikely to be shared with the scrutiny committee and the public tonight.
The report says, “Key drivers of the projected overspend are non-delivery of savings agreed at full council in March 2022…”, meaning council officials are not controlling their budgets, “… and other new pressures previously not anticipated.”
And the outlook is grim. Very grim.
Local authorities are far from immune from the rapid rise in inflation – the worst in 40 years – and the huge hike in energy prices.
“The council continues to face significant financial pressures,” West says in her report, which very likely will get rubber-stamped by Tory Perry’s puppets at a cabinet meeting to be held on Wednesday next week.
The council’s Conservative Mayor is already lining up his excuses… “The delivery of Year 1 of the [financial recovery plan] (2021-2022) was aided by covid depressed demand for Council services that enabled the monthly expenditure to be reported as an underspend in many areas.
“Demand has begun to pick up for some council services which is removing that underspend.
“There are also early signs of demand increasing for some services due to the cost-of-living pressures being driven by the current national economic outlook. In addition, some resident behaviour which has generated revenue for the council in the past has failed to be reinstated post-covid.
“The inflationary pressures already showing in this forecast outturn are significant.”
Perhaps, when the Tory government at Westminster finally gets back to work after a three-month hiatus, Mayor Perry or one of his mates can have a word with whoever it is who is put in charge of government finances…
- Click here for the full ‘Budget Monitoring’ financial report (together with appendices containing the two previous month’s figures)
Read more: Further £38.4m to be sliced from next year’s council budget
Read more: Croydon In Crisis: Council can no longer cope with basic tasks
Read more: ‘Mistakes will be made’ warn staff after latest round of cuts
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