‘Uncertainty faced by all local authorities is unprecedented’

CROYDON IN CRISIS: Katherine Kerswell, the council’s chief executive, this morning told staff that despite a third Section 114 Notice in two years, she and her senior managers have been making progress with the bankrupt borough’s finances. EXCLUSIVE by STEVEN DOWNES

Making progress: chief executive Katherine Kerswell claims improvements have been made

Here is the somewhat condescending and self-satisfied missive issued to council staff this morning by their boss, Croydon’s £192,474 per year chief executive, Katherine Kerswell.

Kerswell is the local authority chief who in March this year issued a firm denial that the council was “teetering on the brink of bankruptcy”. Those attending her staff webinar this morning describe Kerswell as “giggling and smiling while telling the staff how very serious this all is”:

This morning, our Corporate Director of Resources and Section 151 Officer Jane West has issued a Section 114 Notice for the next financial year, 2023-2024. It is a formal, legal step that must be taken if the Section 151 Officer believes that we are unable to balance the budget for 2023-2024.

I appreciate that for many of you the issuing of this Section 114 notice may remind you of the two Section 114 Notices being issued in the autumn of 2020 and their impact.

There will be a lot of commentary in the local media, and possibly national media, about what is happening at Croydon and so I want to make sure you have the full picture and all the facts. There will also be lots of briefings for staff in your teams, your directorates and then some whole council webinars with the Executive Mayor, Jane and me. Please make sure you ask all the questions you need to, so we are all clear.

You may be thinking, does this Section 114 Notice mean that we haven’t been making any progress in our work to turn around Croydon Council’s finances?

The answer categorically is no!

I know that all of you have been working incredibly hard to find savings, find new ways to spend less and doing whatever you can to support Croydon’s financial recovery. We have achieved a lot – in the past two years we have delivered over £90million of savings and sold over £50million of assets.

The next question you may be thinking is, so why do we need this Section 114 Notice if we have been making good progress?

The answer is fairly straightforward.

  • Our December 2020 submission to government for our original extraordinary financial support of £150million highlighted a number of risks that we knew would have a financial impact.
  • Since then, we have worked on those risks and now have the financial figures to put right the problems.
  • We are also still discovering historic problems such as Croydon Affordable Homes and its potential £70million cost to the council – this was flagged in this year’s March budget report.
  • The Mayor’s Opening the Books programme has also revealed further issues with our finances that we need to put right.
  • We are getting a much better understanding of managing the council’s debt of £1.6billion, and how the £50million annual cost of servicing our debt makes our overall council budget unsustainable.
  • At the same time we are trying to cope with the impact of the double digit increases in inflation due to the cost-of-living crisis with limited reserves, all of which means that our position as a council is financially unsustainable in the next financial year (2023-2024).

That is why Jane is having to issue the Section 114 Notice today. We are working closely with the Improvement and Assurance Panel in securing further help from the government to deal with these issues.

Legacy issue: the £150m bill for Fisher’s Folly was among the first costly mistakes made at the council more than a decade ago

Our Medium-Term Financial Strategy (MTFS) cabinet paper sets out more detail behind these pressures, including the issues I have mentioned above such as the historic legacy issues and problems identified through the ‘Opening the Books’ exercise, and the actions that are being taken to try and mitigate them.

The report explains that in order to deal with all those issues and balance the budget for next year, we would need to cut council spending by £130million. That is 43per cent of our entire net budget.

I am sure you would agree with me, that simply is not a viable option, and it is this which has driven today’s decision to issue the Section 114 Notice and ask for extra support for next financial year.

With this additional support I know we will be able to continue the good work you have all been doing turning around Croydon Council. Without the amazing effort from each and every one of you, we could not have come this far. These are issues from our past, before the Croydon Renewal Plan, that are now clear and I know we will sort them out.

Please try and read the Cabinet paper and the supporting information and please try to attend the meetings we are organising in your teams, divisions and directorates, as well as the whole council webinars.

Budget engagement

Faced with this financial future we are going to have to scale back what we do as a council to get through this, while at the same time protecting our statutory services.

A series of savings proposals have been developed for 2023-2024, which will form the basis of our budget engagement (set to take place from 1 December 2022 – 8 January 2023). These proposals do reference certain areas that have been put forward as potential savings for next year. Ahead of this email being sent, I asked directors to speak to every team directly mentioned as part of this process, so you should have heard about them first.

I want to stress that today is not the start of any formal staffing consultation for any staff. All of the proposals will be part of proper budget engagement, which means we will be asking staff, trades unions, residents and partners to give their thoughts and feedback online ahead of the final proposals being presented to full council in late February/early March next year.

Ask of government

As well as looking at the additional savings we can make and controls that can be put in place, we are in conversation with the government about the support we need.

Croydon’s fate in his hands: Michael Gove

The uncertainty faced by all local authorities at this time is unprecedented. We are certainly not alone in this, but there are extra pressures and difficulties we face due to our past that make Croydon’s situation increasingly difficult and unsustainable.

Last week’s autumn budget did include a welcome increase in social care funding over the next two years, as well as local authorities being given the flexibility to raise council tax by 5per cent without holding a referendum. However, this is not enough to offset the pressure we are facing and the savings we must make.

We are working very closely with government colleagues and the Improvement and Assurance Panel to design the right package of support to get the council back on track.

All staff webinar: join us at 11.15am

I know you will have many questions about all this news and what it means for the council and for you personally. Please do join our whole council webinar today at 11.15am to talk about this in more detail…. I hope you can join us, but if you can’t make the session, the full recording will be published on the intranet later this afternoon.

Sections 114 measures

A Section 114 means a stop on absolutely all non-essential spending. We do already have many of the Section 114 measures in place, but these will now be tightened.

It’s important to be clear that staff pay, the upcoming pay award and pensions are not, and will not, be affected by this.

Important Links

I hope that this email and detail included in the papers listed above explain exactly why we have had to take action today. I know that Croydon’s financial situation isn’t easy. Many of you will remember the initial Section 114 in 2020 and times where it felt like bad news was unrelenting. We are in a different place now – from the conversations that we’re able to have, to the huge improvements that have been made to our governance and internal processes.

Your efforts have made a big difference, and it is that continued focus and commitment that will help the council get through this, to continue its recovery and hopefully secure the proper funding and support it needs to do so.

Read more: Council forced to issue 3rd bankruptcy notice in just two years
Read more: Mayor Perry has ‘second thoughts’ about investing in Croydon
Read more: This is the stark human cost of the borough going bankrupt
Read more: After nearly a year, Gove is sitting on two ‘improvement’ reports
Read more: ‘We’re not teetering on the brink of bankruptcy’ claims Kerswell

About insidecroydon

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
This entry was posted in Croydon Council, Improvement Board, Jane West, Katherine Kerswell, Mayor Jason Perry, Section 114 notice and tagged , , , , , , , , . Bookmark the permalink.

2 Responses to ‘Uncertainty faced by all local authorities is unprecedented’

  1. You missed off the bit she said at the end

    “I have to tell you now that no such undertaking has been received, and that consequently this country is at war with Germany”

  2. Susan Stein says:

    “giggling and smiling while telling the staff how very serious this all is”:

    Why the fuck is Kerwell still in a job??

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