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Council plundered £40m from ring-fenced housing account

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CROYDON IN CRISIS: ‘Incompetence or wilful pilfering’ of a ring-fenced account for social housing has deepened the financial hole that the authority has dug for itself

Croydon Council raided the supposedly ring-fenced Housing Revenue Account for nearly £40million, a shocked Town Hall committee was told on Monday night.

Council house: another £40m of misappropriated spending has been uncovered at the Town Hall

The cash-strapped council will now have to “refund” its HRA, which collects money from tenants’ rents and is only supposed to use the revenue to maintain its properties and build new homes.

Monday night’s housing scrutiny committee was told that £9.5million was being taken from the HRA each year for at least four years, a period which will have included a time when it was under the leadership of Labour’s Tony Newman, Alison Butler and Simon Hall.

Senior sources in Katharine Street have confirmed to Inside Croydon that this £40million raid on the HRA is separate to and additional to the £73million discrepancy related to Croydon Affordable Homes, one of the housing vehicles set up by the previous Labour administration, that was discovered earlier this year, where housing monies were being misappropriated to pay bills incurred by the council’s general fund.

The misuse of housing monies is one of the major reasons that the council’s auditors, Grant Thornton, have now been unable to sign off on three years’ worth of accounts at the troubled local authority.

The discovery of another £40million of misappropriated money was a major cause of Jane West, the council’s corporate director resources, last month issuing a Section 114 Notice, Croydon’s third in two years, and admitting that there is “no solution in sight”.

Debt hole: the misallocation of HRA money began when Alison Butler was in charge of housing

According to our sources, the latest discrepancy is a misallocation of homelessness costs, which should have been charged to the general fund.

The misallocations began when Butler was the Labour-run council’s deputy leader and cabinet member for housing, while Hall was the cabinet member for finance.

They, together with Newman, have since stood down from the council. Hall and Newman were both suspended by the Labour Party in early 2021, shortly after the council’s finances began to unravel.

The “misallocation” having been discovered by the council’s recently appointed corporate director for housing, Susmita Sen, will now have to be refunded from the pot-less council’s general fund to the housing account – and represents a significant factor in the latest S114 Notice, effectively declaring the borough bankrupt.

Said the senior council figure, “I simply don’t know whether the misallocations were incompetence or wilful pilfering of the HRA to prop up the general fund and help make the balance sheet appear a bit better.

“The latter, as well as dishonest, was pretty dumb because it was going to come out at some time. Both show a complete lack of necessary financial standards and governance.”

At the housing scrutiny meeting, Sen told the committee, “What we’ve established is that there has been an overcharge of the HRA for several years. These are for services that are general fund activity, such as the homelessness service.

“What we’re looking to do to rectify that situation is to return around £40million to the HRA.

“Whilst it is bad news for the general fund it is good news for the HRA.”

Sen warned that it was not impossible that other accounting discrepancies might yet be discovered. The £40million discovered so far dates back to 2019.

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