CROYDON IN CRISIS: A government-appointed inspector, council directors and senior councillors all agree that throwing millions more at the cash-strapped council won’t fix its deep-seated problems.
EXCLUSIVE by STEVEN DOWNES

The Tories who control Croydon Town Hall have already done a deal with the Tories who run the government, in the continuing efforts to try to fix the cash-strapped council’s finances.

Under a cloud: Croydon is waiting on the latest recovery package from government

And it could all prove to be hugely costly for the Treasury and the Department for Levelling Up, Housing and Communities if any Croydon rescue deal establishes some kind of precedent for the many other financially embarrassed local authorities across the country.

Croydon received a £120million bail-out from the DLUHC as recently as March 2021, following its financial collapse the previous year. But that has proved to be inadequate, prompting Croydon’s third Section 114 notice in two years to be issued last November.

And one of the government-appointed inspectors who approved the original multi-million bail-out has stated that a further “capitalisation direction” – bail-out to you and me –  just won’t cut it.

That some deal has already been done appeared to be confirmed when Councillor Jason Cummings, the brains behind Croydon Tories’ Town Hall operation, let it slip at the last full meeting of the council in 2022 when he referred to “the final deal with the government”.

As a Katharine Street source told Inside Croydon, “The use of the word ‘final’ strongly suggests that at the very least a good deal of discussion about what the deal entails.

Final countdown: cabinet member for finance Jason Cummings

“Indeed, it’s significant that Cummings referred to ‘a deal’, rather than a ‘direction’, too.”

When issuing the pre-emptive S114 notice six weeks ago, saying that she could not balance the borough budget for the next financial year, 2023-2024, Jane West, the council’s finance director, said that to deal with Croydon’s “toxic debt”, another bail-out – and therefore saddling the borough with yet more debt – would not work.

West was asking for permission to hike Council Tax by more than the national cap of 5per cent, and she also suggested that the government should write-off at least part of Croydon’s £1.6billion accrued debt.

Recent increases in interest rates have made such an arrangement over the council’s borrowing even more urgent.

“The toxic level of historic debt means that Croydon is trapped in a vicious cycle,” Jason Perry, Croydon’s Tory Mayor, said in November.

“Even with government support, the coming years will be incredibly financially challenging for Croydon Council. Ultimately, this will mean the council needs to do and spend less, with significant spending reductions.”

But exactly how bad things have become has been kept a tightly-guarded secret between Croydon’s bean-counters and the men and women in suits in Whitehall.

‘Impossible levels of debt’: the little-seen or heard Tony McArdle

Nothing had been heard or seen from Tony McArdle, the chair of the government-appointed improvement and assurance panel, since 2021, until his surprise appearance in the Town Hall Chamber in November (in the video above).

Appointed in the immediate aftermath of the council’s initial financial collapse in 2020, McArdle and his team had become Schrödinger’s improvement panel: no one could be sure that they still existed, unless someone opened the theoretical box.

And Michael Gove’s Whitehall department has been keeping a very tight seal on the improvement panel’s box.

It is now more than 12 months since the DLUHC’s improvement and assurance panel last had one of its reports published about the state of Croydon’s finances. The reports were supposed to be every three months.

Some opposition figures at Croydon Town Hall suspect that the reports have been suppressed as part of a political cover-up to help the Conservatives.

The DLUHC dead-bats all questions about the missing reports, just admitting that at least two have been received from the improvement panel since December 2021 and that the reports will be published “in due course”. They refuse to say how long that might take.

Given how dire things are now said to have become with Croydon’s finances, it appears to have been a monumental misjudgement by McArdle and the DLUHC to have agreed earlier last year that such progress had been made that the improvement panel could reduce the frequency of its reports on Croydon’s finances to once every six months.

In-tray: Michael Gove has failed to publish at least two finance reports on Croydon

One of the panel’s reports has been on Gove’s desk since before he was sacked as Secretary of State when Boris Johnson’s government was collapsing around his ears last summer. The second, from September 2022, was sitting in his in-tray waiting for him upon his return under Rishi Sunak.

The DLUHC never gives any reasoning for its failure to publish the reports.

In the time since the last improvement panel report was published in December 2021, there’s been £73million-worth of supposedly ring-fenced Housing Revenue Account money found to have been misappropriated for other Croydon Council spending.

Then another £40million needs to be paid back to the Housing Revenue Account after the council was caught out over-charging for “services”.

In the absence of any reports from his panel, McArdle’s special guest appearance at a council cabinet meeting – “unique” was how he described it – was particularly enlightening.

In a brief speech, McArdle admitted that all the assumptions made by his panel, the DLUHC and auditors which had led to Croydon’s original £120million “capitalisation direction” had been based “against a set of assumptions which now appear not to have been well-founded”.

Stating that £1 in every £5 of Croydon’s spending was now being used to service its “impossible levels of debt”, McArdle said that this was “unique in local government”. On that point, McArdle may be mistaken.

McArdle really let Schrödinger’s cat out of its box when he admitted that, “Just another capitalisation direction itself doesn’t do it.”

Jane West, Jason Cummings and McArdle appear to agree that, rather than just throwing many more millions at the problem, some new kind of settlement is required to sort out Croydon’s deep-seated problems.

Debt mounting: Mike Fisher, the Conservative leader of the council until 2014, left borrowing of £1bn

Of course, the conduct of Negrini, Newman & Co in the previous Labour administration at Croydon Town Hall carries a great deal of the blame for the state of the council’s finances. But when Labour assumed office in 2014, they inherited £1billion-worth of debt from the previous Conservative-run council, much of which had been run up in the first four years under a Tory “austerity” government, where local authority funding was squeezed by Cameron and Osborne, rather than raising taxes.

And the borrowing under Tories and Labour alike, for things such as the over-priced council offices at Fisher’s Folly, for shambolic Brick by Brick’s housing developments, or to pay over the asking price for the Croydon Park Hotel, was actively encouraged by a government that wanted councils to find other ways of funding their public services.

Croydon is far from unique in terms of accruing massive debts through the government’s Public Works Loans Board. In December 2021, Inside Croydon reported how the government itself had admitted that there could be as many as 150 councils close to the financial brink.

When Croydon got its bail-out in March 2021, it was the biggest in history. But that “record” has been broken twice since, and there are other councils in even more parlous positions waiting for their recovery packages.

More recently, Gove himself has spoken publicly about conducting a review of how councils in England and Wales are funded.

The Croydon “deal” may yet set a template for any reforms. With councils from Thurrock to Nottingham, to Slough, Liverpool and Sandwell all on their knees, whatever settlement Gove and DLUHC come up with for Croydon may set a very costly precedent.

Read more: Council forced to issue 3rd bankruptcy notice in just two years
Read more: After nearly a year, Gove is sitting on two ‘improvement’ reports
Read more: ‘There is no solution in sight’ warns council’s finance chief

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