CROYDON COMMENTARY: Having sought government permission to increase Council Tax from April by three times the nationally capped level, Conservative councillor JASON CUMMINGS sets out his reasons why
We have all watched with a sense of horror over the last couple of years as Croydon Council has gone into financial meltdown.
There are many reasons we are in the position we are now and these have been covered in the Reports in the Public Interest and played out in the media. Brick by Brick, the Fairfield Halls, Croydon Park Hotel, Croydon Affordable Homes and yes, changes in government funding, have all played a part in creating the challenge we face today.
It is important to note though, that there are 32 London boroughs. All have had their funding reduced in the same way as Croydon. Of those 32, Croydon sits 20th in terms of funding from the government. Of the 20 outer London boroughs, Croydon is eighth, above average.
If our problems here in Croydon were down to government funding alone then many other London boroughs would also be in this position. They are not. This crisis was made here in Croydon and, at least in part, the solution has to come from Croydon as well.
So what is different here that is not the case elsewhere?
First, our debt.
Croydon is £1.6billion in debt. Of that around £350million is owed by the Housing Revenue Account and is not an issue for the council and is not affecting services.
The £1.25billion owed by the General Fund (that pays for our services) is where the huge problem sits.
In April 2014, total council debt was just under £720million, a figure confirmed by Hamida Ali herself when council leader and printed in council budget papers by Simon Hall in 2015. Of that debt, around £300million was HRA and just over £400million was General Fund.
The huge rise in General Fund debt through lending money to Brick by Brick, messing up the Fairfield Halls and reckless spending and investment has made Croydon an outlier in local government. Croydon has lost that money, almost all of it wasn’t spent buying assets, and so we now can’t reduce the debt by selling things.
Secondly, poor financial governance over recent years has created a backlog of legacy issues we have to resolve. An external company was brought in to run the “Opening the Books” exercise to lift the lid on what was hiding in the accounts. This is where things like Croydon Affordable Homes comes in – a company established under the previous administration – and which may cost us £70million.
There are other issues, like the incorrect charges Labour were making to the Housing Revenue Account to help them balance their books, as well as frankly ridiculous forecasts on future parking income.
Correcting the things Labour were doing wrong is going to cost us £49million a year going forward.
Third is the wider economic picture. Inflation is high at the moment and interest rates have risen. This is of particular concern to Croydon as Labour had taken £300million of short-term loans which have to be refinanced this year. The cost for those loans is going to rise rapidly and make the debt position even worse.
Inflation is putting pressure on wage costs and energy bills as well. If we were just dealing with the macro-economic issues we could cope, but the combination of them and Croydon’s “home grown” mistakes is too much.
Croydon does not have the money to meet all these challenges and they are too large to be solved by making savings and cuts on their own.
To meet this challenge we are putting forward a solution in three parts.
The first is a one-off 15per cent Council Tax rise, which is 10per cent above the limit of 5per cent. That 10per cent extra will increase council income by £20million a year. Built into that figure are significant increases in Council Tax support and a hardship fund to be used for those who just miss out on normal support but will struggle with this rise.
This is a very hard decision to take and is only being put forward due to the dire circumstance the council is in. This rise equates to about £4.50 a week for a Band D property. Coming as it does at a time of significant pressure on household budgets, this will be hugely unpopular and difficult for many in Croydon.
The second part is savings on Council expenditure. Again, these are going to be controversial and will impact local residents. We are currently including £33million of savings in the budget for next year. These include things like the closure of Cherry Orchard Garden Centre. For the next few years after that, there are £20million of savings each year. This is the most that can be taken out and keep services safe.
Even with both of these measures, it doesn’t solve the problem, so in addition we are asking government to write off a portion of the debt Croydon owes. This is a very difficult thing for them to do as it effectively takes Croydon’s debt and gives it to the rest of the country. Why should people in Birmingham or Manchester pay for us?
It would also set a precedent. Negotiations are ongoing and some form of resolution is expected in the next financial year.
If we can deliver all three of these, we can get Croydon out of its hole. It will be painful and Croydon Council is going to come out of it smaller and delivering fewer services, but we cannot simply expect someone else to come in and pay for problems made here in our borough. We are all going to feel the effects of what Labour did to Croydon for years to come.
Are there alternatives? As hard as it is to say this, we think this is the best of a bad set of options. Cutting services even harder would be unsafe and just continually increasing borrowing will hurt more in the long run. There is the opportunity to bring alternative budgets to full council, though, so we will await what the other parties suggest and consider any legal budgets brought forward.
The final thing I would say is about accountability.
We know the consequences of Labour’s years in power, but what is being done about the people who caused this? Those processes have moved slowly but we will see more information coming into the public domain in the next couple of months and, I hope, finally see those responsible held to account.
Jason Cummings, pictured left, is a political consultant who was a government special adviser when Thersa May was Prime Minister. A Conservative councillor for Shirley South ward since 2010, he is the cabinet member for finance
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An insightful article. Well done IC.
With the greatest respect to Jason Cummings surely the council should be, at the very least and moreover be seen to be doing so ; ensuring that all steps are taken to chase the money and notifying the residents with the relevant information in accordance with the Nolan principles ,signed , I am assured by the very ( heavily criticized ,with good cause ,in the independent reports )Complaints department . At the Mayoral Hustling’s whereupon I was a questioner only 2 candidates were very strong on ” chasing the money ” namely Andrew Pelling and Richard Howard . What actual steps has the council undertaken to do this ? .£1. 5 billion is not petty cash however it was accumulated .In my view it totally unacceptable to suggest that the residents pay a huge increase in Council tax and endure more cuts , though in my case I would be very hard pressed to see any difference in cuts or indeed have any hope for improvements in the council services ,as a disabled resident . A view echoed by every single person I speak too. If this was the private sector heads would have rolled together with the very lucrative pensions .It is time for an open meeting with the Mayor all councilors to answer to the Public at large with the press present
Cummings you better remember this: what goes around comes around.
It’s good that Cllr Cummings is willing to come to this site to debate these issues. However:-
1) It’s true that Croydon is currently the only borough in London that has issued a s114 notice, but almost all councils are feeling the pinch financially. Thurrock and Slough (outside London) have declared “bankruptcy” in a similar way to Croydon. It’s likely there will be more.
2) This cannot be unconnected to the huge reduction in Government grant to councils since 2010. In the case of Croydon this reduction is about 70%.
3) Government must provide funds to deal with the exceptional situations councils find themselves in, otherwise ordinary residents who were in no way to blame will be paying. As Cllr Cummings was a Government advisor when Theresa May was PM he will remember the “magic money tree” that somehow found £1 billion for Northern Ireland when May needed the support of the DUP to prop up her Government. So there is money there if there’s a will to find it.
4) The crisis affecting local government is similar to the crisis in the NHS and other public services. Tory philosophy has systematically starved these services of resources. At the same time large parts have been privatised or outsourced to provide profit for the few.
5) Cllr Cummings’ party has presided over a huge increase in inequality in the UK. At a time when wages and salaries of most people are declining in real terms, the pay of FTSE 100 CEOs has increased by 39% in the past year. Profits of many large companies are increasing to obscene levels. There is money in the economy but it’s in the wrong hands. A first step in addressing this must be for Government to make funding for councils like Croydon fairer.
The Conservatives made this mess in the first place by pushing councils to be “inventive” and where the Labour Council also failed so miserably. So whilst it is Croydon’s mess it is also the Tory’s responsibility. As a national government perhaps they should give their pay rises to the country to cover shortfalls.
The main problem with the council tax rise is that now we the Croydon Council subjects will be paying more not for the debt but more murky deals which end up paying the rich to make their dirty gains.
The people who are accountable for this mess should be paying with their grossly inflated pay packets and golden handshakes. We as innocent residents should pay 5% and that’s the end of it. I’ve had enough of being at the losing end of a financial disaster.
Also remember that politicians and senior council staff are known to be economical with the truth or just tell outright lies in a cynical attempt to make you like them. Whatever is said, bear in mind the council tax will probably never go back down. This 15% increase will remain for ever and will only keep increasing.
It’s just a little bit sickening that Jason Cummings can talk about closing a garden centre for adults with learning difficulties, and about how would the voters of Birmingham and Manchester feel about ‘paying for us, when the party of which he is a member has just sprayed £2.3 billion around, in the main to seats that they hope to hold on to or are solid Tory.
It’s clear they aren’t going to help London Boroughs when they’ve pretty much lost London, electorally.
He ought to be getting behind Croydon and challenging Gove, not supporting Perry in going to Gove saying ‘please let us screw our constituents even more by becoming the Council with the highest tax increase in the land.’
All we hear is a long litany of how Newman and co racked up the debt. We bloody well know that already, what we need to know is that this Council will fight for more funding and will seriously look at where reasonable economies might be made without detriment to vulnerable people.
For example, why light up Croydon like a Christmas tree all through the night? Can we rationalise the number of posts in excess of £100k etc.
Who would you like to see foot the bill for this incompetence?
Less of the fucking preaching please. What you’ve said is complete bollocks. Peoples’ lives are more important than your A Level Economics view of the world. The 15% increase means the people of Croydon will suffer.
Political lightweights like you and Perry have no right to make that decision. Your justification for it is hollow, factious and mostly fundamentally correct.
You want to pay 15% extra on your council tax bill? Go ahead and do it – nobody is stopping you.
But do not team up with your Tory mates to conspire that everyone pays the fucking 15% – no way. You can shove that and your amateurish justifications where the sun doesn’t shine.
Jason is understating the debt the Tories left in 2014 by over £173 million. As can be seen on page 49 of the Croydon Council Accounts 2013/14 (see link below) the total borrowings on 31 March 2014 was £893,255,000 (£826,711,000 non-current + £66,484,000 current).
If he actually read the accounts he would know this.
The fact that Hamida Ali didn’t know the correct number, either, is no defence.
If he can’t even be truthful about this, how can you trust a single word he says?
You can see how Jason is trying to understate the debt in 2014 – he is conveniently omitting £170 million of finance leasing and PFI from the total borrowing. This is precisely the same thing as he is accusing the Labour administration of doing with respect to the £70 million of finance leases for Croydon Affordable Homes!
So when Labour do £70 million of creative accounting it’s a scandal. However, when the Tories try and pull the same trick for £170 million, that’s okay?
All of this goes to show that neither the Tories nor Labour in Croydon have the first clue about finances. They’ve both been up to the same and both are equally hypocritical trying to blame each other.