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Fixing our ‘home grown’ problems has to start right here

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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

Inflation-busting: the borough’s Conservative Mayor has been given permission for a 15% Council Tax hike

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.

Mounting problems: loans to Brick by Brick and their £67m shambles of a refurb at Fairfield Halls cannot be solved quickly, says Conservative cabinet member Jason Cummings

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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