- Tory minister Michael Gove asked to agree deal that wipes half a billion pounds from council’s mountain of debt
- After spending months complaining about council’s ‘unsustainable’ debt, Mayor Jason Perry is seeking to borrow another £224m
- Perry’s 15% Council Tax hike is revealed to be ‘a political beating’ from the Tories on the people of Croydon, as the Mayor plans for a 0% increase in the year before he seeks re-election
By STEVEN DOWNES
Jason Perry, Croydon’s Tory Mayor, has leaked details of the bail-out deal he has been negotiating with government for the past six months, under which Tory Levelling Up minister Michael Gove and the Treasury are being asked to write off £540million-worth of the council’s £1.3billion debts.
If confirmed, the deal will make Croydon the first bankrupt borough ever to be allowed to welch on its debts in this manner. “It makes us the Northern Rock of the country’s local authorities,” one astonished Katharine Street source said this morning, referring to the bank which collapsed under the weight of its borrowings during the global financial crisis of 2007.
Even after all the scandals and shocks surrounding Croydon’s dysfunctional council over the past four years, the sheer scale of the debt write-off is likely to have massive repercussions not only for the borough, but for the way councils across the country are funded.
“When news of this gets out, there will be a queue down Marsham Street a mile long of borough finance directors and council leaders all with the begging bowls out, asking the Levelling Up department for similar terms,” said another source this morning.
In the past year, Thurrock, Slough and Northumberland have joined Northants and Croydon as councils to issue Section 114 notices when they could no longer balance their budgets. Liverpool and Nottingham city councils are also under financial special measures supervised by the DLUHC.
Such is the funding crisis among councils, the Local Government Association has said that 90per cent of authorities in England are having to dip into their reserves to fund service costs this year.
The LGA estimates that English councils face a collective £2.4billion shortfall in budgets this year because of unexpectedly high inflation in staff pay, energy costs and contract prices.
Croydon’s position is worse than many because of the casino economics practised by the previous, Labour-run administration under council leader Tony Newman, dabbling in property speculation and other investments. But that was a position that Croydon, in common with other councils, including Thurrock, Nottingham and Spelthorne, felt forced into taking – indeed were encouraged by government and offered cheap loans to do so – after a decade of inequalities in its funding settlement.
Such unfair funding continues: this borough is getting £60million less in 2023-2024 than neighbouring Lambeth, an area with a smaller population and less social deprivation. So a write-off of £540million just about balances out 10 years of Croydon being unfairly short-changed by Tory governments.
A debt write-off has been on the cards since Perry’s council issued its “pre-emptive” S114 notice in November last year, predicting a busted budget in 2023-2024.
Jane West, the council’s finance director, mentioned a debt write-off in her S114 report. Tony McArdle, the rarely-seen chair of the government-appointed improvement and assurance panel (which hasn’t been doing much assuring these past 14 months) addressed the Town Hall Chamber in December, talking of Croydon’s “impossible levels of debt”.
He said, “Just another capitalisation direction itself doesn’t do it.”
And Jason Cummings, Perry’s cabinet member for finance, referred to the debt write-off earlier this week, writing for this website. “We are asking government to write off a portion of the debt Croydon owes,” Cummings wrote. “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.”
When he says it is “very difficult”, Cummings may be utilising a bit of understatement. The reason that writing off councils’ debts is unprecedented is that there is currently no legal framework for doing it, and there is no definite timetable to introduce it for Croydon. So there are no guarantees that Gove will pull this off.
But the actual figures, the quantum of the debt write-off, that £540million, was not made public until this week, buried in 900 pages of budget reports from the council.
Perry made no reference to the half-billion write-off at the public meeting in Waddon last week, nor at the Town Hall meeting of the council that followed it. The £540million was not mentioned when he spent an hour briefing very concerned council staff on Wednesday.
The amount was not mentioned at last night’s council scrutiny committee meeting, either.
And there’s no mention of a £540million debt write-off in an unusually lengthy press release from the council’s propaganda bunker, issued yesterday. “Croydon is in negotiations with the government to secure a new solution that will enable it to protect everyday services for residents,” it said. “As part of this, Croydon has asked for government to write off all or some of the council’s debt, and requested a reduction in interest rates.”
See that: “all or some”. But no actual figure.
The amount did get a mention in a little-read local newspaper, possibly after one of the Mayor’s regular briefings with their underpaid and over-worked reporter.
The amount of the write-off has been determined, according to sources inside the Town Hall, to get Croydon to a level of indebtedness on a par with other, similar-sized councils. At a stroke, it will reduce Croydon’s annual debt repayments by £38million – almost double the amount of money which Perry’s 15per cent Council Tax hike will raise.
The scale of what is being proposed also exposes the relative insignificance to the council’s overall financial standing of the £20million that the 15per cent Council Tax hike will raise, and brings into question the real motivation behind Perry requesting such a large increase and Gove acceding to it.
Given that the budget paperwork reveals that Perry is planning for a 0per cent Council Tax increase in April 2025, the year before he is due to seek re-election, the opportunism at the expense of the people of Croydon and political gamesmanship is obvious.
“The 15per cent is nothing more than a punishment,” one Katharine Street source said today, “a political beating for the people of Croydon.”
Another observer of London politics suggested that Mayor Perry has made himself unelectable by imposing such a large Council Tax increase on the very people who helped bring him to power less than a year ago, especially when it is revealed not to have been necessary.
The financial wheeling and dealing between Croydon Town Hall and Whitehall does not stop there.
Although Perry has repeatedly said that Croydon’s huge borrowings, accompanied by equally eye-watering debt interest repayments, are “unsustainable”, it is now revealed that the executive Mayor has also sought £224million in even more government loans. Perhaps these loans will be more “sustainable” than the other ones?
If granted, this would be almost double the “capitalisation direction” which Gove’s predecessors at the Department for Levelling Up, Communities and Housing handed to Croydon in 2021, soon after it first declared itself effectively bankrupt.
“The council is waiting for government to confirm full details of a bespoke package of support including capitalisation directions to help with debt repayments,” the council’s press release said.
Rowenna Davis, the Waddon councillor who chaired last night’s scrutiny committee meeting on budget issues, told Inside Croydon, “In the short term, the budget adds up – on the massive assumption that the government allows us to borrow the extra funds we’ve asked for.
“We were reassured that the assumptions made and the savings proposed should be achievable. We cannot get out of this mess alone. We need the government to step in if we are going to get out of a dangerous debt trap.
“Until that time, the people of Croydon will continue to suffer for failures that were not their fault – and I don’t believe anyone thinks that’s fair.”
Read more: Perry to preside over record-breaking 15% Council Tax hike
Read more: Public’s furious reaction to Perry’s Premium Council Tax hike
Read more: Mayor Perry: ‘It’s going to get worse before it gets better’
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If this 15% goes through, Perry will never be elected to anything in Croydon again. I’d put money on that.
Why do you think he is getting desperate revealing how much he is begging for then?
Don’t bank on it. Didn’t the Treasury just clip Gove’s wings on the amount of finance he is authorised to spend. This is now a matter for the Hunt not the Gove. Further watching this Central Regime negotiate with the Unions it does not seem able to understand the function of negotiation anymore to make a settlement. So part time can ask for as much as he wants. What he gets will be another matter and this looks like he is trying to exert pressure on the Hunts and exhale pressure being put on him by his local Tory support base. Revealing numbers like this may prove to be a sign of weakness and a failed risk taking exercise.
Cllr Rowenna Davis: “Until that time, the people of Croydon will continue to suffer for failures that were not their fault – and I don’t believe anyone thinks that’s fair.”
Jason Perry thinks that is fair, because he is the latest third-rate politician in Croydon to shaft the borough’s council tax payers, but the evil crooks at Croydon Council have got to collect all that excessive council tax first.
To have the debt taken off the book is perhaps the correct way of doing this in part. The second is to stop selling revenue producing or money saving assets for short term debt interest payments even if indirectly done.
If Gove and Hunt agree the debt write off that will not totally remove the problem as fundamentally the structure and culture that created and led to that mountain of debt has to change.
This is not just about Council (in)competence. What Local Government is set up to deliver and how it is funded has to undergo large scale change.
This saga has shown that at the very least, assets donated in trust for the Community need to be removed from the whims of Politic’s and be owned in trust seperately so they actually are there for the benefit of the residents and not flogged to pay off debt run up by mismanagement/fraud/idiots (choose preference)
Still I am going to take a (naive?) punt and suggest this is not Perry’s cynical way of passing the buck from his regime. After all no matter what he does he was still culpable for the first deficit with Fisher and was unsuccessful at best in preventing the rest though he was by no means the sole culprit and had two partners in that.
It is a step in the right direction.
Does it change the 15%? No! That is still fundamentally undemocratic in the manner in which it was done and until that is put to the vote it should be removed for this year in totality.
The petitions should continue and not just in Croydon. Other Boroughs should follow the IC and friends example also.
5% is the max this year- but there should be a good year ahead to get all the data of where this went wrong and whom and then plan and budget a way out of it correctly – that may mean a 10% hike or a different way of raising finances but we should be given the infoprmation and enabled to make the informed choice – That way you get the buy in of most of the people who are having to pay that increase and minimise the impacts on the most vulnerable.
Irrespective of Croydons muck ups – the Country is also pretty trashed. Everyone – not some crazy political version which means anyone but us – has got to come together and work to save public money and get us back on track to safeguard and grow our childrens futures.
But if this Council wants this to happen it has to instil trust in them to do this fairly and to date they ahve not achieved that at all.
Lets hope this is the start of a better and more honest way of doing things
“We are asking government to write off a portion of the debt Croydon owes,” Cummings wrote.
No Mr Cummings. We are asking this Government to write of the debt it owes Croydon.
We are asking it to take responsibility for its failures to oversee what Fisher and Newman did without let or hindrence.
Perhaps Mr Cummings would understand this better if say some random person he does not know made merry with his identity and the bank said cough up Cummings you owe for what he did in your name.
Effectively that is what has happened. A person does that it’s identity and bank fraud.
An Administration and Strong leader does that and narry a Penn put to paper!
I am confused, how does Croydon owe 3.6 B. and to whom? Why is Jason Perry asking Michael Gove to write off a half billion pounds worth of debt and how does Gove have the power and authority to do so? Somebody please explain.
Croydon does not owe £3.6billion.
It owes £1.3billion, to a range of lenders, but much of it to the government, through its Public Works Loans Board.
Michael Gove is Secretary of State for Levelling Up, Housing and Communities. He is the minister responsible for local government.
At present, £49million per year of Croydon’s spending is on interest on its loans. Reducing its borrowing would reduce those interest payments, theoretically leaving more money available to spend on local services
I think IC should take over the running if the council.
Kerswell is silent on all of this – mute. Useless. A large Nanny McFee with absolutely none of the magical powers.
Flattering. But no thanks. Happy doing what we are vaguely competent at: journalism.
For sure this is the wrong person to lead, terrible financial results, absurd increases, just you are crazy you would vote on this person…