CROYDON IN CRISIS: A Parliamentary written statement today effectively admitted defeat over the council’s bail-outs and ordered a Whitehall takeover of the council ahead of a possible £540m debt write-off

Government intervention: Croydon needs exceptional measures to fix its mess

Lee Rowley, the Tories’ local government minister, announced today an exceptional intervention in Croydon – an admission that after two years of service cuts, asset sales and hundreds of staff redundancies, the council that has accumulated £1.6billion of debts cannot fix itself. 

Rowley’s written statement to the House of Commons ought to clear the way for another £224million government loan to Croydon, and brings closer the possibility that more than half-a-billion pounds of loans can be written off – making Croydon the first local authority in the country to be allowed to default on its debt.

Rowley’s statement came amid a flurry of announcements on behalf of Michael Gove, the Secretary of State at the Department for Levelling Up, Housing and Communities, which also covered two other bankrupted councils: Thurrock and Slough.

After a 15-month hiatus, the Whitehall-appointed improvement and assurance panel for Croydon finally got to see two of their long-delayed reports published. Gove, Rowley and their department, together with Croydon’s Conservative Mayor, Jason Perry, and the council chief exec, Katherine Kerswell, had kept these critical reports under wraps until after they pushed through a 15per cent Council Tax hike last week.

Rowley’s complete written statement can be found online here.

In his announcement, Rowley said:

Local councils play an essential role every day. They deliver core services, including to the most vulnerable citizens, they help shape our communities, and support local democracy. Where councils do not meet the high standards that we set for local government, it is right that government intervenes in order to protect the interests of residents.

Intervention: Government minister Lee Rowley

Today I am updating the House on the intervention arrangements at three councils of concern to the Department for Levelling Up, Housing and Communities. These are Thurrock Council, the London Borough of Croydon, and Slough Borough Council…

The London Borough of Croydon

Regarding the London Borough of Croydon, the council has been subject to two Public Interest Reports by external auditors relating to poor financial decision making and associated governance failings (October 2020) and failures in financial control and poor governance arrangements relating to the refurbishment of Fairfield Halls (January 2022). Croydon has issued three Section 114 Notices since 2020, the latest being in November 2022 following the conclusion that it cannot balance its budget in 2023-2024 and beyond.

The former Secretary of State appointed an independent Improvement and Assurance Panel in February 2021, chaired by Tony McArdle OBE and made up of independent experts, to offer the council advice, expertise and challenge as it sought to address failings related to poor financial control and governance. The Panel has provided regular assurance reports to the Secretary of State on the council’s progress throughout this time, with their latest report being submitted in November 2022.

Whilst the Council has struggled to resolve serious governance and financial issues for several years, I want to place on record that the Secretary of State and I recognise the positive steps taken by the council, with oversight from the Improvement and Assurance Panel, to lay the foundations for its recovery and ensure that legacy issues are being addressed.

In May 2022, Croydon changed its model of governance with the election of a Mayor, Jason Perry, and a new council. The Secretary of State acknowledges the Panel’s assessment in their latest report that the Mayor has been working constructively with them and is prepared to “take firm decisions” to return the council to a sustainable financial footing. The Panel have also commented that within the council there is “much evidence of managers and staff grasping the scale of the problem and doing their best to fix it.”

Historic issues have continued to be unearthed at Croydon and their potential impact on the council and the progress they have made to date cannot be underestimated, particularly given their precarious financial position. Croydon is currently unable to achieve financial sustainability on its own accord and has requested an unprecedented level of support from Government as a result of these historic issues.

On balance, the Secretary of State agrees with the Panel’s latest assessment, that the acknowledged and welcome work of the new leadership has made good progress, however he has concluded, including as a result of the historic problems and the extent of improvement necessary, that the council is not meeting its Best Value Duty.

The Secretary of State is minded to implement the intervention package set out below and in line with procedures laid down in the Local Government Act 1999 to assist the existing extensive effort to go even quicker. Officials in the department have, as a result, written to the council seeking representations on the proposed intervention package.

The proposed package is centred on the council continuing to make the necessary improvements to the satisfaction of the Improvement and Assurance Panel. The Panel will be backed by Directions issued to the council requiring them to follow the instructions of the Panel if they are not satisfied with the progress being made. The Panel will report to the Secretary of State every six months.

It is important that the council leads their recovery but that it does not lose momentum in making the necessary improvements. As part of the representations period, Ministers will reflect on membership of the Panel to ensure the arrangements are fit for purpose to support the council moving forward.

We are inviting representations from the council on the Secretary of State’s proposals by 30 March. We want to provide the opportunity for members and officers of the council, and any other interested parties, especially the residents of Croydon, to make their views on the Secretary of State’s proposals known. Should the Secretary of State decide to intervene along the lines described here, he will make the necessary statutory directions under the 1999 Act. I will update the House in due course…

Conclusion

I want to acknowledge the work of the dedicated staff who deliver the business-as-usual services of the councils included in today’s announcement, many of whom have strived to deliver those services over recent years despite the financial, leadership and governance challenges faced by their respective authorities. They will play a vital role in each council’s recovery. I have deposited in the House library copies of those reports I have referred to that are also being published on gov.uk today.

Croydon’s Tory Mayor, Jason Perry, had put things more succinctly earlier this month when interviewed on BBC Radio London.

He said: “Things are going to get worse.”

Read more: ‘Precautionary measure given the historic issues uncovered’

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