Croydon is far from alone as a cash-strapped local authority. And bit by bit, evidence is emerging from the series of financial crashes of councils that implicates not only Michael Gove but also Prime Minister Rishi Sunak.
By STEVEN DOWNES
Asleep at the wheel: Rishi Sunak was in charge of local government finance
The normally staid and sober pages of the Local Government Chronicle, the trade paper for the nation’s civic servants, never usually stray far from the uncontentious, and almost make a virtue of being downright dull.
So when in the aftermath of the latest financial collapse of a local council, LGC editor Sarah Calkin published an editorial and posted it outside her website’s usually sacrosanct paywall, she clearly had a message that she wanted to be seen as widely as possible.
This was the voice of local government fighting back, after a decade in which the government had outsourced pain to councils, by cutting grants to authorities across the country while luring them into an addiction to borrowing, like a street-corner crack dealer.
Croydon might well have issued three Section 114 notices – effective admission that they are unable to balance their budget – but our council is now far from alone in being boracic. Since that fateful day in November 2020 when Croydon was finally crushed under the weighty demands of making its sums add up, another five councils have also been ground down to submission: Thurrock, Northumberland, Nottingham, Slough and, most recently, Woking.
In Croydon, Tory Mayor Jason Perry was earlier this year allowed to increase Council Tax by the Conservative government by 15per cent, while he slashes public services. Residents in Thurrock and Slough had their local tax hiked by “only” 10per cent.
Croydon’s debts, in case you need reminding, have reached £1.6billion. That includes close to £0.8billion that was left by Jason Perry and his Tory colleagues when they lost power at the Town Hall in 2014, and another £0.1billion that has been added onto the debt mountain since 2020 in not-so-generous government “bail-outs”.
Tory-run Thurrock’s debts are reckoned to be £1.3billion, while Woking, which had a Conservative-run council until 2022, has been described as “Thurrock on speed”, with a £2.4billion hole in its budget.
And all this has been allowed to happen while the government has been deliberately ignoring the problems it has been piling up for local government.
In her LGC editorial, Calkin, describing the financial plight of the Surrey borough as “shocking”, wrote that, “Whitehall needs to consider its own role in allowing Woking to get into the position it is in.
“After all, it is the government, through the PWLB…”, meaning the Public Works Loans Board, the source of cheap borrowing made available by the government to councils, “…that lent hundreds of millions of pounds to the tiny district without even cursory checks on what it was planning to do with the money or how it was planning to repay it. No business would enjoy such freedom from their lender.”
Noting that Woking, like Northamptonshire, Croydon, Thurrock and Slough, had been reporting its borrowing to the Department for Levelling Up through their annual returns, Calkin said, “The government could have stepped in at any time during the 2010s to restrict Woking’s borrowing.”
Awkwardly for the government, between 2018 and 2019, the minister responsible for local government finance who did nothing about the rash borrowing of Woking and other councils was… Rishi Sunak.
“Woking’s decisions did not happen in a vacuum, but rather in an environment where councils were actively being encouraged to behave more commercially by ministers while facing swingeing cuts to their funding…
“The unravelling of the finances of Woking, Thurrock et al calls into question the whole idea of councils behaving more commercially.”
Indeed, the lack of proper checks and balances on government lending to local councils may even have been worse than first thought.
Woking – with a revenue budget of £16million – was allowed by government to build up debts of £1.8billion without anyone at the Public Works Loan Board bothering to question the scale of the borrowing for 15 years.
Woking issued its Section 114 notice last month. Brendan Arnold started work as the beleaguered council’s interim finance director in March. He told the local government conference in Bournemouth earlier this month that Woking had not had an external audit completed on its accounts since 2018.
The PWLB, which had started its loans to Woking towards various commercial investments in 2007, never queried the amounts borrowed until last year.
There could be another reason for so many councils going bust. It turns out that a panel of experts brought together by Michael Gove’s Levelling Up department to determine whether local authorities’ governance and accountability framework was “fit for purpose” has failed to meet… since November 2021.
The unlamented “local authority accountability framework review panel”, to give it its snappy title, is being quietly sidelined, following Gove unveiling his new quango, “Oflog”.
In charge: Michael Gove has tried to claim that the busted boroughs are ‘on offs’
It has also emerged that Gove’s department is handing £1.9billion back to HM Treasury – enough to drive down interest repayments by writing off a large chunk of debt for each of Croydon, Thurrock and Woking, and still have enough for bail-outs elsewhere.
The money was originally meant to be used by DLUHC to help tackle England’s housing crisis. Gove’s department though apparently struggled to find projects to spend it on.
Inside Housing estimates that by not allocating the cash, DLUHC has wasted an opportunity to build 5,000 homes in the middle of a housing crisis.
Read more: Gove finally admits it: Localism got councils all in a Pickles
Read more: Perry admits he can’t take action against council’s bankrupters
Read more: Slough, Thurrock, Sandwell, Liverpool: Croydon’s not alone
Read more: Cover-ups and denial over Brick by Brick failure
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ROTTEN BOROUGH AWARDS: Croydon was named among the country’s rottenest boroughs for a SIXTH successive year in 2022 in the annual round-up of civic cock-ups in Private Eye magazine
This travesty of responsible public finance management undertaken by the Conservative Regimes and it’s fellow travellers since 2010 demonstrate that they simply cannot be trusted in managing the public purse.
All they ever present are cuts to services as proving they are fiscally prudent, but allowing debts to escalate on central Government budgets with stamp duty holidays,and the Dido Harding disasters (amongst so many) and on local Government budgets with borrowing for speculative development and investment returns prove the hollowness of their prudence once interest rates began creeping up to real levels again.
Surely even they must of recognised that interest rates could never remain near zero forever. We still do not though what disasters await us as a result of this unstabilising and irresponsible set of policies that have been inflicted on us for the last decade and a half.
Modern Conservative Governments have never understood public services. The dreadful state of our Councils isn’t an accident, it is a direct result of imposing private sector thinking to public services.
The risk-taking mentality of the private sector has no place in the public sector. Entrepreneurs often set up a business and set out on a risky course with the hope of making money with the knowledge that if it fails, they can declare bankruptcy and start again. This can’t happen in the public sector. First it is not your money that is being risked. Second you cannot simply pack up the public sector and start again because those services have to carry on being provided – people’s lives depend on it.
From my own experience in the civil service I have seen plenty of senior managers brought in from the private sector with the idea that their expertise would transform public services. The sensible ones amongst those managers quickly realised that the same rules don’t apply and if you try to use private sector approaches then public services will suffer. And any company that is making a profit running public services is taking money out of the public sector that could have been used to provide a better service.
While I don’t agree with the paternalistic view of Conservative Party up to the mid twentieth century, there was at least an understanding that Government needed to provide services to care for the people of this country. Sadly, making a profit is now the only motivation for the modern Conservative Party and all notions of public service and acting in the best interests of the country have gone out of the window.
Put very simply where is the money ? What efforts have been made to chase the money? As the article states, the debt in Croydon was well known for years. Despite the £73 Million over spend in social care , I have yet to see a penny of it. Not even a grab rail in 9 years . I am not alone. A point I raised at the Mayoral Hustings to all candidates to include Jason Perry . Indeed one candidate confirmed the failings. Where is the accountability? It is time the Mayor together with his deputy and CEO to hold an open meeting with the press present , for everyone to ask questions In the private sector heads would roll with immediate effect, the Public sector should be likewise. It is public money . Enough is enough.