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Gove’s extra cash barely touches the sides of Croydon’s debts

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Michael Gove’s £600m hand-out to local authorities in England, announced yesterday, won’t go very far, especially if you consider that the Government’s own expert panel reckons Croydon alone needs £540m to wipe out a chunk of its toxic debt.
By ANDREW FISHER

Councils in England are today receiving £15billion less in core government funding than they were in 2010.

That is the context which needs to be set against every warning about council bankruptcy, every Section 114 notice issued and every time you hear about local services being cut or Council Tax going up.

Yesterday’s announcement from Michael Gove, the levelling up secretary, of an extra £600million this year for the 300-or-so councils in England needs to be placed alongside another report issued by his department on the same day, from the improvement panel in Croydon, where the experts appointed by Government agree that this one cash-strapped council alone needs £540million to write off a portion of its debt to secure its recovery.

In recent weeks the Government has been under extraordinary pressure on the issue of councils’ failing finances – with more than 40 Conservative MPs writing to the Prime Minister begging for extra resources for their authorities, and MP Ben Bradley, who has a second job as the leader of Tory-run Nottinghamshire Council, also taking to the airwaves to plea for more funding.

In December, the Government announced its Local Government Finance Settlement – with Gove proclaiming, “These proposals will provide councils with the support they need.”

Council leaders across the country, from all political parties, disagreed.

They lobbied MPs this week in Westminster and made it clear that the funding proposals fell short of what councils need to stay afloat. A combination of rising care costs, increase staffing costs from the uprating in the minimum wage (many local government workers are low paid), and the soaring demand for temporary accommodation – especially in major cities and the south-east – have all exacerbated councils’ financial woes.

This is where the politics comes in.

This May will be the last set of local elections before the General Election. More councils collapsing does not look good in the run-up to a General Election, and neither would widespread Conservative defeats in town halls across the country.

So Gove has also weighted £500million of this additional funding on social care – rather than on housing. In urban councils with a younger population and higher house prices, it is extra housing costs causing more of the strain. In more rural areas with older populations, it is care that is the rising cost burden. Councils in rural areas tend to be Conservative-led, and those in urban areas more likely Labour. But this divide is not a clean one.

Earlier this week, leader Stephen Holt revealed that his Eastbourne Council (LibDem-controlled) currently spends 49p in every pound on temporary accommodation. He told Sky News, “If we’re not careful that safety net is going to collapse.”

And take our very own Croydon for example. An urban council in outer London, but one with rising child and adult social care demands, too. It is a Conservative-led administration, but they won’t be popping the champagne corks in Croydon Town Hall to celebrate Gove’s extra pennies.

In that latest report from the misnamed Croydon improvement and assurance panel, which oversees the downgrading of our council’s services, they recommended “that consideration be given to writing-off £540 million of debt (or providing annual support of £38m in order to sustain it)”.

Even if Gove’s £600million announced yesterday was divided just among London’s 32 boroughs, it would mean Croydon receiving less than half that predicted £38million annual shortfall.

As it is, with the details of the allocation to individual councils yet to be determined, Croydon will be lucky to receive more than £4million from this pot. So probably less than 10% of what is needed just to sustain the unsustainable debt.

It’s important to remember that despite local propaganda about the unique failure of Croydon, actually our borough does not even rank in the 10 most indebted councils in Britain (see chart below, where the missing label for the second bar is for Spelthorne in Surrey).

A senior councillor for a large city council elsewhere in England told me, “The amount each council will get won’t be a game changer for a lot of the worse-off councils.”

Councillors’ representatives were similarly lukewarm about the additional funding, highlighting that at best it would be a stopgap.

Tim Oliver, the chairman of the County Councils Network, said it “will go some way to easing the pressures”, while Sir Stephen Houghton, chairman of the Special Interest Group of Municipal Authorities, which represents urban councils, said it “shows that there is a growing understanding within the Government about the crisis in local government finances”.

Houghton added, “It is disappointing that the funding has only been announced at this late hour. More funding will be required to match the current level of demand-led pressures and stabilise the sector.”

The Local Government Association estimates councils in England face a £1.6billion funding gap in 2024-2025, even with the additional funding announced.

‘Managing demand’ is a euphemism for failing people in need

While extra money for social care will be welcome – and is much needed – let’s put that in context for Croydon: in the current financial year (2023-2024), Croydon Council has cut £12million from its adult social care budget.

In the council’s budget webcast last month, Mayor Jason Perry’s cabinet member for finance, Jason Cummings, set out that adult social care would lose a further £5million from its budget in 2024-2025.

At best, the funding announced this week will only partly ameliorate the proposed cuts for this coming year. It’s something that Croydon’s councillors should scrutinise closely over the coming weeks.

The Croydon improvement and assurance panel report states: “The adult social care and health directorate has maintained the necessary progress in implementation of its ‘managing demand’ programme over the last 12 months. This has enabled the delivery of a balanced budget within 2022-2023, indeed bringing the financial year to an end with a small underspend.”

“Managing demand” is a euphemism for failing to deliver for people in need of care.

A “small underspend” presumably means that the council cut even more brutally than as proposed in the March 2023 budget.

So despite Michael Gove’s self-congratulation, nothing much has changed.

Council Tax-payers across Britain can expect to pay more and get less next year.

Andrew Fisher’s recent columns:

A D V E R T I S E M E N T

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