CROYDON IN CRISIS: Elected Mayor didn’t hang around to face the music from councillors as the £42m overspend was discussed at the Town Hall this week. By STEVEN DOWNES
In the hot seats: Cllr Jason Cummings alongside council director Jane West, explaining to the scrutiny committee how very bad things have become
The council’s projected £42million overspend this financial year is “unprecedented”, and senior council executives and Tory councillors are “disappointed” and extremely concerned that Croydon could be heading for financial rocks yet again.
Inside Croydon reported earlier this month how figures for the first three months of this financial year – through to June – forecast a £24million overspend after getting a £38million “capitalisation direction” from government, as well as after using £5million from a contingency fund and £13million from the council’s reserves.
The figures all come from the council’s own financial performance report, written by Jane West, the council’s “corporate director of resources”, who faced a scrutiny committee of councillors this week and admitted that she and her staff had not predicted the increase in demand for housing, children’s social care and SEND transport that has stoked the council’s spending so steeply, so quickly this year.
According to West, London Councils, the umbrella organisation of local authorities in the capital, is predicting a £600million overspend in total across all 32 boroughs and the City of London. Even neighbouring Bromley are heading for an overspend of £18million.
It was West who described Croydon’s current position as “unprecedented”.
Perhaps the Mayor elected on a promise to “fix the finances” did not think it important enough…
Jason Cummings, Perry’s cabinet member for finance, painted a very bleak position in his boss’s absence.
“It’s extremely disappointing and very worrying,” Cummings told the meeting in the Town Hall Chamber, with a typical frankness that is rarely found among senior local politicians.
Cummings explained that there had been a “significant increase in demand” for many services that the council, by law, has to provide – including housing the homeless and caring for vulnerable children – since February, when he and West were putting the finishing touches to the 2024-2025 budget.
“It is not something we predicted,” Cummings said. Highlighting that this wave of additional spending has occurred across all London, Cummings said: “We got it wrong. But so did everyone else.
“It is real, and we have to deal with it.
“The council is effectively having to rethink everything it is doing in order to mitigate this,” Cummings told the scrutiny committee, chaired now, following the resignation of Rowenna Davis, by Leila Ben-Hassel, the Labour councillor for Norbury and Pollards Hill.
West told the meeting that she was seeking £3million in-budget cuts from every department across the council, not just those with the overspends, meaning more redundancies and fewer services across the board.
“Our current reserve position and our ability to stop things has pretty much been exhausted over recent years,” Cummings told the committee. The latest overspend figures are after £13million of reserves have already been used.
“We are in a very difficult position,” Cummings said.
In the red, in black and white: Jason Perry’s council’s figures in the latest report show that they have lost control of spending
In the finance report, which will be discussed at next week’s cabinet meeting (when Mayor Perry will have to attend, but won’t, again, be subjected to any questioning), it states, “The general fund revenue budget outturn is forecast to overspend at financial year end by £23.9m[illion] at Period 3, after the budgeted utilisation of £38m[illion] capitalisation directions requested from the Ministry of Housing, Communities and Local Government (MHCLG), utilisation of the £5.0m[illion] risk contingency budget and utilisation of £13.0m[illion] corporate earmarked reserves.”
Put together, that represents an even bigger black hole in the cash-strapped council’s finances than in November 2020, when officials were forced to issue Croydon’s first S114 notice.
A S114 Notice is effective admission by a local authority that they can not balance the books. In 2020, Croydon became only the second council this century to issue a S114 Notice, although since then, another seven councils have issued S114s.
No other council, apart from Croydon, has issued three S114s. No council has ever had to issue four S114s. Well, not yet, anyway.
The report states: “It should not be underestimated what a challenge this will be against the background of increased demand pressures which are continuing to build across local government and increased market prices…
Unprecedented: no other council has ever issued three S114s. None has ever gone for four S114s
“However, the council will still strive to bring its 2024-[20]25 budget into balance including through the in-year Financial Recovery Plan.”
According to the report, “Dialogue with MHCLG [the local government department] continues around options of further financial support from government in regard to its level of structural indebtedness to ensure it can deliver sustainable local government services.”
In the meantime, council CEO Katherine Kerswell is spending millions of your money (at least £5million) on three separate teams of consultants, drafted in to advise on how to… errr… cut costs. Next week’s staff-wide webinar to discuss the work of these pricey consultants should be a real doozy.
“We’ve done so much to get control of our finances and deal with Croydon’s own issues and debt burden – but the reality is we are now facing mounting pressures from the outside world,” Kerswell, the council’s £192,000 chief exec who has been in post since before Croydon issued its first S114, has told staff.
The scrutiny committee expressed some disquiet that figures for May and June, especially such shockingly bad figures, had only been brought before them now – and that there had been no mention of this latest financial collapse at meetings of full council, the cabinet and scrutiny which had all been held since the General Election in early July.
Nothing that West or Cummings said provided any assurance to the cross-party scrutiny committee that the overspend could be clawed back before the financial year-end. They have asked to have figures for Periods 4 and 5 – July and August – presented as soon as possible for further checks.
Read more: Mayor Perry busts his unbalanced budget with £42m overspend
Read more: It’s time for our elected councillors to stand up for Croydon
Read more: Perry pleads poverty when he has more Council Tax than ever
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