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Rayner warned Croydon’s ‘budget gap’ will balloon to £83m

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CROYDON IN CRISIS: The south London council ‘remains one of the most financially distressed in the country’, according to the local government minister. By WALTER CRONXITE, political editor

Under a cloud: Croydon has lost control over its spending, according to the chair of the improvement panel who has been overseeing the council’s work for four years

Cash-strapped Croydon Council is going to need an even bigger government bail-out in 2025.

That’s the damning admission in its latest report to government from the Whitehall-imposed (non-)improvement panel, with a “budget gap” in 2025-2026 predicted to reach £83million – the worst ever seen in Croydon.

The letter, signed by Tony McArdle, the chair of the improvement and assurance panel, provides stark, independent confirmation that Mayor Jason Perry and the council chief executive, Katherine Kerswell, have failed in their mission to balance the books, despite making tens of millions of pounds’ worth of cuts to services while hiking Council Tax to record highs.

Croydon “remains financially unsustainable without significant government support”, McArdle says.

And the improvement panel is supposed to be ending its time in Croydon in six months’ time. Yet in his latest letter, McArdle seems to admit that the council is no more financially stable now than it was when he and his team of “experts” were parachuted into Croydon in early 2021.

Exit strategy: Tony McArdle is the government-appointed troubleshooter who is at risk of leaving Croydon in a worse state than when he arrived in 2021

“The majority of actions set out in the Exit Strategy have been met to time and to the necessary quality,” McArdle writes.

“An exception is the objective for financial sustainability, which is at risk.

“You will be fully aware of the current challenging external environment facing the sector. The substantial overspend projected in the current year… reflects this, with a limited number of unit cost reductions being evidenced.

“The council is likely to require a greater level of exceptional financial support in 2025-2026 than in the current year.

“The ability of the council to meet its asset disposal target this year is also at risk.”

The latest report, McArdle’s ninth, is the first since the General Election, and so is his first to Angela Rayner, the deputy Prime Minister and Secretary of State at the Ministry of Housing, Communities and Local Government. The letter is dated November 15.

The MHCLG published the letter this morning, a quicker turn-round than was the case under the Conservative government (McArdle’s previous report, from April, was finally released today, too, eight months late).

Austerity bites: Angela Rayner has inherited huge problems in local government from the Tories, but especially in Croydon

But the November report’s publication was still too late for it to be discussed at last night’s full council meeting – conveniently so for piss-poor Perry, who after almost three years in charge, is no nearer to “fixing the finances” as the Conservative promised when seeking election as Mayor in 2022.

As Inside Croydon first reported in September, the cash-strapped council under Perry and Kerswell is hurtling towards the rocks of bankruptcy with a vast overspend in this financial year, despite the help of the latest £38million bail-out from government.

McArdle, who has had oversight of the council’s financials while all this has been going on, was forced to confront this matter in his November report. According to the latest figures coming out of Fisher’s Folly, they are predicting an overspend of £33.6million for the current financial year, and they were projecting a budget gap of £40million for 2025-2026.

But according to McArdle, that’s not even the half of it.

“The council’s cabinet has approved its draft 2025-2029 Medium Term Financial Strategy (MTFS) for public consultation,” he explains.

“A final MTFS will be considered by full council in February 2025. The current MTFS (approved in February 2024) projected a budget gap of £40million for 2025-2026 (assumed capital direction of £38million plus £2million deficit).

“In the draft MTFS, the gap has increased to £83million (assumed capital direction of £38million plus £45million deficit).”

McArdle outlines that the financial position has “significantly deteriorated” during 2024, because spending pressures in areas such as children’s placements, homelessness and home-to-school transport “had not been identified” when the budget was set.

And there’s more… The cumulative deficit “is projected to grow” in the following three years.

Nine and out…: possibly McArdle’s penultimate report, with Croydon’s finances worse now than they were for his first

In his formal response to McArdle’s report, local government minister Jim McMahon noted that there had been “significant” progress, but added that “the council remains one of the most financially distressed in the country”.

McMahon failed to hold out any solution to wiping out Croydon’s historic debts, saying it is “self-evident that there will still be difficult decisions to come”.

McMahon also made comments about another basket-case council, Nottingham City Council. Which was where Kerswell was interim CEO in 2020, before she was installed in Croydon.

In his letter, McMahon added that it is essential for there to be a “clear strategy for the form respective councils will take as their new operating model, and that prevention and reform of local public services is central to it”.

McMahon wrote: “The road to financial recovery in Croydon and Nottingham must be met with the seriousness it deserves.”

Croydon Mayor Jason Perry will be increasing Council Tax by the maximum he is allowed in April, which is likely to bring increased in the local rates since he has been in power to 27%.

When he took over in 2022, Perry told a radio interviewer that “things are going to get worse” in Croydon. It’s looking like the only promise the Tory Mayor has managed to keep.

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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