CROYDON IN CRISIS: Releasing the council from the shackles of its toxic debt could be the only lasting solution – and talks with Whitehall on the suggestion are continuing, according to a report in a trade magazine
Katherine Kerswell, Croydon Council’s chief executive, believes that there has been “some progress” with government over a possible multi-million debt write-off for the bankrupt borough.
According to official budget reports going forward to a council meeting this week, Croydon has toxic debts of £1.4billion, and expects to spend £71million in the next financial year just to meet loan repayments and interest. The government has agreed £38million annually over three years to assist managing the toxic debt.
A debt write-off for a local authority has never happened in England before, but with the number of councils shackled by their historic borrowing steadily increasing, it is becoming widely viewed as the only feasible, long-term solution to the mounting crisis in local council finances.
The alternative is for heavily indebted councils such as Croydon to keep returning to HM Treasury and the Ministry of Housing, Communities and Local Government with a begging bowl for help. Last week, Croydon announced that it is seeking £136million in a capitalisation direction from government in order to “balance” its precarious 2025-2026 budget.
A report at the weekend suggested that Woking Borough Council in Surrey is seeking a write-off of some part of its £2billion debt, accrued as the then Tory-run authority pursued speculative property deals as a means to replace income as the Conservative government reduced grants under its austerity policies.
‘Unbridgeable’: how The Municipal Journal is reporting the local government finance crisis
Croydon Council has been lobbying for such a solution since before Jason Perry was elected as the borough’s Mayor in 2022.
Tory Perry had promised to “fix the finances”, yet his Conservative colleagues in the previous government offered no solution to the borough’s debt problem beyond allowing him to hike Council Tax by a record 15% in 2023.
But according to a report by The Municipal Journal – where the lead story this week has been headlined “Council funding gap ‘unbridgeable'” – Croydon’s talks with the current Labour government over debt write-off are “active”.
The MJ suggests that a decision on Croydon’s debt write-off will not be made until the summer.
It quotes a council spokesperson as saying: “The ask is a sustainable solution to our debt so that we remove the impact of that £38millio from our revenue budget. That could be a write-off.”
Since 2023, soon after Mayor Perry issued Croydon’s third Section 114 notice, the council’s finances have been under the effective control of a government-appointed improvement and assurance panel, chaired by Tony McArdle. McArdle’s panel has supported requests for a write-off.
‘Active’ discussions: council CEO Katherine Kerswell says talks with MHCLG are on-going
Last month, the Kerswell-commissioned Peer Review conducted by the Local Government Association, described the slow progress on a write-off as “shocking given the ongoing cost to the public purse of servicing the debt”.
It continued: “The peer team would urge government… to engage with the council in a meaningful way to identify how the structural debt issue can be addressed.”
And The MJ quotes a Labour councillor, Rowenna Davis, the former chair of the council’s scrutiny committee, as saying, “If Croydon’s going to stand on its own two feet we need that debt written off or restructured because it’s crippling.”
Read more: Council Tax hits £2,500 per year as debts continue to mount
Read more: Croydon In Crisis: budget overspend now close to £100m
Read more: Labour accuse Perry of ‘mismanagement’ of Town Hall finances
Read more: Mayor Perry busts his unbalanced budget with £42m overspend
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If Perry were a decent and intelligent politician, he’d immediately suspend all proposed cuts to jobs and services pending a government decision on writing off Croydon’s debts
The council tax will still go up. There will still be no bus shelters. Central Croydon will keep looking like a forgotten dump. Nothing will change. If there would be any positive changes on the horizon – we would at least see some improvements by now. So far it’s only going to shit and the speed of this will increase
It’s now clear that the only solution is a total Government bailout. What a waste of previous funds spent on consultants, special advisers, scrutiny committees and the like which have failed in their quest to solve the problem of clearing the debt.
The government didn’t even make an effort to claw back the money they dished out during COVID 19. That’s the problem we we find ourselves in now. Somehow I don’t expect a $1.4bn write off.
When the state bails out private companies it can come up with the funny money of quantitative easing and nationalising bad debts into bad banks with the state socialising private sector debt. There must be a form of these measures that can be employed to allow the councils who followed central Government policy incentives to return to some financial sound footing since what the previous Conservative Regime left behind is unsustainable.
There are different forms of penalties that can be imposed by the central State (as those offered to private consumers ) such as longer term debt repayment plans and preferential interest rates at the very least, but still act as a punishment. One basic thing has to be done though. That is to make sure it doesn’t happen again and this can only acheived by dumping the dogma that speculative profit making is a function that should be followed by Government. Good Governance and profit making are two completely separate businesses.
Croydon, Woking, Thurrock et. al. weren’t ‘following ‘central government policy initiatives’! They were taking advantage of a freedom that they didn’t understand and speculating with OUR money. You cannot blame central government every time you fuck up. BTW, I blame my teachers for my lack of qualifications and the Premium Bonds for my lack of winnings etc etc. Our politicians have to take responsibility!
Politicians will be taking responsibility if they tackle this unsustainble crisis and solve the problem.
By the way who do you blame for your loose grip on reality and rotten inappropriate analogies? We need to know.
Sorry to have upset you. I try and follow Inside Croydon’s rules for discourse – no insults or piss-taking. You might want to have a look at them
So you can dish it out, but can’t take it yourself.
Sounds like Farage and Reform have a secret member.
Quite right! Woking was “investing” hundreds of millions in “Renewable Energy” and giving grants (cash) to businesses like private schools (!) These plans were incompetent and unnecessary and involved a lot of Woking taxpayer’s money being wasted, running up debts of £2.5 BILLION! From a Tory council of all parties! British Councils cannot speculate and compete with the private sector, they do not have the skills and will always run out of cash. Then they panic and locals pay the price!
“Our politicians have to take responsibility!”
How would they do that Christopher?
Alison Butler and the rest of them pay the debts off in weekly instalments?
Liz Truss and Kwasi Kwarteng sell their houses to say sorry for crashing the economy?
Agreed!
Talks are ‘active’… that’s extremely promising. Considering they have been “constructive and ongoing” according to Mayor Perry for the last 3 years.
Can anybody shed some light on the tipping point between talks moving from ‘constructive and ongoing’ to ‘active’?
This is an extremely exciting development from Kerswell, she’s done a sterling job in aiding Croydon’s capitalisation directions reaching £139m this year, an impressive feat!