CROYDON COMMENTARY: After council chiefs admitted that they ‘cannot deliver a balanced budget’, DAVID WICKENS says that their ‘Stabilisation Plan’ is an admission of failure
After Croydon Council released its “Stabilisation Plan” last week, I had a quick look back at Croydon’s journey from stability to shambles. Inside Croydon’s loyal readers will be familiar with some of this, but I think it is worth a recap.
Hamida Ali, the former council leader, was interviewed in July 2021 when she was quoted as saying that the task of turning Croydon around following the financial collapse in November 2020 had “ been challenging”. But back in 2021, the council confirmed that it could balance its 2021-2022 budget and that the Croydon Renewal Plan – which is summarised in a pdf available by clicking here – would enable it to become financially sustainable by 2024.
As she was the council’s chief executive at the time, Katherine Kerswell must have been party to these claims.
In March 2022, Councillor Ali claimed a balanced budget for 2022-2023, just before she stood down from the council ahead of that year’s local elections.
Big stage: when Hamida Ali left the council in 2022, she did so having passed a balanced budget with Katherine Kerswell as CEO
That May, Jason Perry became Croydon’s first elected mayor on the promise that he would “fix the finances”.
By February 2023, Mayor Perry was taking his begging bowl to central government for a write-off of £540million of the council’s debts.
This was rejected, and since then Croydon has relied on capitalisation directions – further borrowing from government – to balance its budgets. The most recent figure of additional borrowing is £136million for the current financial year, 2025-2026.
Thus, the government has kept Croydon Council afloat by lending it more money so it can pay the ever-increasing debt interest due back to the government. This currently stands at £71million per year.
And so we arrive at the Stabilisation Plan, just the latest “Plan” drafted with the stated intention of sorting out the council finances.
I had hoped to see a level of honesty in this report not previously forthcoming from Croydon Council. It is my firm belief (and I would suggest that it was Mayor Perry’s by way of seeking a write-off rather than borrowing) that Croydon is in a situation where there is no prospect of reducing demand for services (housing, adult social care, children’s care) or expenditure sufficiently to enable it to meet its costs as they become payable.
Selling assets will delay the rate of growth of this debt, but Croydon’s debt is now at a level where the growing interest burden is unstoppable. The Stabilisation Plan tinkers at the edges but really doesn’t acknowledge that there is no solution available.
Croydon and many councils are in a position where the annual grant settlement is generally around the rate of inflation. Increases in Council Tax above a set figure (4.99%) requires government approval for a referendum – or special permission from the Secretary of State, as was the case when Mayor Perry asked to raise Croydon’s Council Tax by 15% in 2023.
Councils are finding that this funding is now insufficient to meet essential duties and are borrowing to pay the bills.This would usually lead to bankruptcy, where debts are written off.
Local government is different, and to date debt write-off among councils has not happened. That’s probably because the government holds most of the debt.
Croydon’s £1.6billion of current debt represents £4,100 per resident of Croydon.
This is a very worrying sum, with those seemingly ever-increasing interest repayments.
This interest is about 12% of Croydon Council’s core spending power.
The additional savings proposed under the Stabilisation Plan by the council for 2025-2026 total £27.3million. Of this, more than half – £15.5million – is classed as “high risk”. One can be confident, therefore, that the target will not be met.
In terms of “stability” even the report states that the proposals will not solve the financial problems. So what will?
The council and government need to be honest about Croydon and other councils’ similar problems. Perhaps the government are anticipating a massive savings windfall from its reorganisation policy? Personally I don’t see much prospect of this. Neither do I see the government radically increasing its various grants to local government.
Keir Starmer, when he was in opposition, said on many occasions that Council Tax would be frozen, which has proved to be untrue, as it has increased much as usual.
So the only action I can see for Croydon is more tinkering at the fringes, money and effort wasted on senior management and consultants trying to convince the electorate that they can fix the finances, when anyone with a basic understanding of local government knows this is not possible with the current overall funding available.
- David Wickens is a retired former Croydon Council employee
Croydon Commentary provides a platform for any of our readers to offer their personal views and experiences about what matters to them in and around our corner of south London. To submit an article for consideration for publication, email us at inside.croydon@btinternet.com, or post your comment to an Inside Croydon article that has caught your attention
Read more: Cash-strapped council has spent £6.4m… to make more cuts
Read more: Kerswell’s ‘Stabilisation Plan’ has failed before it is approved
Read more: Government grants Perry’s record £136m council bail-out plea
Read more: Mayor Perry busts his unbalanced budget with £42m overspend
A D V E R T I S E M E N T
PAID ADS: To advertise your services or products to our 10,000 weekday visitors to the site, as featured on Google News Showcase, email us inside.croydon@btinternet.com for our unbeatable ad rates
- If you have a news story about life in or around Croydon, or want to publicise your residents’ association or business, or if you have a local event to promote, please email us with full details at inside.croydon@btinternet.com
As featured on Google News Showcase
- Our comments section on every report provides all readers with an immediate “right of reply” on all our content. Our comments policy can be read by clicking here
Inside Croydon is a member of the Independent Community News Network
Thanks for your informative assessment of the sad facts.