Warning report: but Perry’s council has hidden away the auditors’ critical findings
The council’s emergency borrowing since 2019 will top £1billion within three years, according to a highly critical report from auditors Grant Thornton, as they show Croydon’s Mayor the local authority equivalent of a yellow card.
By our Town Hall reporter, KEN LEE
In the fantasy world inhabited by Jason Perry, Croydon’s failed Mayor, the £50,000 pay-off to Katherine Kerswell for not working at the council for three months is not “a pay-off”, and the council, with its £1.4billion debt, has “made huge progress” in managing its finances.
Despite what Perry might think, Croydon’s external auditors, Grant Thornton, have issued his council with a statutory warning requiring urgent action because “arrangements to achieve financial sustainability have deteriorated”.
This important auditors’ report has been hidden away on the council’s own website. But then, at the last two council cabinet meetings, in September and then again last week, there have been no up-to-date financial reports published, either.
The October cabinet meeting at the Town Hall was given figures that were three months out of date. Yet that was only the second time in this financial year that Mayor Perry has reported publicly on his budget performance.
Question time: Mayor Perry will be in the hot seat at the Town Hall on Wednesday, but without his loyal chief exec at his side to feed him the answers
It’s a level of secrecy and dodgy governance that is reminiscent of the dark final days of Tony Newman and Jo Negrini being in charge at Croydon Council.
When Grant Thornton stepped in with a Report In The Public Interest in the autumn of 2020, senior figures at Croydon Council tumbled like nine-pins.
First CEO Negrini got a pay-off and scarpered before the then council leader and his cabinet member for finance, Newman and Simon Hall, were forced to resign. Within weeks, Croydon was issuing its first Section 114 notice, of effective bankruptcy.
The latest deep delve by Grant Thornton was part of their scheduled annual audit. Their report is buried away by the council in the appendices ahead of this Wednesday’s meeting of full council – the first full council meeting in the Town Hall Chamber where Mayor Perry has been subject to questioning for four months.
It will also be the first at which the Mayor has not had Kerswell at his side to assist with the difficult questions. And it will be the first since the government appointed Commissioners to oversee the management of the borough.
Under Section 30 of the Local Audit and Accountability Act 2014, council auditors have a legal duty to consider whether there are any “issues” arising that “indicate possible or actual unlawful expenditure or action leading to a possible or actual loss or deficiency”.
The auditors’ statutory warning, which must be considered in a public meeting (such as this week’s council meeting), is in effect a “yellow card”, one step short of issuing a formal Report in the Public Interest.
The latest auditors’ report completely contradicts Mayor Perry’s rosy outlook.
They state: “The council has set a balanced budget for 2025-2026, however it has only achieved this by assuming continued government support via a £136million capitalisation direction.
“This demonstrates a continued, and increasing, reliance on this support, which has created an unsustainable debt burden for the council, having relied on this support each year since 2019-2020. The council has undertaken a series of asset disposals under EFS [exceptional financial support] arrangements since 2019-2020 to reduce the need to fund the full amount through borrowing.
Grim reading: the Grant Thornton report does not put any gloss on the failures of Kerswell and Tory Mayor Perry
“However, with assets being a finite resource, going forwards the council may need to rely on borrowing to fund its future EFS. The impact of this is that borrowing could increase from £135million in 2019-2020 to £888.2million by 2028-2029 (reduced from £1.077billion in total due to £188.8million in asset sales)…
“This is not sustainable and an urgent solution is needed to the council’s increasing levels of debt.”
In some respects, the auditors’ report accuses council management of conning themselves, and therefore conning the public, that they are achieving financial stability.
In their report, Grant Thornton say that in 2024-2025, “The council achieved a General Fund provisional outturn underspend of £0.7million. However, to achieve this position, in total, the council used £51million of EFS (for which it needed to borrow £19.6million) and £20.6million of reserves and contingencies.
“Therefore, it’s underlying deficit for the year is in excess of £70million.” That’s £40million worse than the council conceded earlier this year.
And they add: “Overall, the council is unable to achieve financial sustainability in the medium term under current arrangements. The continued reliance on EFS has placed the council in a ‘vicious cycle’ whereby the increased revenue cost it creates, from additional borrowing, causes budget gaps which require EFS at an increasing rate each year, exacerbating the problem year on year.
“The council’s ability to achieve financial sustainability now requires identification of an alternative solution, in collaboration with central government.”
So that’s the conclusion of Grant Thornton auditors, as well as the council’s finance director, the chair of the now-departed non-improvement improvement panel, opposition councillors, mayoral candidates and the Local Government Association. Even Mayor Perry has admitted that for him to “fix the finances” as he promised in 2022, he actually needs government help.
It just requires the government to join that consensus and determine a solution.
The present Secretary of State at the relevant department, the MHCLG, is Steve Reed OBE, a Croydon MP since 2012.
Read more: Perry fails to publish any council spending figures since May
Read more: When’s a pay-off not a pay-off? When it’s 50 grand in Croydon
Read more: Council accused of cover-up over multi-million agency spend
Read more: Borrowing plan would lead to council’s ‘collapse’ says report
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Why didn’t Grant Thornton issue another “Report in the Public Interest”? With the council’s history of cover-ups and being economical with the truth, surely Grant Thornton should have known that by just reporting to the council, the report would be kicked into the long grass and ignored (as usual) ?!
This is the process required by law.
So we can see why Kerswell Reid scurried off so quickly content with a Council she has driven onto the rocks being committed to providing her with in excess of £50,000 for failing and being simply surplus to requirement. Perhaps Croydon should now practice the rescheduling of such non-contractual ex-gratia payments into long term installment payments and offer her terms of payment of this take the money and run grab into a period lasting at least twenty years.
Works for me!
This explains Kathy Kerswell’s rush for the exit
It was already determined the day the Commissioners were appointed.
The report is merely an objective assessment of the position, without the usual Perry spin.