#FUNDCROYDONFAIRLY: Government announces it will re-set its system for deciding grants to local government and, at last, cash-strapped Croydon might receive a fairer share. EXCLUSIVE by STEVEN DOWNES
‘Now, about that funding…’: minister Steve Reed in discussion with Croydon mayoral candidate Rowenna Davis in Thornton Heath last night
The Labour government has today announced that it is to scrap “outdated funding formulas” for local councils, “so local people finally get the vital public services they deserve”.
According to senior Katharine Street sources, “This could mean very good news for Croydon.”
Inside Croydon has long given its support to a people’s campaign, comprising residents’ associations, trade unions, council workers and community groups, which has demanded #FundCroydonFairly, to address the disparity in central government grants between neighbouring boroughs.
Under this postcode lottery of a funding system, based on funding allocations from December last year, Croydon receives £4,650 for every resident. Lambeth, meanwhile, gets £5,077 per person. And just the other side of a borough boundary, Southwark council receives £5,378 for every resident.
For 14 years, Conservative-led governments did nothing about the unfairness of the funding system, and only made matters worse through their application of austerity, passing tax increases down the food chain to Council Tax-payers.
Cashing out: by next April, Council Tax will have increased by 33% under Tory Mayor Jason Perry, while services have got worse
In 2023, Tory Mayor Jason Perry hiked Council Tax in Croydon by 15%, ignoring public protest. By next April, Perry will have increased Council Tax by 33% since he took office.
Even such huge Council Tax increases have failed to dent the borough’s toxic debt, which still stands at £1.4billion – close to the level when Perry assumed office as Mayor.
The announcement from the Ministry of Housing, Communities and Local Government today did not provide firm figures for the new deal for Croydon. That won’t be known until the figures are released by Whitehall in the week before Christmas.
According to council finance reports this week, under the new fair funding formula, the council expects to receive an additional £17million in extra funding next year (2026-2027), £34million the year after that and £51million each year thereafter.
Welcome as that may be, the Town Hall’s financial reports suggest that even those increases will get swallowed up in financing Croydon’s loans, unless or until something is done to write-off or reschedule the council’s crippling debt.
For now, the MHCLG has not addressed the debt rescheduling issue. “We need to fight one battle at a time,” a source close to MHCLG told Inside Croydon today.
“For too long, an outdated council funding system based on decades-old data has entrenched inequality – leaving some councils on a financial cliff edge and communities in deprived areas facing crumbling services, cuts and rising bills,” the Ministry said.
“Meanwhile, some councils in less deprived areas have benefited disproportionately, building up reserves while others struggled to cope,” they continued, although there are few councils, of any political colour, who would recognise the description of having surpluses and reserves.
The announcement from the MHCLG’s offices in Marsham Street said: “Today’s reforms reverse this injustice and ensure councils will be funded fairly, based on the latest deprivation data and local need, so that communities with the highest demands get the public services they rightly deserve.”
And Reed, an MP for a Croydon constituency for 13 years, himself confirmed that this borough will be among the beneficiaries of the funding re-set.
More support: Labour MP Natasha Irons has written to Reed about Croydon funding
“The Conservative government spent 14 years underfunding Croydon, leaving our streets dirty and our council services failing, and local Conservatives went along with it all.
“Labour’s Croydon mayoral candidate Rowenna Davis will keep campaigning for the best possible result for Croydon when the final figures are confirmed in December,” Reed said.
Reed received a double nudge from senior figures within the Croydon Labour Party this week.
On Monday, Croydon East MP Natasha Irons wrote directly to the Secretary of State to repeat the call to Fund Croydon Fairly.
“While neighbouring boroughs receive greater financial support, Croydon’s public services have been increasingly underfunded and overstretched as demand continues to rise,” Irons said in her letter to Reed.
And last night, at a party fundraiser staged in a Thornton Heath restaurant, Reed was seated alongside mayoral candidate Davis. “It’s fair to say that Rowenna was bending his ear,” a Labour member told Inside Croydon.
Davis described today’s announcement from MHCLG as being “one step closer to securing the fair funding deal Croydon deserves”.
Davis has so far collected 2,000 signatures on a campaign petition demanding fair funding for Croydon. “This is a huge win for our campaign,” she said tonight.
“But we’re not there yet. We’re going to keep fighting until this deal is in black and white. Conservative Mayor Jason Perry has sat on the council for 30 years and has failed to get this far. With a Labour government, Croydon’s time could finally be coming.”
And Davis added: “So many people have been calling for this for years – including Inside Croydon – and I want to pay tribute to them today as well.”
- Read Andrew Fisher’s open letter from Inside Croydon to the then Secretary of State: Dear Angela: It’s time for you to act and fund Croydon fairly
Read more: Labour’s Davis tells minister Reed to fund Croydon fairly
Read more: Now even Mayor Perry agrees we need to Fund Croydon Fairly
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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The key paragraph from this article is:
“Welcome as that may be, the Town Hall’s financial reports suggest that even those increases will get swallowed up in financing Croydon’s loans, unless or until something is done to write-off or reschedule the council’s crippling debt.”
Labour’s plans amount to a continuation of the austerity programme that was started by the Tories. Increasing the percentage of Government grant that goes to some councils while increasing it a bit to others doesn’t solve the problem that all local government is underfunded. All councils are being forced to make cuts to essential services because the overall level of Government funding has been systematically reduced since 2010.
In the case of Croydon the demand should be for a write-off of a substantial proportion of the Council’s £1.4 billion debt. Without this the Council’s financial position remains unsustainable. Merely increasing slightly the percentage of the annual grant that Croydon receives compared to other councils does not fundamentally change this.
Everyone seems to think that the formula isn’t, wasn’t, fair – but it’s always taken deprivation data into account. The Tories, when they were in charge of Croydon, lobbied hard for fairer funding. The argument, I seem to recall, was that they were being penalised for prudence – their historic spending wasn’t enough to generate more generous funding. Seem to think the same thing happened to Sutton under the early Lib Dem rule
The Labour government’s Fair Funding Review consultation on altered local government grants was launched in June.
Like many predecessors the government has not been willing to take on the difficult review the Council Tax which was only meant to be a temporary emergency replacement for the poll tax/Community Charge.
Steve Reed isn’t just trying to fix the finances, it very much looks like he’s also trying to fix the election – with our money
The problems include local overheads – running the Council and local services, and national ones such as Adult Social Care effectively delegated to the Council by government. If Care were funded by the government, perhaps via the NHS, Councils could breathe again. Outsourcing of services to private enterprise has failed. The Council pays fewer salaries to employees, but pays increased sums to companies which don’t meet contractual standards and don’t get penalised. The current funding system for Councils does not work, the whole Council system needs a drastic review. Yes, income taxpayers would have to contribute more, but council taxes could be spent on Councils’ local duties instead of debt interest. This is a national problem, not just a Croydon one.