Council admits to being “financially and operationally unsustainable”, issues s114 notice

Croydon Council has issued a third section 114 notice after its chief finance and s151 officer concluded that the London borough would not be able to balance its budget in the next financial year.

The local authority’s new Executive Mayor Jason Perry has written to Secretary of State for Levelling Up, Housing and Communities, Michael Gove, calling for further Government support.

Mayor Perry, who was elected in May, claimed that the sheer scale of the financial issues he had inherited “means that the council cannot recover without a new government solution for long-term financial sustainability”.

Croydon said the Mayor’s ‘Opening the Books’ exercise, a forensic review he commissioned of the council’s situation and financial processes, had uncovered more unresolved historic accounting risks, adding new costs of almost £48m to next year’s budget.

The local authority added that inherited debt levels totalling £1.6 billion (of which £1.3 billion is General Fund debt) had also become critical to the sustainability of the council’s revenue budgets with current interest rate levels.

“Currently the council must pay £47m from its budget to service this debt before it can spend money on services for residents. The ongoing national economic crisis has also meant council services are more expensive to deliver,” it said.

Croydon insisted it was “doing all it can to support its own recovery through its savings and transformation programmes”, which it said had already delivered more than £90m in savings and £50m in asset sales over the past two years, with further proposals for £44m in savings in 2023/24 and around £100m in proposed asset disposals in the coming years.

“But it will not be enough to meet the council’s costs and ongoing toxic debt burden, which are just too big to manage in a sustainable way without further support from the government over a longer period.”

The council estimates that it would need to reduce spending by £130m in the next financial year “which would leave the organisation financially and operationally unsustainable”.

Croydon, which said it was on track to balance its in-year budget, has published its Medium Term Financial Strategy update, which will be discussed at Cabinet on 30 November.

Jason Perry, Executive Mayor of Croydon, said: “Despite the hard work of staff to support the council’s recovery, the toxic level of historic debt means that Croydon is trapped in a vicious cycle. Even with Government support, the coming years will be incredibly financially challenging for Croydon Council. Ultimately, this will mean the council needs to do and spend less, with significant spending reductions.

“I am determined to fix what the previous administration has broken and to protect our residents, our staff, and the borough as much as possible, but getting the council back on track to recovery and long-term financial and operational sustainability will take a long time and need radical solutions.

“We must balance our books and become a much smaller organisation, which is more efficient and delivers priority services that support our residents, our communities and the borough.”