Improvement panel sets timeline for exiting Croydon amid governance progress

The improvement panel set up to help steer Croydon Council to financial sustainability has said it plans to leave the local authority in July 2025 or sooner.

Croydon issued its first section 114 notice in November 2020 in the face of £1.6 billion in debt.

Ensuing public interest reports were severely critical of governance failings at the council and led the government to appoint the Improvement and Assurance Panel.

The reports found failings in how the council arranged budget setting and monitoring and failures in record keeping for the overview of council-sponsored or controlled projects, among other things.

But the panel, which is chaired by Tony McArdle, has now reported that "substantial progress" has been made in improving governance at the London borough.

In its exit strategy report, published this month, the panel said that the initial response of stopping making poor decisions, fixing a target of 'London and/or sector average' in respect of costs and setting out to recover from the most evident examples of poor investment "have gradually been formalised into proper action plans and have been pursued with some success".

It added that the major driver of governance change since 2020 has been the decision by referendum in October 2021 to move the council to a model of mayoral-decision making and the adoption of a 'strong Mayor' model, which sees the Mayor handle the maximum level of delegated decision-making.

The report said: "The Executive Mayor has grasped the critical central requirement of returning to financial stability and has put this to the fore in his prioritised Mayor's Business Plan. He has accepted the need for very difficult decisions to be made in order to bring this about.

"We have observed that he takes a collaborative and transparent approach to taking forward these priorities, and debates upon them are vigorously and constructively held in the appropriate forums."

The report also noted that the Audit Committee is now independently chaired and that the Scrutiny Committee is chaired by the opposition, bringing further governance improvements.

Outside of governance, the report highlighted changes in culture and leadership at the council.

It noted that there is now "stable and consistent political leadership, and a culture of transparency and well-ordered decision-making has been established".

Despite the improvements, the borough is still set to spend £64m of its budget this year on servicing debt before it spends any money on local services. Around £320m of its debt is not backed by assets and is therefore "toxic," the council said.

To address this, the council has requested continued government support over the next four years, including £38m in 2024/25.

"However, the council has been clear that more borrowing is not a solution. Croydon will need a bespoke package of support – preferably through a £540m debt write off – if it is to become financially sustainable," the council said in an update on its financial position.

"The alternative of further permission from the government to borrow to fund revenue spend, through capitalisation directions that waive accountancy good practice, simply piles more debt on the council. This may be necessary in the short term but is not a long term solution."

Tony McArdle, Chair of Croydon's Improvement and Assurance Panel, said: "Our Exit Strategy reflects the progress that the council has made and the need to maintain this pace of change in delivering ambitious targets for the next 18 months. If the council does so, it should give confidence to the government that the council is capable of sustaining this path of improvement.

"It addresses the matter of the extraordinary extent of the council's debt and makes some inroads into reducing it – but also recognises that only limited progress can be made in this timescale. A plan for the long-term is needed and the council is in discussion with us and with the government over what that might look like."

Jason Perry, Executive Mayor of Croydon, said: "I welcome the government and the panel's confidence in Croydon, that we can continue to lead our own recovery, and I want to thank panel members past and present for the experience and expertise they have brought to our improvement journey to date. I look forward to continuing to work with them as we maintain our relentless focus on making our council better for the people of Croydon."

Adam Carey