Croydon Council issues section 114 notice

Chief finance and S151 officer Jane West has issued a Section 114 notice which acknowledges that the council will not be able to balance its budget in the next financial year.
Croydon Council has stated that it will be unable to balance its books next year without additional assistance from the government due to the ongoing impact of historic financial mismanagement, which has rendered the authority financially and operationally unsustainable.

The borough’s Executive Mayor, Jason Perry, has written to Secretary of State Michael Gove, requesting additional assistance to address the ongoing impact of the financial issues. Mayor Perry has stated that the magnitude of these issues means that the council will be unable to recover without a new government solution for long-term financial sustainability.

A forensic review of the council’s situation and financial processes has revealed more unresolved historic accounting risks, adding nearly £48 million to next year’s budget.

Debt levels totalling £1.6 billion (of which £1.3 billion is General Fund debt) have 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.

Croydon is doing all it can to support its own recovery through its savings and transformation programmes, which have already delivered over £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.

However, it will not be enough to meet the council’s costs and ongoing debt, which are simply too large to manage in a sustainable manner without additional government support over a longer period of time.

The council estimates that it will need to cut spending by £130 million in the coming financial year, rendering the organisation financially and operationally unsustainable.

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 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.

Jason Perry, Executive Mayor of Croydon

On 30 November, the council’s cabinet will meet to discuss its medium-term financial strategy. This will outline a series of budget cuts, asset sales, and transformation proposals developed to aid the council’s recovery. These savings plans will serve as the foundation for a public engagement that will begin in December 2022.