It’s official: Labour has bankrupted Croydon

Last  Wednesday (11 November), Croydon Council’s Director of Finance officially declared the Council bankrupt and a “Section 114 notice” was issued. This is because the Council’s Labour-run administration has lost control of its finances over several years and run up £1.5 billion in debt as a result. This debt costs £43m a year to service – money which should be spent on schools, children’s services, street cleaning, leisure centres etc. This financial catastrophe long pre-dates Covid-19, and Croydon is the only London Borough in this situation.  There is no-one to blame for this but Croydon’s disastrous Labour councillors, who continue to run our Borough even today.

The Section 114 Notice states that Labour’s budget “continues to significantly exceed resources, and plans to rectify this financial position are insufficient”.

Labour claimed to have identified £27.9m in new savings, but the report says £17.7m were “incorrectly identified”. It also highlighted the financial problems created by Brick by Brick, the Council’s 100% wholly owned property developer, which “adds to the financial pressures and the Council’s inability to deliver a balanced budget this financial year.”

The notice is very clear: the Labour administration has not used “the necessary level of pace, urgency or radical options to… balance the budget.” Because of this, “the Council faces an extremely serious financial situation”. The Section 114 notice, which is only issued “in the gravest of circumstances”, means that the Council is now bankrupt and must cease all non-essential spending.

You can read the notice by clicking here

The Council has been warned about this repeatedly. Just last month, the Council’s auditors Grant Thornton felt legally obliged to publish a damning report showing that since 2014, when Labour took control of Croydon Council:

  • Labour ignored repeated warnings from the Auditors and from the opposition Conservative Group about the precarious finances going back to 2017, which the Report lists in painful detail
  • Labour ran the reserves down to dangerously low levels – from £58.2m in 2015/16 down to £16.6m in March this year (before Covid). The auditor says these have been “unsustainably low” for some time, are the lowest in London and Labour has consistently “failed to address the low levels of reserves”
  • Labour lent almost a quarter of a billion pounds of taxpayers (i.e. our) money to their wholly owned property developer Brick by Brick, which has failed to repay a single penny – even though £110 million was supposed to have been repaid by now according to their own plans
  • Labour ran up the Council’s debt to over £1.5 billion – more than any other London Borough by a large margin
  • Labour only made provision to cover a quarter of the repayments on the debt they have run up – these debt repayments are now running at an incredible £43 million per year, money that should be spent on essential services, not paying for Labour’s debt mountain
  • Labour recklessly speculated using our (taxpayers) money on failed commercial property investments without even bothering to formulate and approve a strategy first. This included gambling £53m on buying a secondary shopping centre whose value has now crashed, and gambling £30m on buying Croydon Park Hotel which has since gone bankrupt. The meeting which finally happened to approve the strategy timed out before that agenda item was reached and the plans were approved with no discussion.  This is truly staggering.
  • Labour’s “approach to borrowing and investments has exposed the Council and future generations of taxpayers to significant financial risk. There has not been appropriate governance over the significant capital spending and the strategy to finance that spending.”
  • Labour allowed “considerable overspends” on budgets with little or no proper financial control and “without an appropriate level of challenge”
  • Labour used £73m of capital over three years to fund transformation of services (i.e. make them more efficient) but the report finds there has been “little evidence” that any of this worked
  • Labour’s “governance over the budget setting and monitoring has not been good enough“
  • Labour has covered up its reckless mismanagement of parts of the budget in a way that appears to border on fraud. The report says: “The impact of the overspends has been masked by both the accounting treatment of the Dedicated Schools Grant deficit (which we disagree with) and the use of the flexible capital receipts”
  • The Government is now having to send in its own inspectors to make recommendations for clearing up the mess

The full horrifying Grant Thornton report can be read here:

This has all come about because the Council’s Labour administration has been unaccountable to residents. It underlines the need for a Democratically Elected Executive Mayor who will be genuinely accountable to the public and will listen.  I am hoping the referendum on this will happen soon now that we have handed in enough signatures to trigger one – although I fear the unaccountable clique running the Council will continue to ignore the public and try to delay holding the referendum as long as they can.

I will keep you updated with further news on Croydon’s financial position.