Last week, the Government gave Croydon Council permission to raise Council Tax by 15%, in order to help fix Labour's toxic legacy in this Borough. This decision is an extremely difficult one to make, so I wanted to explain:
- Why we are having to raise Council Tax by this much;
- What we are doing to support residents with this increase;
- Who is responsible for the unaffordable debt;
- The actions we have already taken to reduce spending and make savings;
- What we are doing to hold those responsible for Croydon's mess to account.
This blog is a long one, but I know how much this issue matters to local people, so I thought it was important to include all of the necessary details.
With best wishes,
Mayor of Croydon
The toxic £1.6 billion debt and financial failures of the previous Labour administration left Croydon with a hollowed-out council which has been reliant on government bailouts for multiple years. That clearly isn’t sustainable in the long-term.
Over eight terrible years they destroyed the finances, and the services. I was born in Croydon, I’ve lived here my whole life. It breaks my heart to see the terrible damage that Labour did to our once great borough.
Since I was elected as the Mayor of Croydon last May, I have been working to find out what went wrong, and to take the difficult but necessary steps to get the Council back on a stable footing. Given the scale of the financial collapse Croydon has experienced, that will require incredibly difficult decisions. That is why we are proposing a one-off increase in Council Tax of 15% this year. This amounts to around an extra £4.50 a week for the average ("Band D") property.
I know this is going to be difficult for people in Croydon, so I have directed that we will also significantly increase the support we provide to low-income households, to protect those who cannot afford to pay their council tax and would otherwise be pushed into hardship by the increase.
I was elected to clean up Labour’s mess – I will fix Croydon Council, but it won’t be easy for any of us, and it will take time.
Labour bankrupted Croydon Council three times.
They played monopoly with your money, including spending £30 million on the Croydon Park Hotel and £50 million on the Colonnades shopping centre. Over £250 million was wasted on Labour's failed Brick by Brick housing company. They wasted over £70 million on a failed refurbishment of Fairfield Halls – and the roof still leaks!
Unlawful accounting - potentially to the tune of £70 million - has been unearthed surrounding the Croydon Affordable Homes company. Labour also set unrealistic income targets (for example, on income from parking) which could never be met, then failed to scrutinise those targets properly.
Multiple years of accounts have been left open and unaudited.
Labour's dither and decay led to the stagnation of Croydon Town Centre. Their incompetence also meant that Council tenants on Regina Road were left to live in inhuman conditions.
Yes, it was. The Conservatives ran Croydon until 2014; Labour then took over and were in charge until May 2022.
When Labour took office in May 2014, they inherited a debt of approximately £720 million. Of this, approximately £350 million was for the ‘Housing Revenue Account’ which means it was used to look after social and council housing in Croydon. The rest was for the 'General Fund', which is used to pay for all other Council services (such as bins, libraries, and so on).
During Labour's eight years in office, they trebled the General Fund debt to nearly £1.3 billion.
That’s not all though – the spending choices we made pre-2014 were affordable, just like a mortgage. At that time, the money was used to invest in vital infrastructure like roads and schools that Croydon residents really valued - not wasted on a failed property developer.
That is why we are in such a dire financial situation – debt is not always a problem, but the type, speed and level of debt that Labour accrued was.
One of my first actions on becoming Mayor was to launch a forensic ‘Opening the Books’ review of the council’s finances, which uncovered significant issues with the Budget inherited from the failed Labour Administration:
- Parking and Traffic income over-estimates – Almost £14 million
- General Fund spending wrongly charged to the Housing Revenue Account - £9.5 million
- Errors in the Housing Benefit budget - £9 million
- One off benefit money from the NHS built into the ongoing budget - £5 million
- Underestimate of Minimum Revenue Provision - £2.6 million
- Landlord licensing income wrongly assumed - £1.5 million
- Incorrect capitalisation of salaries - £1.3 million
- Structural shortfall in Housing funding – £5 million
These issues add an extra £48 million of costs to the Council’s budget each year, as well as a one-off bill of £75 million to balance previous years’ accounts. Three years' accounts still remain open.
As a result of this exercise, my Administration has already taken significant action:
- Introduced a Deficit Recovery Plan to get on top of in year overspends and reduce unnecessary spending by millions of pounds.
- Identified £36 million of new savings for the coming financial year. This is one of the largest savings programmes of any Council in the country.
- Identified and begun the process of marketing around £100 million of council assets and buildings for sale to reduce council debt levels.
- Engaged with forensic accountants investigating potential fraud and potential criminal activity in the refurbishment of Fairfield Halls.
- Developed a new enhanced Council Tax Support Scheme to protect residents most affected by potential Council Tax rises.
- Started negotiating with Government to find a long-term solution to Croydon’s debt problem, including potential capitalisation loans and debt write offs.
There is more to be done, but we are not resting on our laurels. We are taking the tough decisions necessary to get Croydon back on the straight and narrow.
I really wish this Council Tax increase was not needed, but Labour left us with a debt so high that servicing it costs the council £47 million each year.
That’s around one sixth of all Council spending - or roughly four times how much it costs to empty all our bins.
I have already directed the Council makes £36 million of savings this year - one of the largest savings programmes in the country. Without this proposed rise in Council Tax, we would need to make an extra £20 million of cuts on top of this. This scale of reductions would be dangerous to so many across Croydon and could put vital services to vulnerable residents at risk. I am just not prepared to do that.
My Administration will, however, significantly increase the support we provide to low-income households, to support those who would otherwise be pushed into hardship by the increase.
I am continually in discussion with the Government to agree a reduction in the Council’s long-term debt. They have already bailed the Council out to the tune of £150 million – but due to the recently discovered "mistakes" in Labour's budget, we need more help. In the meantime we hope to agree a new Capitalisation Directive to address the historic financial failures which still sit on the council’s balance sheet.
These steps, together with the continuing programme to transform how the council operates, are important and necessary steps to making Croydon a sustainable local authority.
Separate work is also progressing to ensure that those responsible for Croydon’s financial collapse face justice for their catastrophic failures.
I have instructed forensic accountants to investigate potential fraud that has taken place, and we have ensured that the police are aware of the activities of the last administration.
There are numerous reports that are being completed looking at the culture of the Council under Labour, and I expect these to be published in the relatively near future.
For us to get closure on this tumultuous period, we need to shine a light on not only the toxic financial legacy of Labour, but also their culture of bullying and obfuscation that led our Council down this terrible path.
The gears of justice grind slowly – but we will ensure those responsible are held accountable.