Croydon’s failing Labour Council is officially bankrupt - that's the view of the most senior finance officer at the Council, who today issued a Section 114 notice.
This second devastating report slams the Labour Leadership of the Council by revealing:
- It had identified savings that weren’t actually there;
- Its failing development company, Brick by Brick, is not paying back its loans, interest or dividends;
- a failure to deliver urgent savings;
- Departmental costs continuing to spiral out of control;
- a lack of pace, urgency or radical options.
The officer responsible for issuing the Section 114 notice reports:
I am not seeing the necessary level of pace, urgency or radical options to be presented to members to take decisions upon to give me confidence that the Council can make the level of savings required to deliver a balance budget in year.
It is a very sad day for Croydon when this failing Labour Council has bankrupted our borough through their utter mismanagement of the finances.
This report follows hot on the heels of another embarrassing investigation by independent auditors Grant Thornton’s ‘Report in the Public Interest’. Despite knowing about this for many months, Labour Council Leader Cllr Hamida Ali has failed to act, as the S114 report makes clear in great detail.
Yet Croydon’s failing Labour Council were warned, many times over many years, and they refused to listen.
A S114 notice has serious implications for our residents. Other than statutory responsibilities, no new expenditure can take place. This will put a huge strain on vital services; services that are most heavily used by the most vulnerable residents of Croydon.
Croydon Council have gone cap in hand to the Ministry for Housing, Communities and Local Government for a bailout, essentially even more borrowing, to get themselves out of this self-created hole.
Cllr Jason Perry, Leader of Croydon’s Conservative Councillors says:
For years we have warned Labour that the choices they were making and the policies they were advocating would lead to this terrible situation. They ignored all of our many warnings.
They have failed to meet their own savings targets within their budgets year after year and have spent millions on transformation projects that have not produced any savings or benefit for the Council.
Labour have recklessly gambled with taxpayers money, borrowing £millions to buy hotels and shopping precincts. They have doubled the Council debt to £1.5 billion, that’s £15,000 every single hour since they took control of the Council in 2014. That’s no way for a responsible Council to behave.
They have played at the property market by creating their own development company, Brick by Brick, to which they have loaned £250 million. Today the Council have issued notice that they will be writing off £36 million of interest and dividends not paid by Brick by Brick.
Labour have failed to act, failed to plan and failed to deliver for Croydon. Croydon deserves better. The only way to fix this mess, is for the Conservatives to take over the Town Hall in 2022.
Quotes from the S114 notice report
‘Croydon’s financial pressures are not all related to the pandemic.’
‘In year savings not delivered – £17.7m of the £27.9m of the ‘new’ savings presented to Cabinet on 21 September 2020 and the Council meeting on the 28 September 2020 were incorrectly identified as new savings and as a result the forecast overspend has not reduced by as much as previously reported.’
‘Brick By Brick - The strategic review of Group Companies currently being undertaken has identified that there is a greater risk than previously anticipated around Brick by Brick being able to make interest and dividend payments due to the Council this year and for previous years. The non-delivery of this income adds to the financial pressures and the Council’s inability to deliver a balanced budget this financial year.‘
‘Budget Development Meetings – The Council’s internal Budget Development Meetings designed to identify budget savings in the medium term 2021/24 is failing to deliver the amount of necessary savings proposals and reduce growth demand to date.’
‘Spending controls – Despite the Council having put in place spending controls over the summer 2020, non-essential cost have continued to be incurred.’
‘I am not seeing the necessary level of pace, urgency or radical options to be presented to members to take decisions upon to give me confidence that the Council can make the level of savings required to deliver a balance budget in year.’
You can read the full S114 notice below along with Grant Thornton's 'Report in the Public Interest':