Most followers of Croydon politics will be aware that in October 2020 the Council’s auditors, Grant Thornton, felt compelled to issue a Report in the Public Interest, which highlights its concerns about how the Labour Council’s finances have been run for the last few years.
These reports are rare, only half a dozen councils having suffered the ignominy of such a report and none in London.
The report confirms what Croydon Conservatives have been saying since 2015: that the council is taking huge financial gambles; that it has reserves (‘savings’) which are far too low and its commercial ventures were always risky and are now failing.
It’s a damning report. It punctures the Labour Administration’s narrative that its current financial catastrophe is all the fault of the Government and/or Coronavirus. It makes it quite clear that the seeds of the current disaster were sown in the first few years after this failing Labour Group took office and, worse, that they ignored repeated warnings that they faced disaster. Essentially, Grant Thornton chose to issue their report because the Council had failed to act on private warnings (and caveats to previous audit reports) about the unfolding problems and, therefore, they had no choice but to ‘go nuclear’.
The report outlines that the council and its political masters displayed corporate blindness to the warnings. That they were so fixated on blaming the government for giving them – as they saw it – too little money to play with, that they failed to understand that they still had to live within their means.
Instead, year after year, budgets were set to which it was obvious (to all insiders) were not deliverable. Every year the same savings were put on a pedestal as the way the budget was going to balance, and every year it became obvious that they were not going to happen. Council budgets are set covering April to the following March, and it was evident by September every year that the council was set to massively overspend.
So who is to blame? Council officers or their Labour political bosses? In recent weeks we have seen the removal of the CEO, the Leader of the Council, both Deputy Leaders and the cabinet member responsible for finance. The Grant Thornton report makes it quite clear that there was a total failure of political oversight on the process, and that the decisions foisted upon the council by the politicians – its property speculation and the abominable Brick by Brick developer – were largely to blame for its current woes.
The report is highly critical of the role of elected members, but sadly it does not differentiate between Labour councillors – who had access to all the information – and Conservative councillors, who did not. I think this is probably simply an oversight based on acceptance of the rules prevailing for how councils make decisions.
As the Leader of the Opposition from 2014 until August 2020, I am quite clear that the Conservatives in Croydon did everything possible to question and critique the decisions. There is virtually no criticism in the report that we had not been making ourselves for many years.
￼But the reality of decision making in local government these days is that it is almost impossible for opposition parties to prevent their council making damaging decisions. The party in Administration has significant latitude to decide things under their own authority, but major decisions have still to be taken in public, in Cabinet.
The cabinet has up to ten members and anywhere where one party has a majority of councillors it can appoint the entire cabinet, and only they get a vote on cabinet decisions. In Croydon the opposition is able to attend cabinet and ask a question or two, but get no votes. So not once, in the entire time the cabinet system has been in operation (20 years) has cabinet even so much as modified a decision, let alone decided to reject something put in front of it.
So the cabinet system has a lot to answer for in terms of creating the culture of secrecy and spin which the audit report identifies. But wouldn’t you know it, ten years after Blair foisted this ridiculous system upon us, Gordon Brown came along and made it even worse. In one of his last decisions before being ejected from office in 2010, he introduced the ‘strong leader’ model. As if the cabinet system didn’t concentrate too much power in too few hands, the changes Brown made focussed virtually all decision-making power in the hands of one person – the ‘strong’ leader.
The outcome of this is that it incentivises administrations to reduce what they decide in cabinet and instead agree only overarching strategies there, with all implementation decisions taken by officers and/or members in private later. And that is what has happened in Croydon – cabinet now takes maybe half the number of decisions it did under the Conservatives before 2014, because most of detail has been removed for decision in private.
Similarly disastrous has been the councils experiments in property development, through the discredited Brick By Brick (BxB) wholly-owned company. By getting BxB to do its social housing development the council is able to avoid making the properties become eligible for ‘right to buy’ (which Labour hates) and, better still, because it is a nominally independent company it cannot be scrutinised in the way that the council’s own decisions can.
In three years BxB has borrowed hundreds of millions of pounds from the council – which itself borrowed the money from the government – and the council has received back a tiny handful of social-rent flats. When we try to question it, we are told that BxB doesn’t have to hold itself open for scrutiny ‘because it is an independent company’. It is now clear that the income the council expected to receive from BxB is not materialising and this has contributed massively to the council’s current financial woes. For several years we have been calling for BxB to be closed down (that was our election pledge in 2018), and a more honest and transparent system for building the needed social housing be put in place – such as good, old-fashioned, building of council houses.
The one area where all councillors do have a role, and a little influence, is when it comes to the annual budget setting. As I identified earlier, the council has long been inclined to set naïve budgets – where it is difficult to believe that the savings it is using to balance the budget are really deliverable.
The budget meeting takes a number of decisions: it sets the rate of council tax, it sets out how the money raised will be split by department for investment in services and it decides on its capital programme & borrowings. You vote for most of this in one go: how much the tax rise will be and where it will be spent. So if you know that the council must max out its tax increase to avoid going bust, but you fear that its savings package is not deliverable, what do you do as an opposition councillor? Do you vote against the budget because you feel it is not deliverable or vote for it because, in the end, the council must have the extra money to stave off bankruptcy?
That is the unenviable decision which the group I led had to make in 2019/20 and 2020/21. In the end we concluded that so many services would fall over if the council tax was not put up by the maximum allowable that we could not, in good conscience, advocate this. For those readers who are inclined to go back and review our budget speeches in those years on the web cast you will see that we were very critical of the financial performance and direction of travel.
Sadly, in order to overturn the administration’s budget we need seven members of the Labour group to vote with us – and that is something which has never happened and probably never will. Our ‘strong leader’ has the back up of needing to fill nearly thirty positions in his administration which generate an additional allowance (money) for the lucky recipient, and that patronage is used ruthlessly to marginalise those few members of the Labour group who do have an independent mindset and don’t swallow the spin uncritically.
In the end, an opposition’s ability to constructively oppose is governed by how much access to information they get. In the ‘good old days’ council officers were clear that they answered to councillors as a whole, albeit more so to the controlling group. We got quality briefings and were proactively advised in advance of decisions which officers accepted might be contentious. The cabinet system has slowly, but inexorably, changed that. We are rarely advised of officer work streams which will lead to controversial decisions and the information available is dumbed down so far that it is virtually useless. The culture in the council has been to cover up and dissemble wherever possible.
A few residents have suggested that, whilst the administration is overwhelmingly to blame for the catastrophe, the opposition has perhaps not ‘opposed enough’. Superficially I can see why they might wonder that. But, as I hope I have demonstrated, we have a limited number of weapons in our armoury and, on the budget, we have used them all:
- Call-ins to scrutiny
- Questioning in council and debate motions
- Written questions to cabinet members
- Use of normal scrutiny committee processes
- Writing in local publications
- Putting out our criticisms on leaflets and social media
- Appearances on radio and TV
- Working with local MP Chris Philp to generate wider coverage
- Writing to national government outlining our concerns
- Hosting public meetings to bring the issues to the attention of residents’ groups
All these things cause embarrassment to the administration but they can’t stop the poor decisions from being made.