Croydon Council to receive £120million government bailout

By Tara O’Connor, local democracy reporter

After months of waiting, Croydon Council will receive a vital government bailout to help it balance this year’s budget.

On Friday evening the council heard that the government will allow borrowing of £120m – £70m for the financial year 2020-21 and £50m for 2021/22.

This is known as a capitalisation direction and is needed  for the council to have any chance of bouncing back from effective bankruptcy.

The council wrote to the Government in December to request this.

It means the council can charge revenue expenditure to capital which is then paid back over an extended period.

The council was forced to issue a Section 114 notice in November as it was then facing a projected overspend of £60 million – the projected overspend now stands at £96.5 million.

The council is also being monitored by the government through an Improvement and Assurance Panel, appointed in January.

Despite the loan, Croydon Council will still have to make a series of cuts and curb spending in the coming months and years to get its finances back on track.

Council leader Hamida Ali said: “This means we can now put forward a balanced budget and it gives us a solid foundation to focus on putting those plans for sustainable finances into practice over the next 12 months.

“We have a lot of work to do and our finances remain critical over the medium term, but we have already shown in the way we have responded to the government and external reviews that we are serious about tackling our financial situation, improving how Croydon is run and providing good value services for our residents.”

The loan comes just in time for Croydon to be able to set a balanced budget, a legal requirement, which has to be done by March 11.

The council’s cabinet is set to meet today at 2pm to discuss the 2021/22 budget ahead of a full council meeting this evening.

Conservative MP for Croydon South, Chris Philp, blamed the council’s financial crisis on spending on commercial properties, controversial developer Brick by Brick and having debts of £1.5 billion.

In a Tweet, he said: “The government has agreed a £120m bailout for Croydon Council – the largest in history.