Croydon council declares bankruptcy for third time

By Tara O’Connor, Local Democracy Reporter

Croydon council has been forced to declare effective bankruptcy for the third time.

The authority this morning has issued a Section 114 notice as it admitted it cannot balance its budget in the next financial year.

The council has blamed the ongoing impact of historic financial mismanagement for the latest bankruptcy filing.

The council first declared bankruptcy in 2020. At the time it was given a £120m bailout loan by central government to balance the books.

Croydon mayor Jason Perry has now written to Secretary of State Michael Gove asking for more money from the government.

The mayor said the council has uncovered £48m of extra costs which will be added to next year’s budget, blaming “unresolved historic accounting risks”.

The council has a total of £1.6bn worth of debt which it has to pay £47m a year to pay off.

Since the first bankruptcy filing two years ago, Croydon has made £90m in savings and £50m in asset sales, with further proposals for £44m in savings in 2023/24 and about £100m in proposed asset disposals in the coming years.

However, this will not be enough to put the council on a sustainable footing, and it would need to reduce spending by £130m in the next financial year, which would leave the organisation “financially and operationally unsustainable”.

Mayor Perry said: “The previous administration has left a legacy of unprecedented financial mismanagement, toxic bad debt and a lack of governance and transparency that shames Croydon and continues to have a long-lasting impact on the sustainability of our council.

“Despite the hard work of staff to support the council’s recovery, the toxic level of historic debt means that Croydon is trapped in a vicious cycle. Even with government support, the coming years will be incredibly financially challenging for Croydon council. Ultimately, this will mean the council needs to do and spend less, with significant spending reductions.

“I am determined to fix what the previous administration has broken and to protect our residents, our staff, and the borough as much as possible, but getting the council back on track to recovery and long-term financial and operational sustainability will take a long time and need radical solutions.

“We must balance our books and become a much smaller organisation, which is more efficient and delivers priority services that support our residents, our communities and the borough.”

The council’s cabinet will meet on Wednesday, November 30 to discuss its medium-term financial strategy.

In a video, cabinet member for finance, Councillor Jason Cummings, said: “Croydon council has today had to issue a new Section 114 notice as a result of legacy issues from Labour bankrupting the borough.

“This notice has the full support of the mayor and cabinet. This is happening because on our current projections it will be impossible to set a balanced budget next year with the resources we have.”

Pictured: Bernard Weatherill House, Croydon council offices, Fell Road (Picture: Tara O’Connor)