Croydon council to borrow £240 million to balance budget

By Tara O’Connor, Local Democracy Reporter

As Croydon Council works to regain financial stability it is expecting to borrow £240 million over the next three years.

The cash-strapped council is currently waiting to hear back from the Government on whether it will receive a £150 million loan, known as a Capitalisation Direction.

It needs this to balance the budget this year and next – a legal requirement.

It has more than £60 million projected overspend for 2020/21 which forced the council to issue a Section 114 notice in November.

At a cabinet meeting last night (Monday, January 18) councillors heard details of the draft financial programme for 2021-24.

This included the borrowing of another £90 million over the three year period – The council already has £1.5 billion worth of debts and just £7 million in reserves.

The council’s medium term financial strategy includes £9.8 million a year to pay back existing borrowing.

Opposition councillor and shadow cabinet member for finance, Jason Cummings, said: “We have got used to seeing increased borrowing year on year for quite some time now but the council’s ability to support borrowing has taken a significant hit.

“The capital programme however does commit us to another significant jump in borrowing but the council is effectively at it’s limit.”

Lisa Taylor, director of finance, said full borrowing limits will be set out in budget papers expected to be published in February.

At the same meeting, interim chief executive, Katherine Kerswell, revealed that the Ministry of Housing Communities and Local Government will be setting up an improvement panel which will feed back directly to secretary of state Robert Jenrick.

Ms Kerswell said: “They wish to have an improvement panel that will probably be in existence for a minimum of three years that will report back privately to the secretary of state for MHCLG.

“Let us be clear we have received no formal letter from the Government about the role and activity of the improvement panel and there are a number of powers that the secretary of state has to set up different bodies.

“Northamptonshire had commissioners who were given formal powers by the Government to step in the place of councillors. That is not what we’ve been told the improvement panel will do and I would urge all of you not to place any weight on other messages that will tell you otherwise.”