Croydon supremo vows: ‘We will not go bust’ as it freezes vacancies and pins back non-essential costs amid massive Covid-19 overspend

By Tara O’Connor, Local Democracy Reporter

‘We will not go bankrupt’ Croydon’s council leader has assured – but there will be restrictions on non-essential spending and a recruitment freeze as the town hall faces a cash crisis.

Councillor Tony Newman told councillors that the council is facing significant pressures which will mean tough decisions need to be made.

The council is facing a £62 million overspend and currenty has £440 million worth of debt made up of short-term loans.

Given its annual budget this year was £280 million, the overspend represets about one fifth of the council’s total annual spending power.

At a virtual scrutiny meeting on Tuesday (May 26) cllr Newman said: “We have significant pressures but we have a very strong team making sure Croydon will not find itself in 114 territory. We are absolutely delivering a plan to make sure we protect frontline services.

“We shouldn’t pretend that it’s easy, we’re going to have to make tough decisions on where money is spent.”

The council leader refers to a Section 114 notice which is issued by councils in dangerous financial circumstances, banning all new expenditure.

In 2018 Northamptonshire County Council was forced to issue the notice – the first local authority to do so in nearly 20 years.

Chief executive of Croydon Council Jo Negrini said that the coronavirus pandemic has impacted the council’s finances.

She said: “This is a very, very challenging time for all councils and Croydon is absolutely no exception from that.

“As of May we have received £19.9 million of funding directly for covid costs but if you have a look at the types of costs we’ve incurred it’s not just direct covid costs we’ve lost income as a result.

“We’ve put in place exemptions on all parking across the borough we’ve also ensured that there is support for council tenants and commercial tenants who were really struggling in terms of council tax and business rate relief.

“A whole package has been put in place which means we’ve lost significant income.

“We are taking a  proactive approach we’re not sitting around waiting around for the government to tell us what they’re going to give us. We’ve been acting immediately to stem spend assuming we won’t receive all we require from government.”

So far this means that a recruitment freeze has been put in place and the council is stopping all non-essential spending.

There is also set to be a ‘complete review’ of all council finances.

Overall the financial impact of coronavirus on the capital is estimated to be £1.8 billion.

And in Croydon the projected overspend for 2020-21 is £62.7 million.

At the same meeting, director of finance Lisa Taylor revealed that the council currently has £440 million worth of debt made up of temporary loans borrowed for up to two years.

She said: “We’ve also arranged additional borrowing of £141 million from other local authorities to refinance that debt. That £141m doesn’t increase the £440m.

“What I would say at the moment is that we are still able to borrow money, we are still able to take advantage of the market we are borrowing at low rates and we have not seen any restrictions as a local authority on borrowing the cash.”

Ms Negrini said that the council was facing uncertainty of how much coronavirus will affect the council’s finances and how much will be reimbursed by the government.

She added: “The key thing for us is the level of uncertainty with the government over the outstanding money that we will potentially lose over a full year.

“We may be coming out of this in the next three months which would mean we would be able to earn income or deliver our savings programme as planned

“We can reassure all of our residents that we’re doing all we can so we can continue to deliver services to them.”

Data from The Bureau of Investigative Journalism shows that since 2017 Croydon Council has borrowed £266 million through 39 loans from other local authorities.

Many of these have been paid back but some are due to be repaid this year and next.

Of these 23 were short term loans and the biggest lender was Westminster Council with two £10 million loans – one was paid back in 2019.

According to the data, Croydon has not lent any money to other councils.