Croydon council calls for £136m government bailout

By Harrison Galliven, Local Democracy Reporter

Croydon council has revealed it has overspent by £35million this year and is now seeking an unprecedented £136million bailout from the Government as it struggles to balance its budget for next year. 

With a projected shortfall of £98million from its budget for the forthcoming financial year, the council is asking for enough money to cover the shortfall on top of the standard £38million it gets to help pay off its historic debt.

The bleak financial picture comes despite a year of cuts to public services and an increase in council tax. 

This revelation also comes despite Mayor Jason Perry’s electoral promise to ‘fix the borough’s finances’ and address its £1.4billion toxic debt burden after a disastrous few years that saw the council declare bankruptcy three times.

Leader of the Labour opposition, councillor Stuart King, said: “Residents are paying more but getting less.

“Under Mayor Perry, finances are getting significantly worse, and residents should not bear the cost of his failures.”

The council cites a surge in homelessness and social care demand, plus rising costs for children’s placements, as key factors behind its worsening financial situation. 

The bailout is likely to take the form of more capitalisation directions, which the council has previously undertaken to address its finances.

Capitalisation directions allow local authorities to classify specific revenue expenses as capital expenditures, but, Labour Councillor Rowenna Davis said ‘in very oversimplified terms that means we are selling our buildings to pay for your rubbish to be taken away’.

The Conservative-led council published its proposals ahead of the budget meeting next Wednesday. 

Included within are the anticipated 2.99 per cent rise in council tax and a two per cent increase in adult social care levy, which aligns with the government’s overall 4.99 per cent cap for London boroughs.

But, this move means that by April 2025, council tax in Croydon will have increased by 25 per cent since Mayor Jason Perry was elected in 2023. 

In an effort to address its historic debt, the council has also undertaken a host of public service cuts. These included closing four lesser-used libraries in Bradmore Green, Broad Green, Sanderstead, and Shirley in November 2024, while the nine remaining would increase opening hours.

The council is in the process of ‘restructuring’ its Youth Engagement Team, which manages a range of youth services across the borough. 

A knock-on effect of this could be the loss of Croydon Youth Assembly which gives young people a platform and a voice, and gives them something constructive to be involved in.

It’s been credited with steering youths away from gangs and crime. 

The council is now proposing to ‘commission community partners’ to deliver focused youth engagement work to streamline and save money on services.

Mayor Perry defended his approach, stating that the council must modernise to become more efficient. He outlined plans to overhaul council operations, including using digital tools and partnering with charities to deliver services more effectively.

While these local efforts are intended to save £27.7million annually by 2028, they won’t be enough to make Croydon financially sustainable. The council is continuing its discussions with the Government to secure long-term solutions for its debt and services.

Croydon is one of seven London boroughs, including Lambeth, Newham, Havering, Enfield, Barnet, and Haringey, calling for more Government support.

Mayor Perry said: “Despite the huge strides we have made in improving our council, we are facing significant financial challenges, owing to the spiralling demand and surging costs that are impacting all local authorities across the country.

“The scale of the challenge means that savings are not enough, and I am not prepared to pass the cost to local people. We must act and do things differently. To protect public services, now and in the future, we must modernise our council and become more cost effective and efficient. This will mean better outcomes for residents, a better experience for all our customers and closer working with all our partners.

“In addition, we need Government action on the demand and costs that are impacting all councils. They have made clear they plan to address these.”

Pictured top: Croydon council has announced it cannot balance its budget for 2025/26 without government help (Picture: Harrison Galliven)