Croydon council “effectively declares bankruptcy” by banning most new spending

By Tara O’Connor, Local Democracy Reporter

Croydon council has effectively declared bankruptcy, issuing a Section 114 notice which bans most new spending.

The notice bans all new expenditure with the exception of safeguarding vulnerable people and statutory services.

It comes just over two weeks after a damning audit report highlighted years of financial mismanagement and ‘collective corporate blindness’.

It is the first council to be forced to issue the notice since Northamptonshire County Council in 2018.

The council has £1.5 million worth of debt and was facing a budget black hole of more than £60 million this financial year.

There are also very low reserves at the council, this was at £10 million for years but reduced to £7 million at the end of the last financial year.

The Section 114 notice was issued by director of finance at the council, Lisa Taylor, today.

Despite cuts budget cuts, which included 400 jobs cuts, there is still a ‘significant’ budget gap for this year.

Last month the council also went to the government for a £20 million bailout, known as a capitalisation direction, which would have to be paid back.

Ms Taylor said in the notice: “I am not seeing the necessary level of pace, urgency or radical options to be presented to members to take decisions upon to give me confidence that the council can make the level of savings required to deliver a balanced budget in year, without external support in the form of a capitalisation direction.

“This is unlikely to be confirmed before Christmas, leaving just three months in which to deliver balancing savings if the request is not approved.”

At this point, the council has a forecasted overspend for this year of £66 million.

The notice means that during the next 21 days the council cannot spend any money unless approved by Ms Taylor.

A council meeting must be held within 21 days, where councillors must agree to stop all non-essential spending and come up with ways to reduce costs immediately.

Pictured top: Croydon Town Hall