Croydon Mayor admits council is “unable to deliver wholly balanced budget” without rethink from Government

Croydon’s Mayor has kickstarted the borough’s relations with the Labour Government by calling for a ‘new approach’ to local government finances.

In an open letter to Angela Rayner, Mayor Jason Perry acknowledged Croydon’s £1.6billion debt burden and the consequences of serving this debt year after year.

In his letter to the new Deputy Prime Minister and Secretary of State for Housing, Communities and Local Government, Mayor Perry said: “The scale of this unprecedented debt means that we are simply unable to deliver a wholly balanced budget, without that different approach to extraordinary financial support from the Government.

“To date, Capitalisation Directions totalling £379million, plus £38million for 2024/25, have been approved in principle by your predecessors in Government. However, this cannot continue in the longer term.”

The capitalisation directions granted by the previous Tory administration allow Croydon to sell its assets to service the debt. But, others have warned that once sold, assets are hard to get back into public ownership.

These concerns came to light earlier this year when the Tory-run council voted to raise council tax by 4.99 per cent, making it the second highest in London. At the time Labour Councillor Rowenna Davies, who chairs the Scrutiny committee, said: “Every year to balance its budget, Croydon Council needs £38million of capitalisation.

“That means the national Government lets us borrow or sell our assets to be able to meet general expenditure, in very oversimplified terms that means we are selling our buildings to pay for your rubbish to be taken away.”

Later in his letter, Mayor Perry said that his council is doing its best to cope with the situation and lists some of his apparent achievements. He said: “We are one of only three London boroughs to deliver a balanced budget this year, albeit with a Capitalisation Direction in place.

“We have also embarked on a ground-breaking transformation programme, ‘Future Croydon’, which will completely overhaul the way in which we deliver better outcomes for our residents.”

Despite this, he is pretty clear that the debt situation is only going to get worse. This conflicts with what he said when the historic council tax increase went ahead at a budget meeting in March.

During that meeting, he pushed back against attacks from the Labour opposition, and told the chamber “we are not in a death spiral of debt”  and that “it is not getting worse.”

Back then, and in this recent letter, he was quick to lay blame at the feet of the previous Labour council.

The council experienced a number of its bankruptcies under the previous Labour administration, led by Tony Newman. Many believe that the council’s mismanagement and failed endeavours like Brick by Brick led to them becoming only the second local authority in two decades to go bust, after Northamptonshire in 2018.

Labour, now in opposition, has since taken to questioning the council’s capitalisation programme and has persistently called for Mayor Perry to secure a debt write-off deal with the Government.

In his letter, Mayor Perry gives the nod to other local authorities in financial turmoil and acknowledges that the Government will be wary of not wanting ‘to reward historic failure’, by granting a bailout.

The Leader of the Labour opposition, Stuart King, said: “Despite spending two years meeting and working with his own Conservative government, Jason Perry failed to secure any deal on the council’s debt.”

Before signing off, Perry called for an urgent meeting with Ms Rayner to discuss the future of local government finance.

In a statement accompanying the letter, Mayor Perry said: “I am calling on the new Government, and our local MPs, to work with me in bringing forward this solution.

“If we work together, we can achieve the best possible outcome for local people and ultimately restore pride in our borough.”