Croydon: Council issues further Section 114 notice as Mayor says books cannot be balanced

Croydon Council has just been forced to declare effective bankruptcy for the third time, with the authority issuing another Section 114 notice this morning as it admitted it cannot balance its budget in the next financial year.

The council, led by Conservative Mayor Jason Perry, has blamed the ongoing impact of historic financial mismanagement. After issuing a Section 114 for the first time in 2020 it was given a £120 million bailout loan by the government to balance the books.

Perry has now written to Secretary of State Michael Gove asking for more money. The Mayor said the council has uncovered a further £48 million of costs, which will be added to next year’s budget and blamed “unresolved historic accounting risks”.

The council has a total of £1.6 billion of debt, which it has to pay back at a rate of £47 million a year. In the past two years Croydon has made £90 million in savings and raised £50 million in asset sales, with further proposals for £44 million in savings in 2023/24 and around £100 million in proposed additional asset disposals in the coming years.

However, this is not enough to put the council on sustainable footing and it would need to reduce spending by £130 million in the next financial year, leaving the organisation “financially and operationally unsustainable”.

Perry said: “The previous administration has left a legacy of unprecedented financial mismanagement, toxic bad debt and a lack of governance and transparency that shames Croydon and continues to have a long-lasting impact on the sustainability of our council.

“Despite the hard work of staff to support the council’s recovery, the toxic level of historic debt means that Croydon is trapped in a vicious cycle. Even with government support, the coming years will be incredibly financially challenging for Croydon Council. Ultimately, this will mean the council needs to do and spend less, with significant spending reductions.

“I am determined to fix what the previous administration has broken and to protect our residents, our staff and the borough as much as possible, but getting the council back on track to recovery and long-term financial and operational sustainability will take a long time and need radical solutions. We must balance our books and become a much smaller organisation, which is more efficient and delivers priority services that support our residents, our communities and the borough.”

The council’s cabinet will meet on 30 November to discuss its medium term financial strategy. In a video, cabinet member for finance Jason Cummings said: “Croydon Council has today had to issue a new Section 114 notice as a result of legacy issues from Labour bankrupting the borough. This notice has the full support of the Mayor and cabinet. This is happening because on our current projections it will be impossible to set a balanced budget next year with the resources we have.”

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