The new leader of Croydon Council has vowed to change “how we make decisions as an organisation”, accepted the need to improve financial management, and opened the door to meeting campaigners for a governance referendum, which could result in Croydon switching to a directly-elected Mayor model of local government.
In her first interview since being elected council leader last month, Hamida Ali told On London that auditors Grant Thornton, who have produced a Public Interest report criticising the council for “collective corporate blindness” about the seriousness of its financial situation, were “right to raise the concerns they did.” Responding to the report’s view that stewardship of public money has been poor, Ali added that, “it doesn’t get any more serious than that in terms of concerns that might be raised with a public authority”.
Ali also said she would be “very happy to meet with” campaigners for a governance referendum, who were told in September that a petition they had delivered to the council earlier that month seeking a referendum under local government law could not be formally accepted before 6 May next year due to emergency Covid-19 legislation.
“Clearly there is an appetite among residents to have this conversation [about the borough’s governance model]. The role of the local authority, in the right circumstances, is to facilitate that debate,” Ali said. “I’m grateful to the campaigners for reaching out to me and I will honour their request for a meeting.”
Ali’s stance towards the campaigners is markedly more conciliatory than that of her predecessor Tony Newman, who resigned last month, and appears to recognise that a referendum is probably inevitable at some stage. She told On London that council officers and representatives of the campaign, which has been considering a legal challenge, have already met
Newman’s departure after leading the council since 2014 followed those of chief executive Jo Negrini and cabinet member for finance Simon Hall. It came in advance of the Grant Thornton report, but followed Croydon’s application to the Ministry of Housing, Communities and Local Government for a “capitalisation direction” – effectively a bid to be allowed greater flexibility in the management of its finances in order to cope with its budget gap.
Last Thursday, the day before Ali spoke to On London, communities secretary, Robert Jenrick sent a three-person team into Croydon to conduct a “rapid non-statutory review” of the council’s situation in response to Grant Thornton’s report, which found particular fault with Croydon’s control of adult and child social care budgets and complex local property investments.
Asked if she bore any responsibility for Croydon’s predicament, Ali, 44, who was first elected in 2014 in the same ward as Newman and served in his cabinet before becoming leader, replied that “the report is quite clear that the challenges are quite systemic across the organisation,” and identified a “common thread” in Grant Thornton’s report “about members not providing sufficient challenge”, though she also said, “I am acutely conscious of my role in cabinet across all four years” covered in the report. Ali was the cabinet member for communities and community safety during the period covered by the Grant Thornton report, following a year in a deputy cabinet role concerned with finance.
Newman reiterated to On London in October his long-held view, held in common with his Conservative predecessor as Croydon leader, that the borough has been historically underfunded by central government, which has failed to recognise high levels of disadvantage experienced by a growing number of residents in north end of the borough in particular.
However, Grant Thornton record identifying concerns going back to 2017/18 and recommendations for action “that were not implemented”. The council was found to have made initial “swift” progress in response to a financial review conducted in May 2020 as the pressures brought by the coronavirus left it increasingly exposed. But the report adds that although the continuing difficult financial position was brought to the attention of the cabinet in July and subjected to a call-in by the scrutiny and overview committee of councillors in August, “neither meeting referred the significant fact that the budget gap exceeded the available reserves to full council.” It concludes: “In our view, this was a failure of governance and showed a lack of understanding of the urgency of the financial position.”
A “revolving investment fund” (RIF) aimed at financially supporting house-building and other property schemes with a view to promoting growth and long-term income streams was judged to have been poorly risk-assessed, especially in view of the complexity of its arrangements. Grant Thornton found “little evidence of challenge by Members in meetings (Full Council or Cabinet) on the deliverability of the schemes or the impact of each scheme on the long-term financial position of the Council.”
One of the projects supported by the fund, the council-owned house building company Brick by Brick, which is financed by commercial loans from the council, is described in the report as having “not made any interest payments with £5 million owing at 31 March 2019”. A Brick by Brick spokesperson, however, said the company is fulfilling its house-building mission with “over 1,000 homes under development” and that it is now “entering a new and important phase where the proceeds from sales of our homes provide a significant financial return to the council which can be spent on frontline services, benefitting the people of Croydon.”
Ali declined to comment on the performance of Brick by Brick or any of the other schemes supported by the RIF, saying she would wait until a previously-commissioned review of the programme by PwC is completed, hopefully within the next couple of weeks. Asked whether Croydon’s growth strategy under Newman had been too ambitious, she pointed out that it is “not alone as an authority in developing more activity in a much more commercial context than local government would have done previously,” adding that “local authorities have to some degree been pushed in that direction by cuts to the revenue support grant”.
Though declining to express a set opinion about directly-elected executive Mayors, Ali, whose career outside local government comprises 21 years with various public sector bodies working on equality and diversity policies, referred to Croydon’s recent internal governance review and issues it examined about how to more fully involve the majority of the borough’s 70 councillors in the formation and execution of policy. Highlighting the Grant Thornton report’s points about insufficient challenge and scrutiny within the corporate culture, she observed that an aspiration “to make more decisions more collectively” raised the question of, “Do you want to concentrate power even further?” at the top of the governance structure.
Croydon Council has the power to hold a governance referendum on its own initiative, as Newham’s Mayor has said her borough will do. At the same time, Newham’s own decision to decline to accept a petition presented to it earlier this year faces a legal challenge. If a referendum is held in Croydon, the choice is required by law to be between the current governance model and a single authorised alternative. Ali said Labour in Croydon will discuss the issue and settle on a position in due course, and that, “ultimately, if that referendum takes place it will be the people who decide”.
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