Politicians in Croydon have been reacting to the news that the council has effectively declared bankruptcy. Serious financial problems at the council have come to light in recent months, and director of finance Lisa Taylor has today issued a Section 114 notice, stating that the council will not be able to balance its budget this year, with a forecasted £66 million overspend.
The notice bans all new expenditure with the exception of safeguarding vulnerable people and statutory services. In the next 21 days the council will need to decide how to make savings immediately. Until then, all spending has to be stopped unless it is approved by Taylor.
The council’s new leader Hamida Ali, who was elected to the post three weeks ago, said the Covid-19 pandemic and austerity have had a major impact on finances. But she added: “It’s clear the council has also made mistakes. I am committed to fixing that. We know that we cannot do this alone and we want to work in partnership with everyone with a stake in Croydon’s success. That includes seeking financial support from the government and today’s section 114 notice is a part of making that case.” She said difficult decisions lie ahead.
Croydon’s opposition Conservatives group finance lead Jason Cummings blamed the Labour administration for the financial state of the council. He said: “I expect even more damming revelations around their decisions to lend hundreds of millions of pounds to their failed development company, Brick by Brick, and to invest in dodgy property deals.” Tory group leader Jason Perry accused the council of “playing monopoly”. He said: “It is a very, very sad day, Labour has bankrupted the town, it has been on the cards for some time. “They’ve been playing monopoly, buying hotels and shopping centres hoping that the income was going to come through.”
The council has been seeking a “capitalisation direction” from the government, which would effectively give it more flexibility over its finances to help stabilise them. However, although discussions are said to have been productive the council has reached its crunch point earlier than hoped and before the government decision has been made. The Section 114 notice, issued under the Local Government Finance act (1988), may have the shock effect of moving Croydon more quickly to a narrower budget gap that meets the government’s requirements.
Additional reporting by Dave Hill.
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