The Croydon conundrum – how do you salvage council services without the income to pay for them?

The Croydon conundrum – how do you salvage council services without the income to pay for them?

The Mayor of Croydon, Jason Perry, expressed regret in his latest weekly newsletter for the 15 per cent increase in council tax he is set to raise from the borough’s residents, but he did not apologise for it. “Proposing a council tax increase is the last thing that I want to do,” he wrote, “particularly when local people are already facing cost of living pressures.” However, he added: “Croydon simply cannot keep kicking tough decisions down the line. That’s why the council is now burdened with £1.6 billion of toxic debt.”

Reaction to Perry’s decision, which is possible because communities secretary Michael Gove has allowed him to levy a much higher council tax increase than the national limit because of Croydon’s painful financial position, has come from a number of quarters and in a range of political colours.

The TaxPayers’ Alliance pressure group, which springs from the small-state libertarian right, issued a broad denunciation which did not mention Perry by name. “Taxpayers will be picking up the tab for the dismal failure of their local authority to get a grip on spending,” it said, adding that “any increase in council tax should come alongside sensible savings from waste in local budgets, including top level salaries”.

Local website Inside Croydon, which seems to hold anyone connected with the borough’s local authority and politics in contempt unless they are on the Jeremy Corbyn left  nonetheless takes a similar line to the extent that it says the hike will be unfair on residents when they’ve done nothing wrong – especially if services are cut at the same time – and repeatedly snipes about the chief executive’s salary.

Local Labour MP Sarah Jones has said “this is not the time to raise taxes to such a degree” and asked Perry to “think again and negotiate a better deal with government”. But what are the chances of any attempt by Perry to do so being successful? After all, it is hardly in his interests to be raising a local tax by such a large amount less than a year after being elected. It is therefore hard to imagine he didn’t make a decent effort to keep it lower.

The previous, Labour-run, Croydon administration made the case that Croydon is underfunded by national government even more than other London local authorities because it is treated as a relatively well off suburban area when, in fact, the north of the borough has an inner city social character much like that of neighbouring Lambeth. Croydon’s population has been increasing too – up by 7.5 per cent or 27,300 between 2011 and 2021, according to the 2021 Census.

This underlines that the argument for a big rethink about local government funding and powers – including the power to raise local taxes – is strong. But despite the relatively generous recent 9.2 per cent funding settlement for 2023/24 it is unlikely to cut much ice with Rishi Sunak’s Conservatives as they wrestle with their own desperate finances and worry about the health service perhaps most of all.

What options did Mayor Perry actually have? He could have gone for a lower increase in the coming financial year, as Jones’s might be indirectly suggesting in her comment, but that might have meant larger ones in subsequent years than would otherwise be the case and more service cuts in the immediate future (though, granted, it might suit Perry better politically to front load the fiscal pain in the hope of providing relief prior to the next borough elections in 2026).

His Labour predecessors tried to square Croydon’s funding circle by going all out for growth, especially in housing and other development. More dwellings and businesses means larger council tax and retained business rates bases – the two sources from which local authorities derive around 75 per cent of their funding. But those bold ambitions  came badly unstuck through a combination of poor financial management and some bad luck. They were also bitterly opposed by local Conservatives and conservationists (and, naturally, by Inside Croydon).

The current council tax for Band D households in Croydon is £1,384.36 a year, plus a £185.71 adult social care precept and City Hall’s precept of £395.59, making £1,965.66 a year in council tax in all. Perry says without the coming increase Croydon would have to make cuts of £20 million on top of the £36 million it is already proposed.

Assuming his figures are sound, are any of Perry’s local critics in favour of making those extra cuts? Not many. And if any of them have a better idea for avoiding making them in the short term, it would be nice to hear the details. Petitions and cries of outrage don’t qualify.

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Categories: Analysis

1 Comment

  1. Philip Virgo says:

    Key to restoring responsibility to local government is to allow them to keep ALL their business rates – thus giving them an incentive to grow them and reduce dependence on Central Government.

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