Government to intervene in Croydon council as report warns of ‘financial crisis'
Government commissioners are being sent in to run Croydon council after a report found its finances were 'deteriorating rapidly' and it was heading for effective bankruptcy for the fourth time in recent years.
Jim McMahon, the minister for local government, said he would be sending commissioners to run the council until July 2027, describing the local authority as 'one of the most financially distressed councils in the country'.
'The scale of the financial difficulties facing Croydon, the failure of the council to adequately respond to these difficulties and the assurance required moving forward means that a short and sharp reset, with fast action, is required to shift the dial on the council's recovery,' he said in a ministerial statement on Thursday.
The council has hit back at the intervention, with the executive mayor, Jason Perry, saying the government, and the external panel which has been monitoring the council since 2020, had not previously told him the council should be taking more action.
'Surely that means we are doing everything possible, and they agree with our actions? We have already made very difficult decisions and in my view the residents of Croydon have felt enough pain,' he said.
'Despite all the improvements that have been delivered by the council and its staff, it appears the government wants to centralise control into the hands of commissioners.'
McMahon said the latest report by the panel on the state of the council had found its 'deteriorating financial position, which is not being gripped and tackled adequately by the council, is reaching a financial crisis'.
The council was increasingly relying on government support to balance its budget, its operating costs continued to be 'unreasonably high' and its debts were expected to rise to more than £1.9bn by 2029, McMahon said.
The council's current debts sit at £1.4bn, and it has received about £553m in exceptional financial support from the government since 2021.
Perry said the council had made savings of £167m over the past four years, and had sold off £130m worth of assets, with plans to sell a further £68m this year.
Croydon council has declared effective bankruptcy three times since 2020, most recently in 2022 when the situation was blamed on 'unprecedented financial mismanagement, toxic bad debt and a lack of governance and transparency'. It raised council tax by 15% shortly afterwards.
Croydon, London's largest borough with nearly 400,000 residents, was second only to Birmingham in the amount of exceptional financial support it got this year – £136m, up from £38m granted to the council in 2024-25.
The latest announcement suggests Croydon could follow Birmingham with a series of brutal budget cuts and council tax hikes. Perry said he would not support cuts that would 'decimate local services' or any further council tax increases above the cap of 5% a year.
Council leaders have criticised the government for failing to address the hole in local authority finances in Wednesday's spending review.
Tim Oliver, the chair of the County Councils Network, said the sums announced 'fall well short of filling the projected £2.2bn funding gap faced by county and unitary councils next year, and consequently further service cuts will be hard to avoid'.
Louise Gittins, the chair of the Local Government Association, said many authorities would have to increase 'council tax bills to try to protect services but still need to make further cutbacks'.
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