Croydon Council has revealed it has overspent by £35 million this year and is now seeking an unprecedented £136 million bailout from the Government as it struggles to balance its budget for next year.
With a projected shortfall of £98 million from its budget for the forthcoming financial year, the council is asking for enough money to cover the shortfall on top of the standard £38 million it gets to help pay off its historic debt.
The bleak financial picture comes despite a year of cuts to public services and an increase in council tax. This revelation also comes despite Mayor Jason Perry’s electoral promise to ‘fix the borough’s finances’ and address its £1.4bn toxic debt burden after a disastrous few years that saw the council declare bankruptcy three times.
Council opposition has criticised Mayor Perry, claiming that under his leadership the finances are ‘actually getting worse – significantly worse’. Croydon Council cites a surge in homelessness and social care demand, plus rising costs for children’s placements, as key factors behind its worsening financial situation. It also has the third-highest number of people seeking homelessness assistance in the UK.
Despite Mayor Jason Perry’s recent meeting with his government counterpart, the £136m bailout move would be unprecedented. The bailout is likely to take the form of more capitalisation directions, which the council has previously undertaken to address its finances.
Capitalisation directions permit local authorities to classify specific revenue expenses as capital expenditures, however, Labour Councillor Rowenna Davis told the Local Democracy Reporting Service ‘in very oversimplified terms that means we are selling our buildings to pay for your rubbish to be taken away’.
The Conservative-led council published its proposals ahead of the budget meeting on Wednesday February 12. Included within are the anticipated 2.99 per cent rise in council tax and a 2 per cent increase in adult social care levy, which aligns with the government’s overall 4.99 per cent cap for London boroughs.
However, this move means that by April 2025, council tax in Croydon will have increased by 25% since Mayor Jason Perry was elected in 2023. In an effort to address its historic debt, the council has also undertaken a host of public service cuts. These included closing four lesser-used libraries in Bradmore Green, Broad Green, Sanderstead, and Shirley in November of last year, while the nine remaining would increase opening hours.
The council is in the process of ‘restructuring’ its Youth Engagement Team, which manages a range of youth services across the borough. A knock-on effect of this could be the loss of Croydon Youth Assembly which gives young people a platform and a voice, and gives them something constructive to be involved in. It’s been credited with steering youths away from gangs and crime. The council is now proposing to ‘commission community partners’ to deliver focused youth engagement work to streamline and save money on services.
Labour Leader Councillor Stuart King said: “Residents are paying more but getting less.” Cllr King added: “Under Mayor Perry, finances are getting significantly worse, and residents should not bear the cost of his failures.”
Mayor Perry defended his approach, stating that the council must modernise to become more efficient. He outlined plans to overhaul council operations, including using digital tools and partnering with charities to deliver services more effectively.
While these local efforts are intended to save £27.7 million annually by 2028, they won’t be enough to make Croydon financially sustainable. The council is continuing its discussions with the Government to secure long-term solutions for its debt and services.
Mayor Perry emphasized that Croydon’s financial struggles would persist without Government action to address the broader pressures on local services. Many in Croydon Council blame the previous Labour administration and their mismanagement of expensive schemes like Brick By Brick for the broken finances.
He stressed that protecting public services and securing a sustainable future for Croydon requires urgent national intervention. Croydon is one of seven London boroughs, including Lambeth, Newham, Havering, Enfield, Barnet, and Haringey, calling for more Government support.
He said: “Despite the huge strides we have made in improving our council, we are facing significant financial challenges, owing to the spiralling demand and surging costs that are impacting all local authorities across the country and in London in particular.
“The scale of the challenge means that savings are not enough, and I am not prepared to pass the cost to local people. We must act and do things differently. To protect public services, now and in the future, we must modernise our council and become more cost effective and efficient. This will mean better outcomes for residents, a better experience for all our customers and closer working with all our partners.
“In addition, we need Government action on the demand and costs that are impacting all councils. They have made clear they plan to address these. I am working with them to respond to these issues locally, protect public services and secure a sustainable future for Croydon.”
