Croydon: Lessons for Newham

As the commissioners walk in the residents of Croydon are left wondering how the council came so close to bankruptcy.

There is now a total ban on spending. A Section 114 notice has been issued which effectively halts all new expenditure at Croydon Council, with the exception of statutory services for protecting vulnerable people.

A damming report issued by their auditors Grant Thornton, stated the following as the reasons for the financial collapse in Croydon.

“Croydon Council experienced deteriorating financial resilience for a number of years with spending pressures within both Children’s and Adult Social Care and low levels of reserves which created a significant financial challenge in 2020/21. The financial position deteriorated between 2018/19 and 2020/21 and the auditor’s recommendations to resolve the situation were ignored. As a consequence, Croydon Council’s reserves have been falling for years and there are insufficient reserves to cover their overspends.” 

Croydon Council also increased its level of borrowing significantly (£545 million in three years) and used the borrowing to invest in companies it established and to purchase investment properties. Croydon Council established a number of companies including wholly owned and part owned companies. These investments failed to make any significant return.

Does any of this sound familiar?

Newham Council has a deteriorating financial position the main driver of this is Children and Young People’s Services and the table below.

Like Croydon Council, Newham Council has raided the reserves to balance the books and this is shown in the table below. It shows how in two years, Newham’s balances have been cut in half and show no signs of improving. Fiaz relied on Corbyn’s promise of central government bail-outs to balance the future-books. These clearly have not materialised. Instead, they are faced with a need to slash services.

Like Croydon, Newham Council also has a property company which is planning to borrow £455.6 million over the next 3 years with no plans for a significant return on the taxpayer’s investment. 

We have seen the changes in Labour. It used to be that the Labour Party was known as the ‘Tax and Spend’ party. 

Under the Fiaz regime Newham Labour has become the ‘Tax and Cut’ party, but not it seems of the Mayor’s vanity projects.  Will the service-slashing cuts be sufficient to bail out Newham Council? Only time will tell.