Croydon Council - a tale of mismanagement

By Michael Swadling of the Croydon Constitutionalists


Did you know councils can’t go bankrupt? No matter how much of taxpayers’ money they risk on dodgy investments, mismanagement and harebrained schemes, they’re always protected from total financial collapse. The only way to stop councils spending reckless sums is by issuing a Section 114 notice, which restricts them to only spending on core services.

That’s what happened to Northamptonshire in 2018 when they faced a £10 million shortfall and debts of around £1 billion. Croydon has just over half the population of Northamptonshire, and yet still managed to exceed this, with debts of £1.5 billion and a £50 million overspend. Unsurprisingly, it’s now facing its very own threat of the same order being issued.

Lauded as a future ‘smart city’ in 2016, lined up for a £1.4 billion Westfield shopping centre in 2017, and recently announced as the London Borough of Culture 2023, Croydon’s future was looking bright. So what went wrong?

In 2014, a new council administration immediately implemented a strong drive for more housing, huge changes to core services, and reviving the night time economy by spending millions on profusive projects like BOXPARK and the refurbishment of Fairfield Halls.

The housing drive has proved not just controversial but also extremely expensive. In 2015, Brick by Brick was formed as a private company owned wholly by Croydon Council to “provide properly designed, affordable homes for local people”. After buying council land for as little as £1, the company was kept afloat by £260 million of the council’s (borrowed) money. It was expected Brick by Brick would eventually repay the council - but having so far built 300 homes at a loss to the tune of £774,952, Croydon taxpayers are going to be waiting a very long time before they see any of that money back. 

Like many councils, Croydon has been speculating in the risky commercial property market. Thanks to a loan in excess of £80 million from the Public Works Loans Board, the council purchased the Croydon Park Hotel and the out of town Colonnades Retail Park. The plan? To make almost £2.5 million a year. But with such large borrowing, only minor changes in margins were needed for taxpayers to be lumbered with servicing the debt. The result? The Croydon Park Hotel has fallen into administration, and retail parks across the country aren’t exactly going from strength to strength in the current covid climate.

It’s not just borrowed funds causing problems - spending has spiralled out of control. Build costs are soaring with the new leisure centre in New Addington costing £10 million more than planned, and the Fairfield Halls rebuild going £12 million over budget. Investments in the town centre were also met with disaster; the £1.1 million spent on Croydon’s once-famous Surrey Street Market led to over a fifth of traders leaving.

Whilst the trendy BOXPARK has been more successful, it has been a costly exercise. After an initial £3 million loan from the council, it still receives a £160,000 annual subsidy from Croydon’s Cultural Growth Fund. It’s funded many events, including £10,000 for a festival where an actor defecated on stage - talk about excessive levels of waste! The Growth Fund, together with the Community Ward budgets awarded by councillors, gave over £35,000 to Croydon Pride in 2018, and over £59,000 the following year. They are great events, but is it really taxpayers’ job to fund my weekend entertainment?

Given all this overspend, Croydon’s contribution to the Town Hall Rich List seems utterly obscene. The latest report showed the council has 23 staff on over £100,000 a year and 3 who earn more than the Prime Minister - way more than neighbouring councils. Barnet, a similar sized borough, makes do with just 7 staff on over £100K. Ratepayers were no doubt happy to see the £217,000 a year Chief Executive Jo Negrini leave, but with a reported £440,000 golden handshake and the new chief on £192,474 a year, it’s hard to see how this helps hardworking taxpayers. Understandably, taxpayers’ concerns have led to a campaign for a new local government structure and a 20,000 strong petition for a referendum for a Democratically Elected Mayor.

Whilst Covid has no doubt hindered Croydon Council, it’s clear the financial challenges predate the crisis. Too much money has been squandered on schemes that have not paid off. Anyone can see that too little value has been provided for the people of Croydon. Things are moving fast in Croydon the cabinet member for finance resigned and has been replaced. The council leader has also announced his intention to stand down. It’s difficult to see how the borough can recover from the current crisis, but putting a stop to unnecessary expenditure, slashing executives’ pay, and ending risky commercial investments would certainly be a good start.

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