Croydon Council: the pain for taxpayers’ continues

The Local Government Chronicle reports that “Croydon may need higher 2020-21 bailout amid ongoing turmoil”.  Ever since Croydon went into de facto bankruptcy in November last year, we have seen a succession of bad stories for the council, including bumper councillor allowances, accusations of bullying, bumper executive pay, and the disgraceful condition of flats in Regina Road.

Now we hear “Significant sums” are still being queried by auditors in Croydon LBC’s 2019-20 accounts – with the auditor having sought advice from a QC over one outstanding issue – while a number of “significant risks” remain over the current year’s budget”

The Chronicle reports: “concerns around the approval of a £30m refurbishment budget for the council’s Fairfield Halls arts centre, to be paid for through the transfer of land to Brick by Brick to be developed and sold” and that “there are “a number of significant risks, amounting to £26.6m, which could negatively impact on the outturn position” – even before any accounting adjustments needed for the Fairfield Halls development are taken into account” compared to reserves of just £7.4 million.

It has now been almost 10 months since we first spoke of the imminent de facto bankruptcy of the council.  We now have to ask, what has changed in that time?  How have the finances of local taxpayers’, and the needs of service users been protected?  Why has it taken 10 months for these issues to come to light?  We want to know why weren’t the fully extent of the problems made clear when the councils finances were first recapitalised, and how can we fell confident we will ever see an end to this ongoing failure of governance?

Full Local Government Chronicle article – https://www.lgcplus.com/finance/croydon-may-need-higher-2020-21-capitalisation-direction-amid-ongoing-turmoil-18-06-2021/

TaxPayers’ Alliance, Town Hall Rich List 2021 – Croydon Press Release

Croydon leading the list of local boroughs with executives paid over £100K, according to report.

The TaxPayers’ Alliance have issued their 2021 Town Hall Rich List of council employees in the UK in receipt of over £100,000 in total remuneration.  The list covers the financial year 2019-20, and since then we have seen Croydon Council issue a Section 114 notice, declaring de facto bankruptcy.  It’s not hard to see why the council ended up in this position when despite years of complaining about a lack of funding, and years of maximum council tax increases, Croydon Council still had 19 people earning over £100,000 a year, with six people whose remuneration exceeded the salary of the Prime Minister.

To put this in context, neighbouring Bromley had just 9 staff whose remuneration exceeded £100,000.  Sutton had 10 staff, Merton 9, Tandridge 2, and Reigate & Banstead 6.  Whilst our inner London neighbours Lambeth had 18 and Lewisham 15 (both fewer than Croydon), Barnet a similar sized borough made do with just 9 staff on over £100K.

Private sector organisations often benchmark salaries against other similar organisations.  Indeed, within the council, schools are required to benchmark themselves on a range of financial measures against others similar schools.  We wonder if it has ever benchmarked their own executive salaries, and if it has, what conclusions they drew?  We can see why Croydon Council’s external auditors Grant Thornton described the situation at the council as follows:  “There has been collective corporate blindness to both the seriousness of the financial position and the urgency with which actions needed to be taken”.

The current council leader, and others in the cabinet were in the cabinet at the time these bumper salaries were being paid out.  What were they doing to control council expenses?  Of course we now know those councillors were in receipt of the highest average allowance in London.

Many things have changed at Croydon Council but the latest figures still show 16 people being paid over £100,000 and two on more than the nation’s Prime Minister.  Deep cuts are being made to front line jobs and services, can we say that is being reflected in the salaries of those at the top?

As council tax bills are landing in people homes, the people of Croydon who will pay for the mismanagement of the council budget have the right to ask, why we are being expected to once again pay more, when the those at the top of the council seem to be so well rewarded.

Croydon Council Pay over £100,000, 2019-20:

CouncilNameJob titleSalarySub totalPensionTotal
CroydonJo NegriniChief executive £189,165 £189,165 £29,193 £218,358
CroydonGuy Van DicheleExecutive director (interim) of health, wellbeing & adults £197,171 £197,171 £11,983 £209,154
CroydonShifa MustafaExecutive director, place £156,060 £156,060 £24,085 £180,145
CroydonJacqueline Harris-BakerExecutive director of resources and monitoring officer £153,936 £153,936 £23,795 £177,731
CroydonRobert HendersonExecutive director of children, families & education £148,886 £148,886 £22,986 £171,872
CroydonHazel SimmondsExecutive director of gateway, strategy & engagement £137,700 £137,700 £21,252 £158,952
Croydon Undisclosed  £157,500  £157,500
CroydonLisa TaylorDirector of finance, investment and risk and interim S151 officer £124,393 £124,393 £19,216 £143,609
Croydon Undisclosed  £137,500  £137,500
Croydon Undisclosed  £137,500  £137,500
Croydon Undisclosed  £137,500  £137,500
Croydon Undisclosed  £132,500  £132,500
Croydon Undisclosed  £117,500  £117,500
Croydon Undisclosed  £117,500  £117,500
Croydon Undisclosed  £117,500  £117,500
Croydon Undisclosed  £117,500  £117,500
Croydon Undisclosed  £117,500  £117,500
Croydon Undisclosed  £102,500  £102,500
Croydon Undisclosed  £102,500  £102,500

Full Report: https://d3n8a8pro7vhmx.cloudfront.net/taxpayersalliance/pages/17258/attachments/original/1617382775/Town_Hall_Rich_List_2021_Doc.pdf?1617382775

Council-by-council breakdown of data: https://d3n8a8pro7vhmx.cloudfront.net/taxpayersalliance/pages/17258/attachments/original/1617382651/Town_Hall_Rich_List_2021_Dataset.xlsx?1617382651

Celebrating our town – Winterbourne Nursery and Infant School

Mike Swadling of this parish is Vice Chair of Governors at Winterbourne Nursery and Infant School in Thornton Heath, Croydon.  Many of us have found lockdown hard, too many of us have failed to put the time to good use, but one local school has used this period to good effect.

“Founded in 1906, Winterbourne Nursery and Infants School sits on a site with separate Junior Boys and Girls schools. The last remaining single-sex, state-funded junior schools in the country. Whilst the schools often cooperate they remain very much independent schools, with their own staff, heads, budgets and governors”

“ensure compliance with required regulations and the good governance of public resources. Following much hard work over the previous year the school received a commendable ‘Substantial Assurance’ audit”

“Teachers provide a warm, nurturing start to each day with a live online session. They give clear guidance and support to pupils and parents about the day’s learning tasks.”

“This past year has been a challenge for everyone, some of us have used the time to set goals, many of us have failed to achieve them, but one local school, Winterbourne Nursery and Infants, can rightly say, its whole community should be proud of its journey of self-improvement”

Full article: https://www.inyourarea.co.uk/news/nursery-and-infant-school-in-thornton-heath-reflects-on-a-year-in-lockdown/

The story was also picked up by the Thornton Heath Chronicle https://www.thorntonheathchronicle.co.uk/wp-content/uploads/2021/04/TTHC-April21.pdf

You may also be interested in a follow-up from August 2021 on the schools graduation ceremony: Croydon nursery and infant school celebrates graduation after year of Covid disruption | InYourArea Community

Croydon council: Testing our better angels – TaxPayers’ Alliance article

The TaxPayers’ Alliance have published an update on Croydon Council written by Mike Swadling of this parish.

“Ambitious for Croydon” was the Labour Party’s motto when they were duly elected to run Croydon again in 2018. Certainly, the plans have been ambitious; as has the spending that went with them. Whilst the budgets that underpinned these goals have largely received cross-party support, things quickly spiralled out of control, as many had predicted”

“makes it all the more galling that the council was forking out vast sums of local residents’ money on things such as solar panelled bins – and now they need to close rubbish tips, which will no doubt lead to more fly-tipping!”

“Croydon’s councillors voted to reduce £300,000 from councillor pay from April 2021. Better late than never, but this will still likely leave Croydon’s councillors in the top 20 per cent best remunerated in the country and top six in London. Is this really fitting for cabinet members who oversaw only the second council bankruptcy this century?”

“Against this backdrop, Croydon’s hard-pressed taxpayers are bound to ask what has changed. Highly paid executives and well-remunerated councillors oversaw a fiasco that has left local households to pick up the tab for many years to come.”

Full article: https://www.taxpayersalliance.com/croydon_council_testing_our_better_angels

The article has also been shared by The Future Cities Project at http://futurecities.org.uk/2021/03/18/croydon-in-crisis/

Video:

Podcast Episode 52 – Lockdown Exit Strategy, A Croydon Referendum & Labour’s Wokemare

We discuss the Government’s confused lockdown exit strategy and the announcement of a referendum on a Directly Elected Mayor for Croydon along with other developments at Croydon Council. We then chat about Sir Keir Starmer’s apparent wish to replace the free market system, the fact that he is not woke enough for some of his comrades and Sadiq Khan’s “Commission for Diversity in the Public Realm”.

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Press Release – Croydon Councillor Allowances

As Croydon goes bankrupt you don’t need to worry about its councillors going short.

The TaxPayers’ Alliance have published a review of local authority councillor allowances – Councillors’ allowances 2020 – TaxPayers’ Alliance.  The report shows people who live just miles apart from each other may be represented by councillors who have similar workloads but are entitled to vastly different allowances.  This is true for the residents of Croydon.

In 2018-19 Croydon’s Councillors received a relatively modest basic allowance £11,407 for these ‘unpaid’ roles, although it should be noted this is the second highest rate in London.  What’s more alarming is when you average the total cost it comes to £21,784 per councillor.  Croydon councillors were the 11th most expensive of 398 councils across the country and the highest costing in London.

In the same time period neighbouring Sutton (£12,135) and Bromley (£12,111) were both much cheaper coming in 168th and 169th in average cost per councillor.  Croydon’s comparatively lavish allowances were being paid whilst the council’s external auditors Grant Thornton were, as recently reported, warning about low reserves and poor financial controls.  You have to wonder how they could justify these allowances whilst asking taxpayers for ever increasing amounts of money.

Since then the council has issued a Section 114 notice and gone into de facto bankruptcy.  After cutting services and making over 400 job cuts Croydon’s councillors have finally shared some of the burden.  On the 16th December Croydon’s councillors voted to reduce £300,000 from councillor pay from April 2021.  Whilst this is a welcome reduction it will still likely leave Croydon’s councillors in the top 20% best rewarded in the country and top 6 highest rewarded in London.  We ask, does this really reflect the damage Croydon Council’s poor administration has wrought on services in the borough?  Do the people of Croydon think their councillors who oversaw only the second council bankruptcy this century, deserve to be the in the top fifth for reward?

Drastic financial restructuring is needed at Croydon Council.  Services will be cut, regressive council taxes will increase, and likely more employees will lose their roles.  We commend Croydon’s Councillors for cutting £300,000 from their allowances, but this must only be a start.  Along with dramatic cuts for the citizens and staff, councillors should step up to the plate and aim to come in no higher than the average cost per councillor in London, still high for a bankrupt council but a reasonable sacrifice.

We ask Councillors Hamida Ali, and Jason Perry to work on further reducing allowances in Croydon.  Until then whatever else you worry about, as Croydon goes bankrupt, you don’t need to worry about its councillors going short.

“The staggering amount Croydon councillors were paid in allowances last year” – Story in MyLondon https://www.mylondon.news/news/staggering-amount-croydon-councillors-were-19497661

How to avoid Croydon’s fate – Harry Fone article for Conservative Home

Harry Fone the Grassroots Campaign Manager for the TaxPayers’ Alliance has written in Conservative Home, on how to avoid the fate of Croydon Council.

“Between 1997 and 2010, before the cuts, Croydon Council raised rates 13 out of 14 years, leaving it with the seventh most expensive council tax charges in London”

“Frankly, access to loans from the PWLB was all too easy. One former council leader described the process as “absolutely bonkers” having requested hundreds of millions of pounds only to receive it “three days later.”

“As Council Tax increased, both Negrini and Lacey repeatedly failed local residents, but enjoyed gold plated pay at their expense. Council leaders shouldn’t assume that paying top dollar for chief executives will benefit taxpayers. All too often it ends up costing residents dear.”

Full article: https://www.conservativehome.com/localgovernment/2020/12/harry-fone-how-to-avoid-croydons-fate.html

This follow a litany of failures by the council which resulted in the section 114 notice being issued which we write about here, a damming audit report, and years of excessive salaries and spending.

For more on Croydon Council see our other articles: http://croydonconstitutionalists.uk/category/croydon-council/

Croydon Council – Section 114 notice

Croydon Council issued a Section 114 notice on Wednesday (11 Nov) afternoon “due to the severe ongoing financial challenges facing the authority.”

News of this is being widely reported including by the BBC – https://www.bbc.co.uk/news/uk-england-london-54897296

“The Section 114 notice bans all new expenditure at Croydon Council, with the exception of statutory services for protecting vulnerable people”

“£17.7m of the £27.9m of the “new savings” presented to Croydon’s cabinet on 21 September and the full council meeting on 28 September were “incorrectly identified as new savings”

“Croydon’s financial pressures are not all related to the pandemic”. It is under a government review amid claims of “irresponsible spending”

Whilst we have been by no means alone.  In the 2 and a half years the Croydon Constitutionals have been running we have regularly reported on what we have seen as irresponsible spending by the council. 

These concerns have been validated by the recent audit report:

Mike wrote a summary of the problems for the TaxPayers’ Alliance:

All of this spending didn’t improve services for the people of Croydon:

With the TaxPayers’ Alliance and some cross party support we’ve highlighted the high rates of executive pay at the council:

Poor commercial property investments have caught up with the council. Rather as we expected them to:

We didn’t think Croydon Council got value for money for residents:

We have asked them to tax us less and even found ways to save money:

Don’t just take our word for it we’ve also interviewed Councillor Robert Ward, Councillor Jeet Bains who also spoke with us about planning in Croydon, Councillor Mario Creatura, Chris Philp MP, former Chairman of the Croydon Conservative Federation Alasdair Stewart and council candidate Jayde Edwards.

Things can change in Croydon and Mike spoke about the campaign for a Democratically Elected Mayor of Croydon at one of our events.

For more of our articles and podcasts on the council go to http://croydonconstitutionalists.uk/category/croydon-council/

Why did they not find out? – further failings at Croydon Council

By Mike Swadling

External Auditors are under a duty to issue a report in the public interest when a significant matter comes to their attention which they believe the Council should consider or the public should know about i.e. it is in the public’s interest to know about this.(Source)

Croydon Council’s external auditors Grant Thornton have issued a damning ‘Report in the Public Interest’ on Croydon’s “deteriorating financial resilience”.

The full report available at https://www.croydon.gov.uk/sites/default/files/articles/downloads/Report%20in%20the%20Public%20Interest%20-%20London%20Borough%20of%20Croydon.pdf, details the past few years of the worsening financial position at the council and more worryingly the lack of response from the borough to resolve the problems, which statements like these demonstrate:

“There has been collective corporate blindness to both the seriousness of the financial position and the urgency with which actions needed to be taken”

“Had the Council implemented strong financial governance, responded promptly to our previous recommendations and built up reserves and addressed the overspends in children’s and adult social care, it would have been in a stronger position to withstand the financial pressures as a result of the Covid-19 pandemic”

I have written many times over recent years about what I saw as the council waste of public funds, be it on BoxPark, Cultural events or the Surrey Street Market refurbishment.  But these are political disagreements.  When the council has run out of reserves and is threatened with a Section 114 notice it is mismanagement, but still working withing the guidelines of the system.  With an Audit report, with the statements that follow, it is unclear if the council took notice of guidelines:

“Having a company dissolved by compulsory strike off is a failure of governance and we have not identified evidence that the dissolution of London Borough of Croydon Holdings LLP has been reported to Cabinet or the General Purposes and Audit Committee”

“Minutes of the Scrutiny Committee noted that the paper (explaining the Council’s proposed decision-making matrices) was produced after the first bid had been lodged and with this paper it would not have been possible to judge the soundness of the acquisition. Whilst opportunities can arise at short notice, good governance would require the strategy to be approved prior to the first purchase”

The full report is well worth reading, it makes 20 recommendations which we should all hope the council fully implement.  A number of themes come out in the report of systemic failure in the councils actions, which I have grouped as follows:

Lack of oversight

  • “The reports were accepted by Members without an appropriate level of challenge to continued service overspends”
  • “There was insufficient challenge from Members on the financial risks in the budget, credibility of the planned level of income from third parties and deliverability of the savings plan. The Council’s governance over the budget setting and monitoring has not been good enough.”
  • “In our view this was a failure of governance and showed a lack of understanding of the urgency of the financial position.”
  • “The strategy for investing in properties was approved at Full Council using guillotine procedures meaning there was insufficient time to discuss and challenge the strategy and the first purchase was made two months prior to approving the strategy”
  • “There has been collective corporate blindness to both the seriousness of the financial position and the urgency with which actions needed to be taken.”
  • “The budget was approved without evidence of challenge on whether the revised level of reserves was appropriate or whether the history of delivering services within the budget or delivering savings as planned had impacted on setting the appropriate reserves”
  • “it is difficult to determine how Members reached the view that the savings plan within the budget being approved was achievable. We do not consider the Council’s governance over the setting of the original 2020/21 budget to be good enough”
  • “Members of the Scrutiny and Overview Committee accepted the responses received and did not refer the matter to Full Council. In our view this did not demonstrate an understanding of the urgency of the financial position.”

Masking the problems

  • “The impact of the overspends has been masked by both the accounting treatment of the Dedicated Schools Grant deficit (which we disagree with) and the use of the flexible capital receipts. The Council has failed to deliver real savings in children’s and adults’ social care.”
  • “In 2018/19, the Council chose to account for the deficit amount as a debtor at the end of the financial year which we disagreed with as the Council’s approach was based on the view that the Government ought to refund the excess spending rather than any evidence that this would be the case.”
  • “When UASC service costs were seen to exceed the funding available, the Council’s response was to lobby government for increased funding”
  • “The 2019/20 Quarter 3 financial position reported to Cabinet in January 2020 reduced the in year overspend by £8 million. This is an unusual movement and there was limited explanation in the report and no evidence of challenge to understand the validity of the adjustments to achieve the revised position”

Lack of control of spending

  • “In the past three years, the Council has reported significant service overspends of £39.2 million within children’s and adult social care”
  • “the Council focused on: improvements in service delivery without sufficient attention to controlling the related overspends”
  • “the Council has not demonstrated that it can take effective action to either manage the cost pressures or establish appropriate budgets within Children’s and Adult Social Care services.”
  • “The Council failed to address the underlying causes of service overspends which during 2017/18, 2018/19 and 2019/20 had a combined overspend of £59.3 million. The overspends were reported in budget monitoring reports but there is little evidence of Member challenge or holding officers to account for the underlying reasons for the overspends or for taking action to address and mitigate the impact in future years.”
  • The 2019/20 Quarter 2 financial position reported to Cabinet in November 2019 showed an in-year overspend of £10.4 million. There was no indication that Members understood the implication of using the remaining general fund reserve on in-year pressures and this in our view contributed to the lack of urgency”

Brick and Brick and Investments

  • “The Council’s approach to borrowing and investments has exposed the Council and future generations of taxpayers to significant financial risk. There has not been appropriate governance over the significant capital spending and the strategy to finance that spending.”
  • “Despite heavy investment from the Council, the Council has not yet received any significant return.”
  • “The savings plan in February 2020 included additional income sources that were in our view optimistic including £3 million dividend from Brick by Brick, a company the Council has already lent almost £200 million to and for which the Council has yet to receive any dividend or any interest owing on loans”
  • “The interest receivable amounts continue to increase however the outstanding debtors indicate that Brick by Brick has not made any interest payments with £5 million owing at 31 March 2019.”
  • “The investments in The Colonnades and Croydon Park Hotel were not grounded in a sufficient understanding of the retail and leisure market and have again illustrated that the Council’s strategy to invest its way out of financial challenge rather than pay attention to controlling expenditure on core services was inherently flawed.”
  • “The Council has established a complex group structure and we found little evidence that the complexity and associated risk to the Council’s financial position is understood by members or officers”
  • “Based on our review of the loan agreements, £110 million of those loans were due for repayment by the date of this report and had not yet been received by the Council”
  • “At the Cabinet in July 2020, the Council made a decision to incur an additional £30 million of borrowing to purchase properties from Brick by Brick to increase the affordable housing supply available. This is not in line with the original business case for Brick by Brick approved by Members in March 2015.”
  • “The increasing complexity of the group structures, the interaction between different subsidiaries, the longer-term financial impact for the Council and how to safeguard the Council’s interests is not clearly understood.”
  • “London Borough of Croydon Holdings LLP was dissolved by compulsory strike off due to a failure to file accounts. The facts or progress in remedying the situation have not been reported to Members or subject to scrutiny”

The above are by no means all of the adverse comments in the report.

Where does this leave us?

We have a new Council Leader, a new cabinet and a new Chief Executive, all of which are to be welcomed.  All of those at Croydon Council, both Councillors and senior officer need to ask themselves how we have got into this position.  Within the new cabinet the 6 (of 10) members who are long standing cabinet members really need to step up and explain their part in these debacles.

No doubt much blame will be moved to those who have left and to the council officers.  Here I am reminded of a speech to house of commons by Diane Abbott.  Back in May 1998 the house was debating government policy towards Sierra Leone.  Ms Abbott was questioning the Labour Governments Ministers actions, and went onto say:

“In the tit for tat and media frenzy about the issue, a number of questions have been asked over and again. What did Ministers know and when did they know? I would ask a third question, which is why did they not find out?” (Source)

As the repercussions of this report become clear and further questions are raised from the newly published draft 2019/20 Annual Accounts, I expect we will see a focus on new changes, not the past problems.

To have confidence, to believe that Croydon Council will do better, what we need to know from the Councillors in office during this period and now serving in a new cabinet is simply – If they weren’t told about these problems, why did they not find out?