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Croydon Council 'goes bust' after 'running up £1.5 billion in debt'
11 November 2020, 15:51 | Updated: 11 November 2020, 17:17
Croydon Council has "gone bust" after "running up £1.5 billion in debt," local MP Chris Philp has claimed.
The Council issued a Section 114 notice on Wednesday afternoon "due to the severe ongoing financial challenges facing the authority."
It is thought to be the first local authority to do so since Northamptonshire County Council in 2018.
The step means all new non-essential spending will be stopped while an emergency budget is drawn up to find further savings in this and the coming years.
In a letter to councillors, finance director Lisa Taylor outlined the serious issues facing the council including a potential budget shortfall in the current financial year of around £66m.
Croydon Council has just issued a s114 notice - i.e. they are bust. They are the only London Borough in this position. Labour has bankrupt Croydon through poor financial control, running up £1.5 billion in debt and engaging in disastrous commercial property speculation— Chris Philp (@CPhilpOfficial) November 11, 2020
Issuing the notice is recognition that despite all efforts to do so, the council cannot now balance its budget this year, which it is required to do by law.
Croydon Council’s new leader, Councillor Hamida Ali, said: “When I became leader of Croydon three weeks ago I promised a new approach which tackles the problems the council is facing head-on.
“We need to be honest about the fact that, for a number of reasons, the council is on track to spend more than we have.
“The Covid-19 crisis and a decade of austerity have had a major impact on our finances but it’s clear the council has also made mistakes, and I am committed to fixing that.
“We know that we cannot do this alone and we want to work in partnership with everyone with a stake in Croydon’s success. That includes seeking financial support from the government and today’s section 114 notice is a part of making that case.
“While we continue to work hard to find savings, we must focus our spending on essential services and protecting our vulnerable residents.
“We're not going to fix these problems overnight and there will be difficult decisions ahead but I want to reassure local people that the council will still be here to support you.
“My priority is rebuilding a financially sustainable organisation, which provides the value for money and high-quality services that residents deserve."
Mr Philp, the Conservative MP for Croydon South, tweeted: "Croydon Council has just issued a s114 notice - i.e. they are bust. They are the only London Borough in this position. Labour has bankrupt Croydon through poor financial control, running up £1.5 billion in debt and engaging in disastrous commercial property speculation."
The council had previously acknowledged its worsening financial situation, and has set in train a number of improvement and savings programmes to help put it back on a stable financial footing.
It is also in talks with the government about the financial support necessary to balance the budget and transform the council.
A spokesperson for the Mayor of London, Sadiq Khan, said: “Croydon council recently elected a new Leader and senior team to tackle the council’s financial problems head on.
"The council have now issued a section 114 notice, in part because of the impact of Covid-19 on its finances, and is asking the government for additional financial support.
"The Mayor hopes a settlement can be achieved as quickly as possible that serves the best interests of Croydon residents.”