EXCLUSIVE: Councilors were told this evening the government had agreed to a £ 120million loan deal for the bankrupt borough – but it will take the council at least 20 years to pay off its mountain of debt.
By STEVEN DOWNES
Croydon is expected to be able to go ahead and budget on Monday, after the Department of Housing, Communities and Local Government today released an 11th hour deal to allow the bankrupt council to borrow £ 70million sterling this fiscal year and £ 50million in 2021 – 2022 to repair its financial mess.
At £ 120million, the Croydon bailout is the largest settlement for a local authority in British history.
In December, Croydon submitted a request to MHCLG for a three-year £ 150million capitalization direction. The government’s decision reduces this amount over just two years. It also comes with a series of conditions and warnings of dire consequences if the board does not improve its financial management and governance.
It will also see the residents of Croydon paying off the new loan for the next 20 years, at least.
It was shortly after 5 p.m. this evening when Hamida Ali, the head of the Labor-controlled council, received a letter about “exceptional financial support” from Luke Hall, the minister of local authorities, who confirmed the offer and terms and conditions which will be attached. The deal has the approval of Robert Jenrick, the Secretary of State.
Ali shared the news with his fellow Labor advisers in a virtual meeting that started at 7 p.m.
They now have until Friday March 12 to decide whether to accept the government’s terms. They really don’t have much of a choice.
On Monday, March 8, the council cabinet meets to discuss the modalities, with a full council that evening to set the borough’s budget and the housing tax for 2021-2022.
The government appears to intend to punish Croydon and his Labor politicians by charging 1% more over its usual borrowing rates from the Public Works Loans Board over the 20-year term of the loan, costing taxpayers the arrondissement. An additional £ 24million.
Croydon filed for bankruptcy in November, after exceeding his budget for that fiscal year by £ 66million. The pressures related to the management of the borough during the coronavirus pandemic had been expensive and the council had exhausted its reserves to dangerously low levels.
As Inside Croydon revealed exclusively last week, that overshoot figure has now climbed to £ 96.5million, as the council has not put the brakes on and spent an additional £ 31.8million beyond its means in the first three months of 2021.
The government made the council wait until the Chancellor’s budget statement on Wednesday to decide whether it would allow the additional borrowing. The MHCLG has already agreed on capitalization guidelines stemming from the covid emergency for five other local authorities, including another district in south London, Bexley. Just one of these loans is over £ 10million.
The government’s deal could see Croydon having to find an additional £ 45million in savings over the next fiscal year – 2021-2022 – but Hall’s letter makes it clear that the MHCLG expects Croydon to follow through on his “asset disposal plan,” which includes the flogging of some of the council’s less-than-wise “investments”, such as the Croydon Park hotel.
He will also expect the board to generate cash from the sale of Brick by Brick properties and sites.
Even with the government’s agreement, the council will be reduced to providing only the bare minimum of legally required services, while continuing to lay off staff and shut down libraries, recycling centers and other council-owned facilities.
Hall’s letter to Croydon expresses hope that the council will continue to “cooperate closely” with the government-mandated improvement panel. Failure to meet the necessary financial goals or follow the recommendations of Tony McArdle and the improvement panel, Hall warns that the management of the borough will be removed from the hands of the council and the appointed commissioners.
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