Croydon Council faces being told what to do by a government appointed panel after  being warned it is not  delivering the best possible outcomes for the residents of the borough.

Despite strides under the new mayoral leadership of Jason Perry, minister for local government, Lee Rowley, said that the government is minded to put in place an “intervention package” as the council is not meeting its “best value duty”.

Best Value Duty is a requirement for local authorities to work economically, effectively and with efficiency, with the focus on improvement – to deliver the best possible outcomes for the public.

Mr Rowley, in a statement issued today (Thursday)  said the ‘existing extensive effort’ to rectify the council’s dire financial situation needed to go ‘even quicker’.

Now the government is inviting representations from the Council on the Secretary of State’s proposals by 30 March.

Mr Rowley said: “We want to provide the opportunity for members and officers of the Council, and any other interested parties, especially the residents of Croydon, to make their views on the Secretary of State’s proposals known.

“Should the Secretary of State decide to intervene along the lines described here, he will make the necessary statutory directions under the 1999 Act.”

Letter to Improvement and Assurance Panel chair Tony McArdle: government minded to intervene at Croydon

Letter to Croydon’s Chief Executive Katherine Kerswell asking authority to make representations on intervention proposal

The statement came as  Croydon residents are set to see their council tax bill increase by 15 per cent after the council was forced to declare effective bankruptcy for third time at the end of 2022.

Mayor Perry had forced through the increase as part of his budget last week after an embarrassing climb down by Labour opposition councillors, who abstained on mass. This followed warnings that if the statutory deadline for setting the budget was missed councillors could face sanctions for any losses incurred.

The update from Mr Rowley outlined that if the council is not seen to be making satisfactory progress it could have to follow instructions from the government appointed Improvement and Assurance Panel.

The panel, chaired by Tony McArdle, was set up in 2021 in the wake of the council’s first bankruptcy notice and reports back to the government on the authority’s progress.

Dysfunctional housing service lacks ‘tangible improvement’

Mr Rowley’s statement continues: “On balance, the Secretary of State (for Levelling Up, Housing and Communities, Michael Gove) agrees with the panel’s latest assessment, that the acknowledged and welcome work of the new leadership has made good progress, however he has concluded, including as a result of the historic problems and the extent of improvement necessary, that the council is not meeting its Best Value Duty.”

The news prompted the council’s opposition Labour group to issue a statement saying locals had already “lost confidence” in the council after the council tax increase.

A spokesperson said: “In a damning judgement the Conservative government has declared Conservative Croydon a failing council that is not meeting its Best Value Duty to residents.”

But Croydon mayor, Jason Perry said he welcomed the move from the government.

Adding: “I welcome the continuing focus government and the Improvement Panel are giving to support our goal of returning sustainable local government to Croydon and reducing the £1.6billion toxic debt level inherited from the previous administration.”

In the statement, Mr Rowley said the Secretary of State, acknowledged the Panel’s assessment in their latest report that the Mayor has been working constructively with them and is prepared to “take firm decisions” to return the Council to a sustainable financial footing. 

The Panel had also commented that within the Council there is “much evidence of managers and staff grasping the scale of the problem and doing their best to fix it.”

The statement says historic issues have continued to be unearthed at Croydon and their potential impact on the Council and the progress they have made to date ‘cannot be underestimated’, particularly given their precarious financial position. 

Croydon is currently unable to achieve financial sustainability on its own accord and has requested an ‘unprecedented’ level of support from Government as a result of these historic issues.

The authority is asking for another £224million bailout loan and has appealed to the government to write off £540m of its debt because it can’t afford to pay crippling annual interest rates of £49million.

The Council has already been subject to two Public Interest Reports by external auditors relating to poor financial decision making and associated governance failings on October 2020  and failures in financial control and poor governance arrangements relating to the refurbishment of Fairfield Halls on January 2022. 

Croydon has issued three Section 114 notices since 2020, the latest being in November 2022 following the conclusion that it can’t balance its budget in 2023/24 and beyond.

In May 2022, Croydon changed its model of governance with the election of a Conservative Mayor, Jason Perry, and a new Council with no overall control.

In the last few weeks the Penn report exposed the shocking failures that left Croydon Council bankrupt – portraying  a dysfunctional and bullying culture overseen by the previous Labour administration.

On March 23, the council will also receive the findings of the Kroll investigation in to possible fraud linked to Fairfield Halls and council-owned developer Brick by Brick.

The panel has provided regular assurance reports to the government on the council’s progress throughout this time, with their latest report being submitted in November 2022.

Mr Rowley said: “Whilst the Council has struggled to resolve serious governance and financial issues for several years. I want to place on record that the Secretary of State and I recognise the positive steps taken by the Council, with oversight from the Improvement and Assurance Panel, to lay the foundations for its recovery and ensure that legacy issues are being addressed.”