The report in to the shocking failures that left Croydon Council bankrupt reads like a modern day farce.
The Three Stooges in this improbable tale are two Labour politicians: Tony Newman and Simon Hall -and a high salaried public servant Jo Negrini.
It’s a story of ineptitude and arrogance – where power coupled with taxpayers money created the ‘perfect storm’ that brought the borough of Croydon to its knees.
The 140 report written by Richard Penn, lays bare shocking failures that triggered Croydon Council to go bankrupt, exposing crippling debt and lack of financial governance but comes two years too late.
Because of legal delays holding up the publication of the report, Penn’s recommendations now seem dated and mostly meaningless but what Penn does in his investigation, through a series of 64 interviews with council employees and politicians is identifies what went wrong in Croydon.
It certainly isn’t the ‘free get out of jail’ card Mayor Jason Perry was hoping for – to divert public anger away from his 15 per cent council tax hike – when his colleague councillor Jason Cummings blamed Croydon Labour for, playing ‘Monopoly’ with public money.
The other problem with the Penn report is the vast majority of Croydon residents will never read it so Croydon Labour gets another free pass. While it does draw a line under the systemic failure of the past Labour administration, it still doesn’t really hold anyone to account.
One option still available to the council is to refer the investigatory report to the Met Police to see if any further action can be taken over the handling of public money and conduct in public office.
This is one of the recommendations that will be considered by the council’s appointments committee along with others on March 23. This meeting 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 Penn report exposes a strange culture of weakness and self denial where officers and councillors alike, were promoted beyond their capabilities – not for good work but for not challenging and remaining silent.
Penn, whose investigation was commissioned through the Local Government Association, identifies how a change of dynamics after the 2018 election led to an internal power struggle between politicians and officers – with neither trusting the other.
So cut off from reality and inward facing were staff that some were convinced that they are: ‘the best performing in London’ with no real evidence to support this view but just ‘will not accept that they may not be the best’, a member of staff told Penn.
Jo Negrini, the indomitable council chief executive, who was solely focused on regeneration is repeatedly described as someone more interested in ‘shiny things’ and ‘good news stories’ than the delivery of core services really needed by the residents of Croydon.
Initially, she found a malleable ally in Tony Newman, the leader of Croydon Labour group whose
career high aside from years as an opposition councillor in Croydon was as keyboard player in an 80s band.
They both wanted to transform Croydon in to a ‘cool place to live and work’.
Hall’s sidekick Simon Hall, a chartered accountant by profession, who served as the cabinet lead for finance provided a double act more suited to Laurel than Hardy.
Both men had a leadership style which can only be described as autocratic and was a major factor in the lack of oversight which allowed the council’s finances to become so irretrievable.
What all three had in common was a similar management style of ‘not welcoming’ discussion or challenge.
Penn was told Newman did not like ‘conflict’ so his way of working was to ‘stifle debate’ and to remove any opposition by dropping anyone from the cabinet who openly challenged or questioned him, so those wanting to stay on in cabinet ‘kept their heads down’.
Cabinet members ‘paid the price’ for challenging and Newman’s style was to get someone else to do his
‘dirty work’ so that he could show ‘a clean pair of hands,’ an interviewee said.
In 2018, Labour won its second term but there had been a significant change in the dynamics of the political administration.
An Ofsted inspection in 2017 of Croydon’s children’s services declared it was “inadequate” and this had rocked the Labour leadership, who had been led to believe by officers it would be at the top end of ‘requires improvement,’ so it was a real ‘bombshell’.
This affected members ‘trust and confidence’ in officers’ advice and the second term began with the Labour leadership more emboldened than previously, and ‘politicians do like to think they are running the show – but then so do officers, so there was inevitable conflict,’ Penn was told.
Penn heard there was a ‘distinct’ change in the relationship with the political leadership following the 2018 local elections and Negrini had become ‘very frustrated’ with the regular interventions in management matters by Hall.
A Labour member, said the the relationship between the former CEO and Executive Leadership Team ‘seemed to break down completely by mid 2020.
As the serious financial problems became more apparent, a Labour member had asked a senior colleague at the Greater London Authority for advice about what should be done?
The response they got was that Croydon had always been well-known for ‘chasing unicorns’.
Penn was told that there are accounts of how decision making about significant matters were ‘corralled’ to four cabinet members.
A member of the Executive Leadership Team said that both Labour administrations since 2014 have had ambitious agendas about investments in assets.
One interviewee was critical of the lack of cabinet challenge and that the leader Newman should have wanted to build a cabinet of the ‘most able’ people in the Labour group.
Because of the lack of adequate challenge, this had resulted in poor decision making such as with the Compulsory Purchase Orders forcing owners out of their shops almost overnight in preparation for a Westfield Development that still has not arrived and that decisions like this “brought the council in to disrepute.”
Another interviewed by Penn said that at Croydon nobody seems to be responsible for anything and no one seems ‘very concerned’ about that, adding that Negrini and leading members of the Labour administration were all part of the problem and between them ‘created the situation the council is in.’
Penn said, it was interesting to hear from staff who had come from other councils and who had been taken aback at the lack of clear processes, a rigorous performance culture and accountability, with one person suggesting it had felt a bit like ’the Wild West’.
Another interviewed, said it was clear that as a key part of its recovery Croydon needs to get back to being a local authority focussed on the effective delivery of its core services, and to stop acting like a FTSE 100 city company.
The council’s lavish corporate headquarters in the town is a clear example of how it forgot what it was really there for. The council, had always preferred ‘spin’ over substance Penn was told.
When Covid hit, Croydon was one of the worst affected because it had still been dealing with the impact of austerity.
Negrini had worked on the assumption the government would cover ‘all of the costs of dealing with Covid’ but that was not the case and that made the council’s financial problems even worse.
Croydon had seen a 75 per cent cumulative reduction in government funding of council services.
In reality, Croydon has had problems with its finances for probably the last 30 years and that pattern has continued and got much worse when austerity really hit Croydon hard in 2010.
While the borough has changed considerably over the years it continues to be seen as an outer London borough when the reality is that it has inner city problems much like its neighbour Lambeth, which has twice the per capita funding that Croydon receives.
A member of the Executive Leadership Team said he believed that Croydon Council forgot that it was a local authority with the core business of delivering services in a borough that has a lot of need.
No one is personally named in the report accept by their roles. Politicians and council officers alike either resigned or left the council so breaches of code of conduct and disciplinary action is not within the council’s power.
Penn does recommend a review of the settlement given to Negrini and that the Appointments and Disciplinary Committee committee consider referring two other former senior council officials to their professional bodies.
In conclusion, Penn says there are three sets of concerns: management misjudgments and actions which lead to an absence of adequate budgetary controls; failures to advise members on the risk which placed the council’s core purposes in jeopardy alongside systemic management failures and failure to stop a corrosive top-down culture of over controlling and bullying by former leading members and the former chief executive.
He says, he accepts individual perspectives are always subjectively based but a picture of organisational dysfunction at the most senior level in the council emerges, he says which stems from poor governance by former political leadership of the council and poor managerial leadership from the council’s most senior officers.
In terms of the politicians the only two referred to in the recommendations are Newman and Hall. They both resigned and were suspended by the Labour Party.
Neither accept they did anything wrong.
Newman, who served as a Labour councillor in Croydon for 27 years – six as council leader, said: “We acted at all times with integrity and honesty. Simon and I very much regret the council’s financial crisis, but things can go wrong without there being any wrongdoing. If we had known a pandemic was coming, of course, we would have looked for additional ways to protect Croydon’s finances. But to suggest that anybody at the council breached the Nolan Principles is false and defamatory.”
Hall, a councillor of 16 years standing, said: “For the avoidance of doubt, Croydon was forced to issue a Section 114 notice because of a single ‘black swan’ event – namely the Covid shutdown, which choked the council of revenue while adding enormously to its costs. It was a perfect storm, and we were unable to weather it because of years of underfunding and austerity, which left us with very limited financial room for manoeuvre.”