Croydon still among most financial distressed councils in country but making progress: Minister

Croydon Council is making "significant developments" in its progress towards reform and recovery but remains one of the most financially distressed councils in the country, Local Government Minister Jim McMahon has said.

His comments came in response to a report from Croydon's Improvement and Assurance Panel, which also suggested that the authority should have taken a more cautious approach to two judicial review challenges it recently lost.

According to the report, which was completed in April 2024 and made public on Thursday (12 December), the council is facing a debt of £1.3 billion whilst still being reliant on around £63m of exceptional financial support (EFS) to balance its budget. 

The report, authored by the six-person panel chaired by Tony McArdle, also warned that "other risks remain", including improving the council's housing service "from a very low base", and the reliance on the council's transformation plan.

The report added: "Whilst the political and managerial leadership understand the challenges that the council is facing – it remains one of the most financially distressed in the country – it continues to be a significant task to transform the 'business as usual' application of everyday work into a widespread understanding of the changes that it remains necessary for the council to put in place."

Elsewhere, it is noted that the council has "increasingly exhibited determination in pursuit of opportunities and to take advantage of its enhanced capabilities – and successfully did so also in defence of its well-considered position in a recent employment tribunal".

However, it said the council has also sought to assert itself in legal cases "when more reflective judgement would have suggested greater caution".

It said: "The council has recently contested and lost two judicial reviews, both on operational issues contested by individual citizens, one in respect of housing adaptations and the other concerning the disputed responsibility for allocation of accommodation, with accompanying critical comments made by the judge in each case raising issues that could and should have been factored into the council's thinking at a much earlier stage in these proceedings."

The report also highlighted an unsuccessful defence of an adjudication relating to an expired highways maintenance contract.

"Although it had limited time to respond to the referral, better preparation and understanding of its evidence base should have taken place and may have brought about a much more positive outcome," the report said.

"This matter is now the subject of a considerable amount of work and cost designed to retrieve the situation."

Turning to the council's governance position, the panel said Croydon's core governance arrangements "continue to operate soundly" and that Council Tax and budget "were set by Full Council following a consultation exercise and engagement with the opposition parties that was continuous and constructive".

Additionally, the report noted that the council's Audit and Scrutiny arrangements "both add value", and the plans for their programmes in the coming municipal year "are well advanced, are derived from the council's stated priority activities and are related to the assessed risks facing the council".

Croydon is also making "steady progress" in terms of financial governance, according to the report.

On culture and leadership, the report said Croydon is benefiting from stable political leadership and consistency in its objectives and the programmes designed to deliver them.

The panel sent an update letter to the Ministry of Housing, Communities & Local Government last month, which warned the council's budget gap for 20256/26 had increased as a consequence of the "financial position having significantly deteriorated during 2024".

It said the financial position had worsened due to spending pressures relating to housing, children's services, and special educational needs and disabilities.

Despite the pressures, the panel said: "We remain positive in our view that the Council continues to make substantial progress in eliminating the failings that precipitated this intervention in 2021."

In a letter responding to the panel's eighth report sent on Thursday, McMahon said: "It is clear that, since you sent your report in April 2024, there have been significant developments in the council's progress towards reform and recovery.

"I also recognise that there is further work to be done to restore the council to long-term financial sustainability and that this should be a priority area of action for the council moving forward."

He later added that the road to financial recovery for Croydon "must be met with the seriousness it deserves, and I am pleased to see a clear commitment to move to a new operating model".

He continued: "Because of the scale of the challenge, it is self-evident that there will still be difficult decisions to come.

"It is essential that in making these decisions there is a clear strategy for the form the council will take as its new operating model, and that prevention and reform of local public services is central to it."

McMahon has asked the panel to provide a further update on the intervention's progress in April 2025, with particular attention to the council's budget-setting process and delivery of its Transformation Plan, which sets an aim to become the "most cost-efficient authority in London".

Adam Carey