Auditors make statutory recommendations to London borough over “unsustainable” debt burden

Grant Thornton’s statutory recommendation calls on the council to work with the Government through its newly appointed commissioners to develop an appropriate package of measures, which enable the council’s operating costs to be reduced, affordable and sustainable.

The recommendation was made in an annual report set to be considered by full council on Wednesday (22 October), which raised a series of concerns about the council's finances.

It comes three months on from the Government sending commissioners into the council to help the local authority comply with its Best Value Duty in relation to continuous improvement, leadership and use of resources.

Croydon set a "breakeven budget" for 2024/25 after using £51m of Exceptional Financial Support (EFS), for which it needed to borrow £19.6m, and £20.6m of reserves and contingencies.

The exceptional support marks the fifth year in a row that the council has been reliant upon EFS - and the 2025/26 budget and medium term financial strategy continue to rely on EFS.

The council expects to have required support totalling £1bn since 2019/20, £888m of which would be funded by borrowing, with the remaining £188m from capital receipts from the council’s asset disposal programme.

The report said: "The impact has resulted in an unsustainable debt burden, with an estimated cumulative revenue cost of servicing this borrowing (using interest rates and average MRP) forecast to be £230m, by 2028/29, and the inability to achieve exit from existing statutory intervention from the Government appointed Improvement and Assurance Panel (IAP)."

Setting out its reasoning for the statutory recommendation, the report said: "A solution to the debt issue is vital to ensure a transparent assessment of the capability and capacity of the council in reducing its operating costs and returning to self-sufficiency in the medium to long term, with an affordable and sustainable debt burden.”

The report meanwhile made six improvement recommendations, including a recommendation that Croydon ensure that it can identify and rectify data quality issues in the SEND service in a timely manner to ensure accurate budget monitoring throughout the year.

The improvement recommendations also called on the council to closely monitor the capacity and capability of the finance team, make improvements to dealing with complaints, and direct resources to ensure continued improvement in its housing service.

In a comment given to the BBC's Local Democracy Reporting Service, Croydon's Mayor, Jason Perry, said: "Grant Thornton's report is absolutely right to highlight the elephant in the room – Croydon's historic debt.

"I welcome the recommendation to deal with it head-on.

"I have worked closely with the commissioners and auditors throughout this process, and they recognise the huge progress Croydon has made."

Adam Carey