Three years into a protracted battle with bankruptcy, Croydon is looking the worse for wear.
Beneath a towering office block in the city centre, rubbish festers. The Whitgift shopping precinct, first slated for redevelopment more than a decade ago, is losing shops. Some public amenities have been shuttered and four of 13 neighbourhood libraries are facing closure.
“Services are on the floor, and we are paying more tax,” said Emma Gardiner, director of the South Norwood community kitchen, a “pay-what-you-can” café and social hub in the borough’s north.
The plight of London’s most populous borough offers a glimpse into what could happen to other councils this year, with town halls warning that a spate of bankruptcies will accelerate across England unless central government intervenes.
A cross-party group of MPs sounded the alarm on Thursday saying levels of funding available through council tax, business rates and government grants have not kept pace with rising costs and demand for services.
The levelling up committee called on the government to “act now if local authorities are to survive the severe crisis and financial distress they face”.
In late 2020, when Croydon issued the first of three section 114 notices — signalling its inability to fulfil a legal duty to balance the books — it was only the second council in England to have done so in 18 years.
Although the borough’s insolvency was partly self-inflicted, precipitated by poor commercial decisions as well as a long term drop in funding, it portended the wider crisis in local government finance.
The strictures that follow bankruptcy are already familiar to six other councils that have gone under since Croydon. But the attritional restructuring in the borough is happening in many other areas obliged to cut services and raise taxes.
“You can destroy something quite quickly but to rebuild it takes much longer — we are slowly rebuilding,” said Jason Perry, Croydon’s Conservative mayor, who was elected two years ago but whose executive powers have been clipped by a Westminster-imposed “improvement panel”.
Perry acknowledged the south London town had “got dirtier” and remained hobbled by the £1.3bn debt built up mostly under a previous Labour administration. But, he insisted, the borough was “moving forward” with an exit strategy that should see the government oversight panel withdrawn in 2025.
“Over time residents will see things are improving,” he insisted.
It is hard to find that optimism in the town’s population. Some residents said they are mainly affected by sclerotic services and the rundown feel of the place.
“They [the council] are not investing money because they don’t have any. We are paying the price,” said Ray Mona, a resident of Purley who works in customer service, complaining that council taxes were raised by 15 per cent last year and were now among the highest in London. A further 5 per cent rise is expected in April.
In order to balance the budget, Croydon has also had to save £36mn this financial year, according to the latest report published by the improvement panel.
For vulnerable people, this translates often into greater difficulty accessing essential services.
After losing a job and finding himself on the street, Michael Orlebar, a youth worker had to move back to his ageing mother’s home. “When I became homeless, I saw first-hand you are a nobody. You are left to rot,” he said.
As of December 2022 when the latest council data was available, there were nearly 2,000 households in emergency accommodation in the borough with 2,589 children among them.
Jana Ernest, operations manager at the homeless charity Crisis, said the situation had worsened since. “The number keeps going up,” she said.
Even for those people who do find a roof over their head, conditions are often grim, the charity said. People housed in emergency accommodation wrote to the council last month describing their lodgings as “uninhabitable” with cramped conditions and infestations of rats, mice and bed bugs.
Council staff are feeling the strain. A senior employee who requested anonymity said morale was at an “all-time low”. Some experienced staff were leaving and the council was filling gaps with agency workers:
“We have got a duty of care to the residents of this borough. We are failing them in so many ways,” the person said.
The government has stepped in twice in the last three years to ease pressure on the balance sheet by allowing Croydon to treat some running costs as capital costs. These interventions have provided £375mn of wriggle room since 2020 by allowing the council to borrow and use asset sales against day to day running costs.
The increase in council taxes will raise around £20mn more annually towards the budget.
As part of its exit strategy, the council has also been forced to sell off assets with properties owned by the housing subsidiary that contributed to Croydon’s bankruptcy among those on the block as well as a hotel and golf course. Sales to date will have raised £125mn by the end of this financial year, according to council forecasts.
However, Croydon’s huge legacy debts remain and so long as it does, the interest payments on it are eating into other essential functions of the council.
“The one thing we cannot do on our own and the strategy recognises is deal with the debt burden” the mayor said.
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