Local Government Best Value: Croydon Council

As I have previously stated when updating the House, this Government are committed to resetting the relationship between central and regional government, and to establishing partnerships built on mutual respect, genuine collaboration and meaningful engagement. Local councils must be fit, legal and decent, and this Government are taking the action necessary to fix the foundations of local government. I am today updating the House on the steps that we are taking to support the London borough of Croydon to recover and reform.

I am today publishing the latest report of the London borough of Croydon improvement and assurance panel, which I received in April. The report acknowledges and welcomes the hard work of the council’s members and staff and notes that there has been some progress over the course of the intervention, which is due to end on 20 July this year. However, the council’s financial position is deteriorating rapidly and the report documents serious concerns, particularly on the council’s ability to improve, on some aspects of leadership and on the use of resources.

Croydon remains one of the most financially distressed councils in the country. The council’s general fund debt sits at around £1.4 billion and it relies on the allocation of exceptional financial support through in-principle capitalisation directions to balance its budget. The dramatic increase in the council’s £136 million EFS for 2025-26, from £38 million granted for 2024-25, is highly concerning. The council has received approximately £553 million in total EFS since March 2021. This is simply not sustainable.

Failing to change course would condemn Croydon’s residents to a worsening position without an exit strategy. The report sets out that there has been a lack of pace throughout the intervention, but the deteriorating financial position, which is not being gripped and tackled adequately by the council, is reaching a “financial crisis”. The stabilisation plan has been in development since late January, but this does not yet provide a concrete plan to achieve the efficiencies and transformation that the council has committed to. Poor financial information and forecasting and a lack of controls have contributed to the deterioration of the financial position. There is an increasing reliance on Government support to balance the budget, operating costs continue to be “unreasonably high” and the medium-term financial strategy projects the general fund debt to rise to over £1.9 billion by 2029.

The panel documents the council’s ambition to deliver transformation but is concerned that the council will find it “enormously challenging” to deliver the necessary transformation and reduce spending while maintaining day-to-day delivery. The report notes that, based on benchmarking data, the council’s operating costs can be improved to be more in line with other authorities. I have carefully considered the report and other relevant material, including the Local Government Association’s corporate peer challenge. I am satisfied that the London borough of Croydon is failing to comply with its best value duty. I am therefore minded to exercise powers of direction under section 15(5) and 15(6) of the Local Government Act 1999 to implement an intervention package that ensures the council’s compliance with its best value duty.

I am satisfied that the scale of the financial difficulties facing Croydon, the failure of the council to adequately respond to these difficulties and the assurance required moving forward means that a short and sharp reset, with fast action, is required to shift the dial on the council’s recovery. On balance, I believe this is best achieved by escalating the statutory intervention to a commissioner-led model, to ensure that the council can achieve sustained change at the pace needed.

The finalisation and implementation of the council’s stabilisation plan, and in time a recovery plan, will be fundamental to Croydon’s transformation, reform and recovery. Commissioners will have greater scope to challenge and support the council to finalise and implement its stabilisation plan and deliver realistic transformation and savings, in line with what the council has committed to. I envisage the appointment of commissioners until 20 July 2027, with a review of the progress of the intervention after 12 months.

I am inviting representations from the London borough of Croydon and any other interested parties on the proposed intervention package by Wednesday 25 June.

I will carefully consider all representations before deciding how to proceed. The proposal to intervene is not taken lightly but is designed to strengthen and accelerate improvement to ensure that the council delivers for its residents. With council focus and support from the commissioners, I expect the council to demonstrate swift and sustained progress necessary to ensuring compliance with its best value duty.

I am committed to working in partnership with the London borough of Croydon to provide the necessary support to ensure its compliance with the best value duty and the high standards of governance that local residents and service users expect.

I will deposit in the Library of the House copies of the documents referred to, which are being published on gov.uk today. I will update the House in due course.

[HCWS697]