Croydon Council asks for £136m government bailout

A south London council is seeking a £136m bailout from the government after revealing a £35m overspend this year.

Croydon Council faces a projected £98m shortfall in its budget for the upcoming financial year and is struggling to balance its finances despite a year of public service cuts and council tax increases.

The Conservative-led council attributes its worsening financial situation to a surge in homelessness and social care demand, along with rising costs for children's placements.

The BBC has contacted the Ministry of Housing, Communities and Local Government (MHCLG) for comment. The department this week announced that £69bn in funding had been confirmed for England's councils.

Croydon Council is seeking a bailout in the form of capitalisation directions - which permit local authorities to classify revenue expenses as capital expenditures.

Proposals published ahead of a budget meeting on Wednesday also include an anticipated 2.99% rise in council tax and a 2% increase in adult social care levy, which aligns with the government's overall 4.99% cap for London boroughs.

It means by April 2025, council tax in Croydon will have increased by 25% since Mayor Jason Perry's election in 2023.

Croydon Council became the first London borough in two decades to effectively go "bankrupt" back in 2020.

It went on to declare bankruptcy for a third time in November 2022.

Perry had promised to address the borough's £1.4bn debt burden when he was elected in 2023.

Recent cuts include the closure of four libraries in November and a restructure of the authority's Youth Engagement Team.

Croydon's Labour group leader Stuart King said: "Residents are paying more but getting less."

"Under Mayor Perry, finances are getting significantly worse, and residents should not bear the cost of his failures," he added.

Perry defended his approach, stating that the council must modernise to become more efficient.

He outlined plans to overhaul council operations, including using digital tools and partnering with charities to deliver services more effectively.

While these local efforts are intended to save £27.7m annually by 2028, they will not be enough to make Croydon financially sustainable.

Perry said: "Despite the huge strides we have made in improving our council, we are facing significant financial challenges, owing to the spiralling demand and surging costs that are impacting all local authorities across the country and in London in particular.

"The scale of the challenge means that savings are not enough, and I am not prepared to pass the cost to local people.

"We must act and do things differently. To protect public services, now and in the future, we must modernise our council and become more cost effective and efficient."

The government said its final Settlement, announced on Monday, provided a 6.8% in cash terms increase in councils' Core Spending Power compared with 2024-25.

"With increased demand and running costs rising, this money is a lifeline and will guarantee no council sees a decrease in their Core Spending Power," the MHCLG said.

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