The Labor-led Croydon Council in south London has issued a notice, effectively the equivalent of bankruptcy, after saying it was unable to fill the £ 66 million black hole in the budget in the wake of the financial crisis caused by a risky property investment. Loose financial control.
The council, which officially issued Section 114 on Wednesday to ensure that the book failed to fulfill its legal obligation to maintain its balance, said “serious ongoing financial challenges” forced it to take drastic action.
All unnecessary expenses of the council have been frozen for 21 days as it prepares emergency cut activities to stabilize its rocky money.
The new leader of the council, Hamida Ali, warned that a “difficult decision” was ahead.
It came a week after the ministers sent a task force to oversee Croydon’s day-to-day management, a week after the Section 114 notice was issued. The council said Wednesday it had discussed with Whitehall officials the possibility of government funding.
Croydon is just one of two councils that have been forced to issue Section 114 in the last 20 years following the steps of the Conservative-controlled Northamptonshire County Council.
Concerns are growing that section 114 could be enacted under Article 114 of the Multiple Councils, with huge revenue losses due to Covid-19 and a reduction in financial reserves due to a decade-long gap in local authority funding.
Croydon’s own auditors sharply criticized the council in a report last month that said former local authority leaders had ignored more than three years of internal warnings about its finances. Auditors accused the council of encouraging “collective corporate blindness” and an administrative culture that did not harshly challenge costly spending decisions.
A spokesman for the Ministry of Housing, Community and Local Government said: “Councils are responsible for balancing their budgets and it is true that the Croydon Council makes the necessary decisions to manage its own finances.
“We are aware of the serious concerns surrounding the council’s management and risk management and the recent public interest report has disappointed the Croydon Council administration, which was completely irresponsible for their spending and investment. That is why we have started a quick non-formal review of the council to bring the situation under control.
“The council has decided to issue a notice under Article 114 and we will consider the results of the review at this stage, which will end later this month.”
In a statement, Ali said: “When I became Croydon’s leader three weeks ago, I promised a new approach that would address the issues facing the council. We need to be truthful about the fact that the council is on track to spend more than we do for a number of reasons.
“The Covid-19 crisis and a decade of austerity have had a huge impact on our finances, but it is clear that the council has made a mistake, and I am committed to correcting that.
“As we work hard to save, we must focus on the services we need and the protection of our vulnerable residents. We are not going to solve these problems overnight and tough decisions will be made before then, but I want to assure the local people that the council will still be here to support you. “
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