Croydon declares bankruptcy with £1.5bn debt
After running up debts of £1.5 billion, following warnings of "corporate blindness", Croydon Council has gone bust.
The local authority issued a rare Section 114 notice, effectively declaring itself bankrupt. The move comes after auditors heavily criticised the south London council for ignoring internal warnings over its finances for more than three years.
The Labour-run Council is the first local authority to issue such a notice since Northamptonshire in 2018. It means the council will now be unable to make almost any new expenditure.
The Section 114 letter was sent by Lisa Taylor, Croydon's director of finance, who said that she was not confident the council could "make the level of savings required to deliver a balanced budget". In a document seen by a national broadsheet she stated: "Despite the council having put in place spending controls over the summer 2020, non-essential costs have continued to be incurred. I am still not seeing an organisation that is taking the necessary radical decisions to stop all but essential expenditure."
The report also found that Croydon's financial pressures were "not all related to the Covid pandemic".
Auditors warned last month that Croydon Council had suffered from "corporate blindness" to the seriousness and urgency of its financial situation. The council now has three weeks to come up with a new, balanced budget.
It had already planned to cut 400 staff, but further job losses are now expected.
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