Agenda item

Cabinet Member: Leader of the Council, Councillor Hamida Ali

Officer: Interim Chief Executive, Katherine Kerswell

Key decision: no

The Leader of the Council delegated authority to the Cabinet to make the following decisions:

RESOLVED: To

1.    Note the updates in relation to the Croydon Renewal Improvement Plan; and

2.    Note that the Chief Executive, in accordance with the delegation approved by Council on 28 November, will submit to MHCLG the proposal for a capitalisation direction on 15 December and provide an update to the Cabinet meeting as this progresses.

The Leader introduced the report which provided an update on the development of the submission to the Ministry of Housing, Communities & Local Government (MHCLG) in support of a capitalisation request and the Croydon Renewal Improvement Plan in relation to the financial challenges the council faced. The plan set out the council’s position, risk, principles, priorities and its savings plan. The improvement journey clearly set out the level of change necessary for financial recovery and the task of management to balance the council’s budget. On the Medium Term Financial Strategy (MTFS) there still remained a budgetary gap of £150 million. The council recognised the scale of improvement required with a total of 400 recommendations to honour. It was cultural change as well as structural changes required to support the renewal journey and overarching improvement and no focus on specific functions. To assure delivery there would be an Improvement and Assurance Board established which would be panelled by external advisors appointed by MHCLG and oversight from the Scrutiny and Overview Committee and the General Purposed and Audit Committee (GPAC).

The Interim Chief Executive Officer (CEO) stated that the submission request was unchartered territory for the council and discussions with MHCLG throughout the past months had assisted the journey. The request to MHCLG was a detailed document and members would be updated with further details following the final submission.

The Director of Finance, Investment & Risk and Section 151 Officer stated that Table 4.7, Page 8 of the report, detailed the capitalisation requirement the council was requesting. Officers were working to ensure, investigate and justify the values listed. The request was for £150 million in total; cumulatively accounting for requirements of £70 million for 2020/21, £50 million for 2021/22, £25 million for 2022/23 and £5 million for 2023/24. The council was looking to deliver £80 million of savings in the MTFS, however there were still gaps remaining and they needed to produce more savings and less growth. Within this plan, they were contributing £5 million per annum to build the reserves towards a net goal of £57 million.

The Director of Policy and Partnership stated that the improvement plan detailed in the report built on Croydon Renewal Plan adopted, following agreement at Cabinet on 25 November 2020. There were circa 400 recommendations drawn together by internal and independent expert lead workstreams tied into a single plan. The plan drew best practice from the NHS, central government and other local authorities who had actioned similar improvement journeys. The report referenced the learning and best practice for the project delivery in Croydon. The planning stage was critical to the journey, which would continue during talks with MHCLG. Going forward, the council required a stronger management structure, clear accountability, more robust monitoring agents and Key Performance Indicators (KPIs). The discussion with MHCLG was so far successful and they had informed the council of milestones and outcomes they wanted to see.

The Cabinet Member for Croydon Renewal thanked officers for their extensive work on the report. He stated this stage was the beginning of the improvement journey, although it was appropriate to reflect on the progress made in the past three months. He reassured Cabinet Members that the submission represented the strongest plan Croydon was able to put forward as an authority to the MHCLG. In reference to Table 4.7 on Page 8 of the report, he stated there were two savings lines. Firstly, the service reductions and efficiencies, which was £81.5 million identified to cumulatively deliver by 2023/24 and currently undergoing a public engagement exercise. Secondly, there was £73 million from the MTFS financial recovery plan. All officers involved in achieving those savings must avoid any risk of double counting because both lines came from the same departments, saving in similar activities and there should be a robust monitoring process.

Following the submission on 15 December 2020, it would be right to allow MHCLG a period of time to digest the proposal and be given time to ask for clarity in any areas. With this in mind, the Cabinet Member for Croydon Renewal stated that it would still be helpful for the council to be given an indication of when it would be possible to publish the submission in keeping with the leadership’s commitment of openness and transparency. In relation to the ‘Finance MHCLG Milestone of Clarity on “areas of risk” for 2020-21 budget’,  Page 27 of the report,  he stated that the council was clearly aware of the risk areas connected to Brick by Brick and asked if there were any other risk areas the council should be specifically focussing upon.

In response to the question of how long the period might be until a response from Secretary of State following the submission, the Interim Chief Executive replied that they had asked MHCLG when they might receive a response. She said they must account for the pressures that the MHCLG department and the Secretary of State would be facing at this time, including the run-up to parliamentary recess, the bank holidays and the local government settlement. It was unlikely the council would receive a response in 2020. They would be working hard to provide the council with an answer, even if it was just to include a package for this financial year, due to the situation of the requirement to hold continuous emergency meetings of the Council to issue S114 notices.

In response to the question of if there were any specific financial risk areas the council should be aware of in 2020/21, the Director of Finance, Investment & Risk and Section 151 Officer stated that there may be risks with greater costs than already forecast, which were not always 100% accurate. It was important that every budget holder across the council paid care and attention to their forecasting and any concerns should be raised and acted upon quickly, particularly for the remainder of the financial year.

As part of issuing the S114 notice a Spending Control Panel (SCP) was established and there was clear evidence of poor financial practice in some service areas making requests to the SPC. However, this provided an opportunity to install best practice into the organisation, namely in terms of raising purchase orders in advance or receiving goods of services, which would enable the council to more accurately forecast spending and understand the financial commitments across the organisation. Other risks included moving into Tier 3 Covid lockdown measures, as the financial implications were not clear, alongside winter pressures, where there would be decreased income and increased demand for council services.

The Cabinet Member for Culture & Regeneration thanked officers and Cabinet colleagues for their serious determination grappling with the financial challenges the organisation faced. He stated that in the report there were a number of references to savings consultations between December 2020 and January 2021. He made a distinction that the savings which would be made to the libraries service would be a separate process and subject to statutory consolation. Secondly, he asked if there was a net financial impact of Covid to date.

In response, the Director of Finance, Investment & Risk and Section 151 Officer stated that the council had received four tranches of Covid funding from the government. A total of £32 million of specific emergency funding. This funding was being held centrally and would be allocated to departments which would be seen as part of the Quarter 3 Budget Monitoring report to Cabinet. The funding would not be enough to provide departments with 100% of their Covid related spending and an allocation would need to be agreed. The Director of Finance, Investment & Risk and the Section 151 Officer noted that the significant overspend in Children, Families and Education and Health, Wellbeing & adults would be offset by some of the emergency funding.

The Cabinet Member for Homes & Gateway Services had two questions; firstly, she asked if the council would have to repeat the process of requesting the capitalisation funding and secondly, if any of the capitalisation fund requested would be in jeopardy if any risks worsened. In response, the Director of Finance, Investment & Risk and Section 151 Officer stated that the council’s ambition by the end of the three year period was to be financially sustainable, following the single submission process for the capitalisation loan with a payback period of 20 years. The lending arrangement would carry conditions from MHCLG and there would be risks associated if the council strayed from those.

The Cabinet Member for Sustainable Croydon thanked officers and Cabinet colleagues for the huge efforts on developing the proposals, which was underpinned by a fundamental transformation of the council systems of internal control, governance and management. He asked what the potential impact of a no deal Brexit would be on the council’s position to deliver a balanced budget and savings proposals detailed in the report.

The Director of Finance, Investment & Risk and Section 151 Officer replied that currently there was not a line in the MTFS covering the scenario of a no deal Brexit because the impact was unknown. They would be keeping a close check on the council’s position and ensure accurate forecasting going forward. In the case of savings plans not being delivered as a result of Brexit, the council would take immediate action to address concerns. There was some Brexit government funding which would cover setting up applications, for example for people to apply for status. In terms of implications on council contracts, this was not yet clear and would be carefully monitored.

The Cabinet Member for Resources & Financial Governance congratulated the team of officers and Cabinet colleagues who had worked on the submission and financial response in the past three months. In reference to section six of the report, Delivery and Monitoring, he stated that he was particularly interested in the how the proposals would be taken forward. This set out the establishment of a Programme Management Office (PMO) and he asked for more details on its operation and funding.

The Leader responded that the assurance of renewal delivery was hugely important given the council’s historical challenge in its capacity to achieve savings targets in previous years. Part of the plan was setting the foundation work before making the improvements across the organisation, which was crucial in building confidence for the MHCLG in the context of the capitalisation request. The Director of Policy and Partnership added that every accountable officer would be asked to ensure they had clear plans for all projects within the improvement plan, including what resources were required for delivery, the amount of funding required and what benefits they would be expecting. The PMO resource was an area planned for growth, supporting the corporate oversight and budget monitoring reporting functions, which were critical for the council’s improvement journey and to provide stakeholders with the assurance of delivery. 

The Cabinet Member for Children, Young People & Learning welcomed the strengthening of payment processes and future budgeting and the support it would give to children’s social care department. The Director of Finance, Investment & Risk and Section 151 Officer replied that the SCP challenged all expenditure across the council as any spending at this time should only be essential. She thanked colleagues who sat on the SCP which met twice per day. The SCP controls were a new territory for the council and it was now at a more developed point where positive changes  were being seen.

The Cabinet Member for Economic Recovery & Skills congratulated officers for their work on the report. She stated that following the Tier 3 lockdown announcement for London, there would be a huge impact on the economy. The Mayor of London, the council and business partners were calling for a compensation scheme for lost income. The report outlined new ways of working and she asked if there would be any changes as London moved into Tier 3. In response, the Leader stated that the focus of the new ways and principles of working were to set the scene for the work ahead, to balance the budget and resolve the council’s financial position. There would be implications of London entering Tier 3 lockdown in terms of support for business going ahead and London Councils shared council concerns.

The Leader of the Opposition thanked officers for producing the report and staff across all departments and the borough for their work during the difficult and uncertain times. He remarked that the papers for this agenda item were issued at 1.30pm on the day of the meeting, which gave the Opposition inadequate time to fully read, challenge and scrutinise the information contained within. However, he appreciated the time constraints on the nature of the documents, but in future would request papers to be published in a timely manner. Councillor Jason Perry praised the strengthening of purchase order procedures, however commented that it was a basic financial procedure of any size organisation.

The reality of the council’s positon was accounted to the decisions made in this Administration’s terms in office, where during this period the council debt had doubled to £1.5 billion, the council lent £200 million to Brick by Brick without any repayments and purchased a hotel and shopping centres without any oversight. The Leader of the Opposition stated that there was a constant theme from the Cabinet Members saying how far they had come, but 70% of the current Cabinet Members had historically supported the choices which lead to those outcomes and were effectively part of the current bankruptcy. He asked how far could they really have  come and what they had learnt which enabled them to be the force of change that Croydon desperately needed.

The Leader responded that there had been a series of papers reporting to Cabinet and Extraordinary meetings of the Council addressing the situation and how the Administration planned to move forward. This included actions for the council from the Report in the Public Interest (RIPI), extensive work on the request for a capitalisation direction and the improvement journey planned to set up the systems and infrastructure required for meaningful change.

The Shadow Cabinet Member for Finance & Resources stated that at the last Cabinet meeting he asked a question in regard to the MHCLG return and if members’ could have sight of the document prior to the final submission. There was clear intent given on this at the meeting, however the submission was not contained in the papers. He asked if the document would be published for Members to read following its submission to MHCLG. Secondly, in relation to the figures on the capitalisation directive, he stated that in the last Cabinet meeting papers the directive figure was £134 million, however it had now rose to £150 million. This suggested the situation had worsened by £16 million in two weeks. Each time any amount of work was completed the figures returned worse than the previous set and he asked how they could be assured the council was at a point where they were confident the figures wouldn’t change again.

The Leader responded firstly, that it was not the intention for the papers of this meeting to have been published so late and she appreciated the understanding given on this considering the nature of the report, which represented the amount of work dedicated to producing the document and ongoing dialogue with MHCLG. The discovery and diagnostic work was detailed in the paper, working to understand the needs of the council during the MTFS and the structural deficit and this had caused a movement on the figures. The council needed to be clear and confident in understanding what it needed to resolve that structural deficit. Going beyond the capitalisation direction, the loan would stabilise the council’s position in future budgets, which could be represented across the MTFS. Following work to understand the council’s financial position, officers were confident that £150 million was the appropriate figure to request and would adequately support the reduction in reliance towards the end of the MTFS.

The Interim CEO stated that it was clear in the previous report that the submission would be presented to the next Cabinet meeting when it was completed, however they would need to provide MHCLG with confidence to explore issues and return for clarification prior to that. The current document may not be the final submission and MHCLG had previously indicated they may seek further information and the document would be available to share with Members once it was finalised.

The Leader of the Council delegated authority to the Cabinet to make the following decisions:

RESOLVED: To

1.    Note the updates in relation to the Croydon Renewal Improvement Plan; and

2.    Note that the Chief Executive, in accordance with the delegation approved by Council on 28 November, will submit to MHCLG the proposal for a capitalisation direction on 15 December and provide an update to the Cabinet meeting as this progresses.