Agenda item

Cabinet Member: Leader of the Council, Councillor Hamida Ali

Officer: Interim Chief Executive, Katherine Kerswell

Key decision: no

RESOLVED: To note the presentation.

A presentation was given to the Cabinet by the Leader, Councillor Hamida Ali, the Interim Chief Executive, Katherine Kerswell, and the Director of Finance, Investment & Risk, Lisa Taylor. A copy of the presentation can be found online

(https://democracy.croydon.gov.uk/documents/b8064/Presentation%20-%20Item%205%20Croydon%20Renewal%20Update%2018th-Jan-2021%2018.30%20Cabinet.pdf?T=9).

The Leader informed Members that the presentation gave Members an overview of the latest position of the council. The Leader highlighted the council’s new priorities and noted that whilst the council was undergoing financial difficulties this was against the backdrop of the pandemic which continued to have severe health and economic implications. It was highlighted that whilst positive test rates were decreasing Croydon still had the 13^th highest rate in the country.

The economic impact had seen an increase in the number of residents claiming Universal Credit in Croydon and nationally. The rise, it was noted, was universal in that it was impacting people on low incomes from all age groups and both genders. The Leader further highlighted that over 53,000 Croydon residents were furloughed which amounted to more than one in four who would be eligible for furlough.

Whilst the council was focused on resolving the financial position, the Leader stressed it was also supporting communities who were being severely impacted by covid-19; both from the sad loss of life and financially.

The Interim Chief Executive noted that in September 2020, Cabinet had made a decision to develop the Croydon Renewal Improvement Plan which was an overarching document to cover the fundamental change required to take place over the following three years. The Plan outlined the transformation of council systems of internal control, governance and management which would underpin the financial recovery of the council. The Interim Chief Executive advised Members that the Plan drew together all of the recommendations from both internal and external reports and put them together into a single clear improvement programme to support delivering change as the right pace and in the right way.

It was highlighted by the Interim Chief Executive that action was being taken, with Scrutiny & Overview Committee (SOC) and General Purposes & Audit Committee (GPAC) consultation on the Report in the Public Interest (RIPI) action plan due to be considered later in the agenda, the second report on the Strategic Review of Companies due to be taken to the February 2021 Cabinet meeting and the reserves would be considered in the budget papers.

The Interim Chief Executive advised Members that the council was waiting for the report following the rapid non-statutory review which had been undertaken on behalf of the Ministry of Housing, Communities & Local Government (MHCLG). It was noted that the council’s submission for a capitalisation direction was made on 15 December 2020 and Members were advised that conversations were still ongoing with MHCLG on a weekly basis and often with other government departments; including a meeting that had been held with the Home Office and Department for Education in relation to the costs associated with Unaccompanied Asylum Seeking Children.

Members were advised that MHCLG had established an Improvement Panel with Tony McArdle being appointed the Chair of the Panel. The remaining positions on the Panel would be filled by the end of the week and would be people with financial and commercial backgrounds. The Interim Chief Executive stated that the council had suggested that people with backgrounds in adult social care and children’s social care should would be beneficial in light of the changes which were required within those departments. It was highlighted that one of the first duties of the Panel would be to review the council’s submission to MHCLG and provide a view to the Secretary of State. Those who had been involved in drafting the submission were thanked by the Interim Executive Director for their hard work and noted that it had been a team effort by all involved for creating a document that spoke to the issues Croydon was facing.

The Interim Chief Executive stressed that Croydon was not the only council in conversation with MHCLG about their financial challenges with an estimated 10 – 12 other councils also making submissions. As such, the Interim Chief Executive, noted that MHCLG and HM Treasury would need to consider the council’s submission with the backdrop of what it meant in terms of local government. The Director of Finance, Investment & Risk advised Members that whilst the council was waiting for an outcome from MHCLG on its capitalisation direction it was still operating under a Section 114 Notice for the 2020/21 financial year and should the council be unable to balance the budget for 2021/22 then another Section 114 Notice would need to be issued.

It was stated by the Interim Chief Executive that the council had agreed to the establishment of an Improvement Board in November 2020 and work had begun to consult on the terms of reference and membership of that Board. With MHCLG establishing an Improvement Panel, the Interim Chief Executive stressed that the Panel and Board were two separate entities with the intention of the Board to draw on colleagues within the community, voluntary and faith sectors, resident and tenant associations and external finance and social care experts.

The ambition was for there to be open accountability and conversations focussed on improvement. The Interim Chief Executive advised that MHCLG had a different purpose for the Panel, which would be in place for a minimum of three years and would report quarterly to the Secretary of State for Housing, Communities & Local Government, however no formal letter had been received from government in regard to the role and activity of the Improvement Panel. It was stressed by the Interim Chief Executive that the council had not been informed that the Panel would have the powers that Commissioners had in Northamptonshire and would not be stepping into the place of elected Members.

Members were advised that the Interim Chief Executive had spoken with the Chair of the Improvement Panel and reported that he was interested in there being a synergy between the Panel and Board.

The Interim Chief Executive highlighted that the Strategic Review of Companies had been commissioned in September 2020 and that a huge amount of work had been undertaken by Chris Buss and PwC, in particular discussion with the new Brick by Brick board, and it was reported that a second report would be taken to the February Cabinet meeting with recommendations on the future of the company. Additionally, it was noted the council had commissioned the external auditors, Grant Thornton, to undertake a value for money review the refurbishment of Fairfield Halls.

It was noted that there were 434 projects and actions across 11 programmes which formed the Croydon Renewal Improvement Plan and Members were advised that work was underway to prioritise those actions as it was recognised that it was essential to get the order of actions right and ensure resources were in place to support the work. It was noted that Scrutiny & Overview Committee had highlighted the need for the Programme Delivery Steering Group to be established in the right way to get the desired results and the Interim Chief Executive informed Members that a regular report would be presented to Scrutiny to receive feedback and challenge.

It was reported that the Executive Directors were continuing to challenge the budget to ensure all potential savings had been identified and whether planned growth was appropriate. Furthermore, the Interim Chief Executive advised Members that work had been undertaken to develop an Interim Asset Disposal Strategy, to support the need to borrow less money from the government. This Strategy, it was stated, would be taken to the Cabinet meeting in February 2021 for consideration.

Members were advised that the council was still waiting for some reports which would further inform the council’s improvement journey. Those reports were; the Richard Penn independent investigation to understand how the council reached the position it was in, the MHCLG non-statutory rapid review and the Centre for Governance & Scrutiny’s work to support the Scrutiny function and inform committee work plans.

The presentation concluded with a timeline of work which would be undertaken during the following six months with budget setting being a major area of work which would be informed by the decision from MHCLG on the council’s capitalisation direction request. The Interim Chief Executive advised Members that the council was hoping to have a response from MCLG by mid-February 2021.

The Cabinet Member for Croydon Renewal, Councillor Stuart King, queried what the implications were in terms of budget setting if the council were not to hear back from MHCLG until the middle of February. The Director of Finance, Investment & Risk and Section 151 Officer stated that the council was hoping to hear from MHCLG to inform the budget for 2021/22 which were due to be considered at Cabinet on 22 February 2021 and Council on 1 March 2021. The council, it was noted, was statutorily required to set the council tax by 11 March 2021 and to have written all residents before the start of the new financial year.

Members were advised by the Director of Finance, Investment & Risk and Section 151 Officer that within the budget report to Cabinet and Council there was a section written by her, as the council’s Section 151 Officer, which sets out her opinion on whether the council could set a balanced budget and that a response from MHCLG would be key to coming to a conclusion on that matter. If a response was not received then she would have to state that the council could not set a balanced budget and the council would have to set an illegal unbalanced budget until a response was received. Whilst the Director stressed that she hoped that it would be not required and conversation were ongoing with MHCLG, she was required to draw Members’ attention to the possibility. It was confirmed that officers were regularly raising the council’s deadlines with MHCLG and they were aware of the timetable and implications.

The Cabinet Member for Sustainable Croydon, Councillor Muhammad Ali, thanked officers for presenting a clear timetable of the work which would be undertaken during the following six months and also thanked all frontline staff for their continued work during the pandemic. Officers were asked what plans were in place given the ongoing uncertainty in terms of the pandemic and the impact on Universal Credit and unemployment.

In response, the Interim Chief Executive stated that the council had been carefully looking at the prioritisation of services and where staff resources should be deployed in light of the new variant of covid-19 being far more transmissible and staff having to self-isolate. It was noted there had been a significant impact on the bereavement service during the previous two weeks with staff becoming ill and the Interim Chief Executive thanked all who had volunteered to supported such an important and sensitive service. With the backdrop of delivering services during the pandemic, the Interim Chief Executive advised Members that delivering the Croydon Renewal Improvement Plan was a big job in itself and delivering the required change during a pandemic was challenging.

The Director of Public Health, Rachel Flowers, stressed that the current variant was significantly more contagious and that many people within the borough and across London were getting ill. The Director of Public Health advised Members that since February 2020 the council had been running Gold and Silver group meetings which had looked at the prioritisation of services and included keeping staff in bubbles to reduce the number of people having to self-isolate.

It was queried by the Cabinet Member for Homes & Gateway Services, Councillor Jane Avis, whether the delay in receiving a response from MHCLG on the council’s capitalisation direction request had been due to the council not fulfilling the MHCLGs requirements or if it had been as a result of other council’s also requesting assistance. The Interim Chief Executive advised Members that the council had hoped to get a response earlier but that they had informed MHCLG that they would continue work on the improvement plan whilst the council waited as it was recognised that the work was necessary. It was noted that the submission was made only a few days ahead of civil service recess for Christmas and in the New Year MHCLG had asked 17 detailed questions to gain confidence in the council’s plans. It was in the Interim Chief Executive’s opinion, that there was positive and open dialogue but it was noted that a decision would not be made until the last moment as MHCLG and HM Treasury would want to be able to take all factors into consideration ahead of making a decision.

The Director of Finance, Investment & Risk and Section 151 Officer advised Members that the capitalisation direction request was new territory for all involved and there was no template for such discussions; as such it was continually evolving. It was highlighted that the council had responded immediately to the 17 detailed questions which had been received from MHCLG and it was noted that a further series of questions had subsequently been received.The Director advised that MHCLG wanted to ensure due diligence had been undertaken before any decision was made and that neither themselves, the council nor Treasury were being exposed to additional risk. The council had been asked to establish means to keep the borrowing at a minimum and so had queried whether the council could dispose of any assets, a challenge which had been welcomed as keeping the level of borrowing low was better in the long term for the council.

The Cabinet Member for Economic Recovery & Skills, Councillor Manju Shahul-Hameed queried whether the Council could set a budget on 1 March 2021 if a response had not been received from MHCLG in advance. The Director of Finance, Investment & Risk and Section 151 Officer advised Members that the council had to set a budget ahead of 11 March 2021 and that budget may not be balanced if a response had not been received from MHCLG. It was suggested that the Council meeting on 1 March 2021 may need to be postponed to enable the council to receive a response and to form a budget but it was felt that MHCLG colleagues would work with the council to meet deadlines.

The Director of Finance, Investment & Risk and Section 151 Officer advised Members that she would work very closely with colleagues in CIPFA, MHCLG and Grant Thornton should the council not be able to set a balanced budget. The Director advised that the external auditor, Grant Thornton, may need to issue statutory notices if an unbalanced budget was set, along with the Monitoring Officer issuing a Section 5 Notice, however it was hoped that it would not be necessary and a balanced budget could be set.

The Cabinet Member for Economic Recovery & Skills, Councillor Manju Shahul-Hameed, further noted that during the previous week it had been announced that the UK economy had shrunk by 2.6% in November 2020 and that recently a number of Croydon businesses had closed permanently and questioned how closely Croydon needed to work with partners, such as the GLA and London Council’s to ensure there was economic recovery. In response, the Executive Director of Place, Shifa Mustafa, advised that the council needed a response from MHCLG to provide stability which the council’s partners would be looking for also. However, it was stressed that whilst the council was awaiting a response it would continue to work with partners to drive economic recovery in the borough.

The Cabinet Member for Communities, Safety & Resilience, Councillor David Wood, noted that there had been interest from community organisations to be involved in the Improvement Board and requested officers provide clarification on how those groups could be involved. The Interim Chief Executive stated that the November 2020 meeting of Cabinet had considered the draft terms of reference and proposed membership of the Board which was being consulted on. It was important to ensure there was representation from across the borough on the Communities Board but to also ensure there was the right balance which allowed for proper discussion to be held. Furthermore, the Interim Chief Executive advised that the Board would be looking at internal control systems and risk management, and so it was important that the right people were on the Board to have those conversations and to ensure that there was openness and transparency.

The Cabinet Member for Resources & Financial Governance, Councillor Callton Young, queried what the implications were in terms of the establishment of the Improvement Panel on MHCLG reaching a decision ahead of the budget setting deadlines. The Interim Chief Executive advised that the Improvement Panel would read the council’s submission and would give a view to the Secretary of State however, the full membership of the Panel would not be identified until later in the week. She confirmed that she had spoken to the Chair of the Panel, Tony McArdle, and was keen to ensure the conversation continued so the Panel’s questions could be answered in good time. Members were advised that the council had been informed that the Panel would feedback to the Secretary of State at the beginning of February, after which a decision would be made.

The Interim Chief Executive stressed that the Panel were not intended to be Commissioners and advised that she had been informed that the role of the Panel was to provide support and challenge to the council on the delivery of the Improvement Plan and to provide assurance to the Secretary of State on the delivery.

The Leader of the Opposition, Councillor Jason Perry, thanked staff for their continued work during the pandemic and stated that his thoughts were with those it had affected, but noted that there were positive steps being taken with the rapid rollout of the vaccine. In terms of the financial position of the council he stated that this was the result of financial mismanagement, including loaning £200m to Brick by Brick and the reduction of reserves to £7m prior to covid-19. Whilst it was recognised that covid-19 had impacted a number of local authorities, the Leader of the Opposition stated that Croydon was the only one to issue two Section 114 Notices and as such, he stated that he understood the consideration MHCLG had taken in reviewing the council’s submission. He expressed concern that the council continued to show a lack of pace and commitment as councillors remained in the Labour Group and whilst the Opposition Group had taken a 20% cut in allowances, the Administration Group was waiting for the budget setting process before making changes. The Leader of the Opposition queried when the Administration would take responsibility and stop, in his opinion, failing the people of Croydon.

In response, the Leader stated that Cabinet had been informed during the evening that other councils were in discussion with MHCLG about capitalisation directions and that Members had been told of the level of work that had been undertaken by the council. She stressed that the council was moving at pace and that in terms of reducing Member Allowances, the Leader pointed to the decision made by Council on 16 December 2020 which would deliver four times the amount of savings than identified by the Opposition.

The Shadow Cabinet Member for Finance & Resources, Councillor Jason Cummings, expressed concern as to the tone of the update as the council was not one of ten councils in a similar position as it was the only one to have issued a Section 114 Notice. He raised further concerns that the update suggested that the council was not responsible for the position it was in. The Shadow Cabinet Member noted that during the presentation it had been raised that discussions had been held with MHCLG in relation to asset disposal and stated that no information had been shared with Members on the matter and queried when that would be shared.

The Leader stressed that in every public meeting since taking the position of Leader she had apologised and acknowledged the reasons set out in the RIPI which had led to the council’s financial position. Furthermore she felt that her Administration were focussed on rectifying the situation. Whilst it was recognised that Croydon’s capitalisation direction request had likely been the largest, the Leader stated that it was a fact that other councils were in conversation with MHCLG. In terms of discussions with MHCLG in relation to asset disposal the Leader stated that it was a live discussion and that the Cabinet had not yet been part of that discussion, but that she looked forward to sharing the information once it was available.

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

RESOLVED: To note the presentation.