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Croydon is on the verge of bankruptcy - is Spelthorne next?

October 30, 2020 2:55 PM

Spelthorne borrowing gamble Splethorne Liberal Democrats (Photo: Photo by Luis Villasmil on Unsplash)Both councils got into hot water following unwise borrowing

Because of a number of high-risk property investments and the impact of COVID-19, Croydon Council is on the verge of bankruptcy. According to newspaper reports ministers have sent in a taskforce to oversee the financial management of the council.

Is Spelthorne also on the edge of the financial precipice? According to Liberal Democrat Cllr Lawrence Nichols, the Chair of the Audit Committee, the Council is safe - for the time being. He said "The tenants of the properties that the Council owns are continuing to pay rent on time at above the national average, despite all the acute pressures of COVID-19. A good level of financial provision has been built up over the last few good years and there is no reason to believe that council services are under any immediate threat."

The profile of the Council's tenants and their leases means that the rent stream should be guaranteed for the next few years, but there is no room for complacency. Spelthorne has borrowed £1 billion pounds over 50 years and so the income has to also last that long. COVID-19 is changing the way people work and there can be no guarantee that the demand for offices or the level of rents will be maintained when current leases expire.

According to the Guardian in Croydon "Auditors heavily criticised the south London council for ignoring more than three years of internal warnings over its finances, accusing it of "collective corporate blindness" and fostering a governance culture in which poor spending decisions were not robustly challenged or scrutinised by councillors."

At the October meeting of Spelthorne Council , Liberal Democrats successfully promoted a motion to increase councillor oversight of the property portfolio and the management of the associated risks. Cllr Nichols, who proposed the motion, said "Councillors have not been able to engage with the portfolio and this needs to change. Scrutiny and transparency are needed to make sure that we have a clear view of all the risks and able to be assured that they are being managed effectively".

Your Liberal Democrat councillors are leading the way on breaking out of the culture of secrecy that covers too much of the Council's activities like a thick fog. Lib Dem leader Cllr Sandra Dunn said "After more than 40 years as a one-party borough there are many aspects of the financial arrangements of the Council that have never been scrutinised. We are committed to shining a light into the dark corners are making sure that everything is in order and being done in the best interest of residents".

A BBC article entitled "Spelthorne Borough Council's £1.1bn property spending prompts review" can be found here.

The full Guardian article on Croydon Council's financial crisis can be found here.

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