CROYDON Council has gone bankrupt after racking up debts of £1.5bn.
The council issued a rare Section 114 notice, effectively declaring itself bankrupt, on Wednesday afternoon.
It comes after auditors heavily criticised the south London council for ignoring more than three years of internal warnings over its finances.
It is the first local authority to issue such a notice since Northamptonshire in 2018 and it means the council will now be unable to make almost any new expenditure.
As a result services will shut down and council workers sacked.
The Section 114 letter was sent by Croydon’s director of finance Lisa Taylor, who said that she was not confident the council could ‘make the level of savings (cuts) required to deliver a balanced budget’.
She said: ‘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 pandemic’.
Many councils are on the verge of going bust. Councils are warning of savage cuts to services to keep themselves afloat.
The County Councils Network (CCN), 32 of whose 36 members are Conservative-controlled, said just a fifth of authorities were confident they could meet their legal duty to set a balanced budget next year and avoid effective bankruptcy.
Over half of its member councils were planning ‘moderate or severe’ service reductions in adult social care, nearly a third were seeking heavy cuts to road repair budgets; and 33% were considering major savings in library services.
Over two-thirds said that cuts to frontline service would hamper efforts to support the government’s ‘levelling-up’ plans to boost local economies in the north and Midlands, while 60% agreed the cuts would result in greater hardship for residents.
The County Councils Network said a survey of its members – 25 of which are county councils and 11 county unitary authorities – revealed growing concerns about their finances over the next two years.
Only 22% were confident they could deliver a balanced budget next year, while only one of the 36 believed this could also be achieved in 2022-23.
More than half said service reductions would impact their efforts to tackle coronavirus, with 60% stating it would lead to a ‘fundamental reduction’ in frontline services. 56% said they were planning to reduce access to social care.
