Croydon’s mayor has kickstarted the borough’s relations with the Labour Government by calling for a ‘new approach’ to local government finances.

In an open letter to Angela Rayner, Mayor Jason Perry acknowledged Croydon’s £1.6bn debt burden and the consequences of serving this debt year after year.

In his letter to the new Deputy Prime Minister and Secretary of State for Housing, Communities and Local Government, Perry lays bare the realities of Croydon’s debt problem and the ongoing problems it could cause for the council’s legal responsibility to deliver a balanced budget at the end of each financial year.

He wrote: “The scale of this unprecedented debt means that we are simply unable to deliver a wholly balanced budget, without that different approach to extraordinary financial support from the Government.

“To date, Capitalisation Directions totalling £379m, plus £38m for 2024/25, have been approved in principle by your predecessors in Government. However, this cannot continue in the longer term.”

The capitalisation directions granted by the previous Tory administration allow Croydon to sell its assets to service the debt it has accrued.

The feeling across the council is that this is not an ideal situation to be in; others have warned that once sold, assets are hard to get back into public ownership.

These concerns came to light earlier this year when the Tory-run Council voted to raise council tax by 4.99 per cent, making it the second highest in London.

At the time Labour Councillor Rowenna Davies, who chairs the Scrutiny committee, told the Local Democracy Reporting Service (LDRS) earlier this year: “Every year to balance its budget, Croydon Council needs £38m of capitalisation.

“That means the national government lets us borrow or sell our assets to be able to meet general expenditure, in very oversimplified terms that means we are selling our buildings to pay for your rubbish to be taken away.

“That breaks the general sound principle of not using capital assets to fund expenditure, but we are going to keep having to do that until we get a government deal that addresses the long-term debt the council faces.”

Later in his letter, Perry states that his council is doing its best to cope with the less-than-favourable situation and lists some of his apparent achievements.

He states: “We are one of only three London boroughs to deliver a balanced budget this year, albeit with a Capitalisation Direction in place.

“We have also embarked on a ground-breaking transformation programme, ‘Future Croydon’, which will completely overhaul the way in which we deliver better outcomes for our residents and make us one of the most effective and efficient councils in the country.”

Despite this, he is pretty clear that the debt situation is only going to get worse.

This conflicts with what he said when the historic council tax increase went ahead at a budget meeting in March.

During that meeting, he pushed back against attacks from the Labour opposition, and told the chamber ‘we are not in a death spiral of debt’ and that ‘it is not getting worse’.

Back then, and in this recent letter, he was quick to lay blame at the feet of the previous Labour Council.

The council experienced a number of its s114 bankruptcies under the previous Labour administration, led by Tony Newman.

Many believe that the council’s mismanagement and failed endeavours like Brick by Brick led to them becoming only the second local authority in two decades to go bust, after Northamptonshire in 2018.

Labour, now in opposition, has since taken to questioning the council’s capitalisation programme and has persistently called for Perry to secure a debt write-off deal with the government.

When previously asked about the possibility of such a deal, Perry often responded saying meetings with the department of levelling up were ongoing.

In his letter, Perry gives the nod to other local authorities in financial turmoil and acknowledges that the government will be wary of not wanting ‘to reward historic failure’, by granting a bailout.

However, the Leader of the Labour opposition, Stuart King, told the LDRS: “Despite spending two years meeting and working with his own Conservative government, Jason Perry failed to secure any deal on the council’s debt.

“In fact the only deal he did with the last Conservative government was the one that gave him permission to increase Croydon council tax by 15%. The new Labour government is clear it will put the country before the party. Sadly, the same cannot be said of Mayor Perry.”

Before signing off, Perry called for an urgent meeting with Rayner to discuss the future of local government finance. He added: “However, I believe that Croydon now offers an example of how a local authority can rebuild after a financial and governance collapse and can offer a way forward.”

In a statement accompanying the letter, Perry said: “Croydon has made huge strides in tackling our financial challenges in the past two years and we are tightly managing all the parts of our budget that are within our control. Our strong progress, under my leadership as elected Mayor, has been recognised by the previous government and by our independent Improvement and Assurance Panel.

"But I have always been clear that Croydon will need a new solution, with a support package from government, if the council is to become financially sustainable for the future.

“I am calling on the new government, and our local MPs, to work with me in bringing forward this solution. I want Croydon to provide the best possible services for our residents, and be the most efficient and cost-effective council so that we provide them with excellent value for money.

"To achieve this, our number one priority must be fixing the council’s finances so that Croydon can be sustainable for the future. If we work together, we can achieve the best possible outcome for local people and ultimately restore pride in our borough.”