n independent investigation into who was responsible for the risky property speculation that bankrupted Croydon Council and how they were allowed to get away with it has been initiated by the cross-party Local Government Association.
The latest inquiry, which can result in formal disciplinary action for misconduct in public office, will seek to examine the roles not just of the Labour Cabinet of ten that ran the council but also of the senior council management.
In the spotlight will be council leader Tony Newman, as well as Croydon’s chief executive Jo Negrini, who quit her lavishly paid £217,000 a year job in August after negotiating a controversial £440,000 pay-off from the council leadership.
Speaking this week at a council meeting of the scrutiny committee over zoom attended by the Standard, the new interim CEO Katherine Kerswell said: “We know what happened, that’s in the auditor’s ‘Report in the Public Interest’. This independent investigation by the LGA will look at how it happened.”
The role of current council leader, Hamida Ali, who replaced Cllr Newman a few weeks ago, is expected to be part of the LGA remit, as she was a member of his cabinet.
Last week Croydon town hall issued a Section 114 notice, declaring itself effectively bankrupt with a £66 million hole in its accounts and seeking a government bailout, the first time a London local authority has done so since Hackney 20 years ago. It followed the council borrowing £545 million to speculate in commercial property – including the purchase of a local hotel two years ago for £30m that has since gone bust, a shopping centre for £46m, and a £250m investment in the council’s wholly owned property development subsidiary, Brick by Brick, which failed to return a penny of the £110m projected income.
While it is not uncommon for councils to take out low interest loans from the Public Works Loans Board to invest in property, few have done so on the scale of Croydon where total debt of £1.5 billion is more than five times the council’s £270m annual budget.
Chris Philp, Conservative MP for Croydon South, welcomed the LGA investigation and told the Standard: “It is clear that the Labour party cabinet of ten who ran the council are responsible for this calamity for which ordinary people in Croydon will ultimately suffer.
“Tony Newman was the leader, Simon Hall was the finance guy, Paul Scott and his wife Alison Butler led on planning and together they formed a tight inner circle who effectively controlled the cabinet.”
He added: “As chief executive, Jo Negrini should have stood up to them and had a duty to run up the red flag. All these people have now left leaving Hamida Ali in charge, who is far from ideal as she was also a strong supporter of Newman and part of his cabinet clique.”
Another independent review by consultants Price Waterhouse Coopers into the failings of loss-making Brick by Brick is expected to be published next week.
At a meeting last night the council agreed an action plan to address the financial crisis, including tackling overspends in children’s social care and mandatory training for senior officers and councillors in financial management.
It said it would be setting out its immediate and long-term proposals to stabilise the budget next week.
Cllr Ali called it “a hugely important step”. “The action plan goes right to the heart of how we are changing the way we do things and shows our absolute commitment to getting Croydon back on track,” she said.