Two local authorities have been put into special measures after struggling to recover from the bad investments and governance failings that pushed them into effective bankruptcy.
Thurrock borough council in Essex has been told that government-appointed managers will take over the day-to-day running of operations, including overseeing all major financial and senior staffing decisions.
Further “necessary and expedient” intervention has been approved at the London borough of Croydon where ministers are concerned ongoing serious problems, especially in its finance and housing departments, have put the council’s future viability at risk. Croydon’s management decisions will be tightly monitored by a government-appointed improvement panel, which has the power to intervene and override the political leadership and senior managers where it sees fit.
The local government minister, Lee Rowley, also raised concerns about the post-bankruptcy progress of a third council, Slough, which he said showed “an unacceptable lack of urgency and focus … to resolve the situation it has placed itself in”.
The stepping up of government intervention at Thurrock and Croydon takes place against a backdrop of wider financial fragility in local authorities in England, which are desperately cutting services while putting up council tax and parking fees in an effort to remain financially solvent. About 12 councils are thought to be on the edge of effective bankruptcy.
Although Croydon and Thurrock were already being partially overseen by independent commissioners, ministers have been frustrated by what they see as the slow pace of recovery. The councils must make huge cuts to services and sell off assets to help bridge financial deficits running into hundreds of millions of pounds.
Croydon and Thurrock have set record council tax bills from April, putting them up by 15% and 10% respectively at a time when the typical council tax uprating in England for a council of their size is 5%.
The Tory-run Thurrock council declared effective bankruptcy just before Christmas after running up an unprecedented deficit when a series of risky investments in solar farms and other businesses turned sour. The resulting £500m hole in its finances is one of the biggest ever financial disasters in local government.
An interim report from inspectors identified a range of serious shortcomings in the management and governance of Thurrock. It criticised the council’s leadership for “unconscious incompetence” – a state brought on by endemic complacency, secrecy and a failure to properly scrutinise decisions.
Thurrock has a financial deficit this year of £470m, a long-term structural shortfall of £184m and debts of £1.3bn. As a consequence, the inspectors said the council was “equipped to do little more than a minimum level of [service] provision for the foreseeable future, if indeed they can continue [to provide services] at all”.
A final inspectors’ report on Thurrock was delayed after commissioners said they needed more time to unravel the scale of the corporate and financial failure. It is expected to be published imminently.
• This article was amended on 19 March 2023 because an earlier version said that Croydon had been told that that government-appointed managers will take over the day-to-day running of the local authority. To clarify: The intervention at Croydon is that management decisions will be tightly monitored by a government-appointed improvement panel.