We must fight for the government to increase local spending instead of letting councils like Croydon go bust, fire their workers and cut essential services

On Wednesday, Labour-run Croydon council issued a Section 114 notice, effectively declaring itself bankrupt. The notice bans all non-essential spending, excluding services for protecting vulnerable people, for 21 days, while the council formulates a plan to reduce the projected £60 million overspend this year.

The notice comes a week after a Public Interest Report was issued by the government claiming the council was guilty of irresponsible spending. Government ministers consequently sent in a task force to oversee the management of the council.

The Council leader Hamida Ali said in response to the Section 114 notice:

“The Covid-19 crisis and a decade of austerity have had a major impact on our finances but it’s clear the council has also made mistakes”

While the council, which is in £1.5 billion worth of debt, has undoubtedly made mistakes in investment planning and spending, it is clear that the more significant factors are a decade of austerity under Tory governments and the failure of the government to increase local council spending during the Covid-19 pandemic.

Several other large councils have also warned that they may also be facing the same fate as Croydon Council, due to diminishing financial reserves caused by the stripping back of local council funding and worsened by the effects of the pandemic.

It is clear that the measures to ban non-essential spending are going to hit low-paid workers within the council hardest. Already in August the council attempted to follow another Labour-run council, Tower Hamlets, in firing workers and rehiring them on worse contracts, to try and reduce spending. 400 jobs were lost and further sackings were only prevented by mobilisation of Unison members within the council.

The council also sacked over 250 workers in the council-run Fairfield Halls and Croydon Park Hotel. Meanwhile, the former leader of the council, Tony Newman, was receiving £53,000 per year in council allowances.

It is likely that more attempts will be made to target low-paid workers within the council, who have risked their lives working throughout the pandemic to maintain services, after the issue of this notice. The issue is particularly shocking for local people since it is a Labour-run council.

It is also clear that the ban on non-essential spending is going to hit the most vulnerable hardest. 30% of children live in poverty in Croydon, with numbers as high as 44%, equivalent to 1,200 children, in one council ward. This number has gone up steeply due to the child benefits freeze as part of the austerity measures.

Homelessness has also been rising significantly and in the past couple of years the council has increasingly had to step in to protect many families from losing their homes, due to high rent demanded by private landlords and insufficient benefits.

Contrary to what the Conservative local councillors and government are claiming, the issue is largely a direct result of the stripping back of local council funding. This has also meant councils have not been able to fund essential services which protect the people that need them. We must resist the attack on local people, particularly the most vulnerable, that will come with this notice and demand proper funding of local councils, particularly during the pandemic.

However, we must also critically look at Labour’s role in this. The council has launched a ruthless attack on jobs, while council leaders have been happy to collect tens of thousands in council allowances and without putting up a fight to the government.

As the pandemic continues, many more councils may be forced into the same situation as Croydon has been and working people will once again be hit hardest.